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Opinion
Andy Mukherjee

A Tropical Paradise Is Brewing a Storm in a Tea Cup

Deprived of tourism dollars, Sri Lanka’s foreign exchange reserves are dangerously low and food staples are running short. The question now is will it turn to China, India or the IMF for help?

Even before the pandemic, the island-nation’s tourism industry had taken a hit.

Even before the pandemic, the island-nation’s tourism industry had taken a hit.

Photographer: Buddhika Weerasinghe/Bloomberg

The Maldives and Sri Lanka, both highly tourism-dependent tropical islands, have seen the pandemic devastate their economies and finances. Government debt this year is expected to linger above 100% of gross domestic product in the two small Indian Ocean nations. Unsurprisingly, both have similar — and similarly poor — credit standings. A default by CCC-rated borrowers is a “real possibility” on Fitch Ratings’ scale.

And yet, the Maldives seems to be turning the corner on visitor arrivals, with numbers last month exceeding the figure for August 2019. Sri Lanka, where a deadly Easter Sunday suicide bomb attack two years ago hit tourism even before the pandemic, is falling behind.