ECONOMIC CRISIS AND ITS IMPACT ON ECONOMIC DEVELOPMENT (SPECIAL REFERENCE TO SRI LANKA)

Abstract

Aim: The aim of the study is to find out the reason of economic crisis in Sri Lanka and the recovery methods for reducing the impact of economic crisis on Sri Lanka’s developments. Methodology: Since it is a qualitative research, data were collected from articles, books and online resources. Result: There is no universal recipe for all types of crisis, not only for Sri Lanka, But also all countries in case of a specific crisis. The best strategy to cope with such events is to use the optimal undesirable effects on the combination of policy ingredients that will minimize the economy .Sri Lanka must be concentrated and responded on Prevent increasing and possibly unsustainable deficits; Contrary to the policy in developed economies affected by the crisis, interest rates should be slightly increased in order to maintain inflation at low levels; Precautionary investment policy, especially with respect to large (and somehow risky) projects in manufacturing, when such projects are financed by the state budget; Better and careful monitoring over the internal financial system, even if the system seems healthy and not affected by contagion. Prevention, rather than curing, is the right policy in these times. Among the experts in the field, there is a clear consensus that in case of such a financial crisis, with possible implications on real economy, the first thing to be done by decision makers is to avoid populist policies. Conclusion: The economic crisis severely affects on Unemployment, Inflation, Ecconomic growth, Export and Import .but, Sri Lanka tries to prevent from such hazards. Therefore what is desirable is to formulate a new/alternate economic model (based on sociallyoriented market economy) where the benefits of economic development are not concentrated in a few but shared by all. Coming back to the Russian summit, BRIC refers to four fast-growing developing economies, namely Brazil, Russia, India and China. Now that Sri Lanka has been granted delegate status at the Shanghai Cooperation Organization, we would be eligible to get enrolled into “BRIC block” if Sri Lanka could truly demonstrate its capabilities as an emerging economy by working out and adopting this new economic model which is in line with “Mahinda Chintana” policies.