Sri Lanka Economic Crisis

Sri Lanka economic crisis is for the bad external advice and misguided policies. The nation has faced the issue due to a severe balance of payments (BoP) problem. Besides, the reserves of foreign exchange are depleting rapidly. Nowadays, it has become hard to import vital consumption goods. As a result, the nation can't repay past debts. In the article, we have let you know about the causes of the recent problem and documented the roles of different groups.

If you want, you can find out the roots of the issue of colonialism and the post-war developmental pathway. In this century, the country's fortune in economy has been tied continuously to exporting primary commodities like tea and rubber and garments. With the help of the primary commodity exports, tourism and remittances, it mobilized foreign exchange reserves, and it used these to import essential consumption items like food.

Sri Lanka Economic Crisis reasons:

1. In 2009, the nation emerged from a 26-year long war. People expected that the growth in economy would revive. The country's post-war GDP growth was high for pent-up demand between 2009 and 2012 at 8-9% per annum. 
2. After the global fall in commodity prices, the economy was on a downward spiral. The country experienced a slow down in exports and a rise in imports. After 2013, the average GDP growth rate became halved. 
3. The government of Mahinda Rajapaksa was under a $2.6 billion loan obtained from the IMF or International Monetary Fund in 2009. The budget deficits were very high in the war. 
4. Besides, the major fight of 2008 drained its foreign exchange reserves. In 2009, they obtained the IMF loan in this context, but they did a condition, the budget deficits need to be decreased to 5% of the GDP by 2011. 
5. While there was no increment in growth or exports, and the nation was experiencing the continuing drain of foreign exchange reserves, United National Party (UNP)-led coalition government took another US$1.5 billion loan from IMF. They approached the IMF in 2016 for three years between 2016 and 2019. The condition of IMF was that they have to decrease the fiscal deficit to 3.5% by 2020. There are other conditions included also— the tax policy and tax administration; control of expenditures; the commercialization of public enterprises; flexibility in exchange rates; improvement of competitiveness; and an accessible environment for foreign investment. 

GDP, Debt and Savings Rate:

The GDP growth rate shrank from 5% in 2015 to 2.9% in 2019. Besides, the investment rate was 31.2% in 2015, but it fell in 2019 and came down to 26.8%. In addition, the country faced a change in the savings rate from 28.8% in 2015 to 24.6% in 2019. The Government revenues get reduced to 12.6% of the GDP in 2019 from 14.1% of the GDP in 2016. Moreover, the Gross government debt experienced a rising GDP from 78.5% in 2015 to 86.8% in 2019. According to Jaishankar, India is working extra time to offer swift assistance to the nation.

Incidet of 2019:

In 2019, the country witnessed two major shocks to its economy. First, they faced the Easter bomb blasts of April 2019 in churches in Colombo, and the accident caused the death of 253 people. Tourists didn't prefer to come after the incident in foreign exchange reserves. And the second incident was when a new government replaced the UNP-led government in November 2019. Gotabaya Rajapaksa was the leader of the new government, named as the Sri Lanka Podujana Peramuna (SLPP).

During their campaign, the new government had promised the people to reduce tax rates and offer wide-ranging sops for farmers. It was Gotabaya Rajapaksa who implemented the plan to slash taxes.

The new government decreased the VAT or value-added tax rates from 15% to 8% in December 2019. Besides, it raised the annual threshold for VAT registration from LKR 12 million to LKR 300 million. In addition, they raised the annual income threshold for a waiver from LKR 500,000 to LKR 3,000,000. They also ruled out the nation-building tax, the PAYE tax, and the economic service charges.

Affect of Covid-19:

According to the estimate, a 33.5% decline was there in the registered taxpayers between 2019 and 2020. They witnessed GST/VAT revenue halved between 2019 and 2020. In 2020, the situation became worse for the COVID-19 pandemic. All the rubber, tea, and garments exports faced a tough time. The country spent, on average, about $260 million on fertilizer subsidies per annum.

The Gotabaya government came up to give a solution to stop foreign exchange reserves from draining. The country became a 100% organic farming nation overnight.

Although they withdrew the policy in November 2021 after the farmer protest, it pushed the nation to the brink of a disaster. The Agricultural scientists warned the Gotabaya government about the potential losses from the organic farming policy. They said the government that yields can drop by 25% in paddy, 35% in tea, and 30% in coconut.

Conclusion:

The country's economy grew slower than usual at 1.8 % in the last quarter of the 2021 financial year. According to the data of the government's statistics department, the entire growth of the year was 3.7 percent. The nation's central bank had projected a growth of 5 % for the year.

Frequently Asked Questions:

Why is Sri Lanka in an economic crisis?

When it was 2010, the nation faced a sharp rise in foreign debt. In 2019, it reached 88% of the country's GDP. Besides, the COVID-19 pandemic has increased the crisis. In 2021, the foreign debt rose to 101% of the nation's GDP result of which the country faced an economic crisis. 

What are the reasons for the situation?

The five main reasons for the crisis are as follows:-

• The five broad causes of the situation are: 
• External Economic Attack. 
• External Information Attack. 
• Breakdowns. 
• Psychopathology. 
• Human Resource Factors

Is the nation in financial trouble?

The country is experiencing an unexpected economic problem. The issues of the nation have been increasing for years. Besides, the country is facing annual inflation in double digits. Their rupee has plunged to a record low against the U.S. dollar.

Eight Valuable Personal Finance Tips for Beginners

The amount you earn has to be spent as living expenses exist. The desire to grow wealthy beyond your means also exists. Savings is the weapon to achieve it, and careful planning is most important. Please find below ways of accomplishing this as personal finance tips for beginners.

• Begin Early:

Everything in life is about early starts. Saving money is no exception to this rule. Irrespective of the amount you can save, the habit and attitude to saving are essentially combined with an early start.

A plan of action does not require a big plan, but the early kick-off matters. It may be in trickles first, but the savings compound into a more considerable value with time passing by, and it is the result that matters in the long run. Delays in such matters would never help, and procrastination would result in lesser savings only and is the best personal finance tip for beginners.

• Prioritize Saving before Spending:

As a growing child, your parents must have taught you the value of money. Moreover, they would have inculcated inside you the thought that to spend money which you have with you. Nowadays, credit cards are available to you, which can reverse your policy of saving. The idea to purchase on credit cards is good provided you pay up the purchase amount before a month or the date the bank starts levying interest.

Just imagine you purchased a Television set and you are paying interest every month! The Television becomes a costlier investment, and there would be excess cash outflow.

The cardinal rule is to allocate the savings and reduce that with your income. It's a bad idea to spend first and save whatever is leftover.

• Be Your Own Financial Advisor:

Saving money is only a part of the deal. The other part lies in managing it wisely. There are many ways to lose those savings, as others become aware of your wealth. They may advise you to invest in profitable ventures, but their end-interest is only the commission they earn through it. As a personal finance tip for beginners it is best to do your research and analysis by acquiring knowledge through the internet or direct investigation and then decide.

On the same note, it's advisable to keep more than an eye on your bank accounts. You can trust Banks to a large extent, but even they may charge you arbitrarily. In such cases, if your account is debited, you can approach the bank and have it reversed. Thus, you become the Finance manager of your savings.

• Budgets:

You may not be in the habit of noting down your cash inflows and outflows. You would be shocked to see that your savings are going down at the month-end even though you have been cautious in spending money.

The only solution is to budget your expenses initially and keep checking on them, not exceeding them. All expenses have to be meticulously noted down, and you would soon know the excessive expenses. When precautions are taken, you can achieve your goal of savings.

• Health Insurance:

You cannot be confident that you will stay in good health always. Neither can your family parents. You may feel that an expense like a Health insurance premium would pull your savings down, but you're mistaken. In case of a sudden accident, a visit to the hospital is bound to cost you an enormous amount.

You may have health insurance through your office; never hesitate to take a few insurance policies on your family, including ageing parents. The prevention you would realize is better than cure.

• Saving for Different Purposes:

You may be a salaried person and well equipped to meet all your expenses, resulting in savings. Savings generally protect you with financial health once you retire or slip into old age. But wait! There are other purposes apart from that. You may desire to go on a vacation or perhaps buy a farmhouse etc. This cannot be met with your available savings but create a special fund to meet those planned schedules in the future.

It is best to deposit these extra savings in an account with a high yield so that money value is not eroded due to inflation. Even a deposit for a short time in deposit schemes like ' CD' (certificate of deposit) is a good idea.

• Be a Knowledgeable Taxpayer:

If you are a salaried person, you ought to know the tax bracket you would fit into. Tax is deducted at source when you work in a reputable organization and your ' Take- home ' is lesser to that extent.

There are many sites on the internet which has tax calculators. All you have to do is punch in your salary, and the tax calculator would let you know your net salary.

• Debit cards Vs Credit Cards:

Debit cards are helpful as you need not carry the money in your bank account. You can only spend within that limit or balance in the secure account.

Credit cards allow you to buy anything or spend money that is not yours. If you can meet that commitment without rolling it over, your savings will not be affected. If you cannot pay that, it will attract a very high rate of interest which will erode your savings. Moreover, if you do not meet the bare minimum charge notified to you by the bank, it would attract late/delayed fees. The tip is to spend when you can meet it within the deadline.

Conclusion:

Financial awareness wins the day and not how high you earn. Tax structures keep changing every year, and money value keep depreciating year after year. It's best practice to know which account to open in the bank or elsewhere to mitigate inflation. If you follow this entire personal finance tip for beginners you will continue to live comfortably after retirement.

Personal Finance Management Key Aspects

Personal Finance Management is all about managing expenses monthly or daily and saving a reasonable amount for the future. Every single person should do this management for healthy and quality living. To effectively organize your money for future needs, consider some of the significant components of your finances.

In this personal finance blog post, we are going to discuss five significant vital aspects of personal finance. So, read the post till the end to draw a better picture of your finances. 

 Components of Personal Finance

These are the five key components of personal finance:

• Insurance for emergency 
• Tax Planning 
• Expense Management 
• Savings are essential 
• Investment

Let's dig in deeper and study these major aspects thoroughly:

#1 Insurance for Emergency

One can do financial protection via insurance to get over hard times. But people don't appreciate this option. Many people don't believe in health insurance or basic insurance. Insurance is an essential element to sail you and your family from difficult times or events. These are the insurances which we all need, these are:

• Term Insurance 
• Property Insurance 
• Health Insurance 
• Personal Accidental Insurance etc.

#2 Tax Planning

Tax planning is another factor that needs to be considered, as some take it for granted. With the right approach, we can minimize our taxes. Pay attention to how much you are spending, over expenses, etc. To grow your money, you can put money in tax-advantaged investment accounts and reduce your unnecessary expenses. One can easily reduce taxable income via tax deductions and exceptions. The most popular sections related to it are Section 80C and Section 80D.

#3 Expense Management

We should track our expenses, whether day-to-day expenses or unforeseen ones. One can fix and keep aside some amount for these unexpected expenses. You can even create funds for vacation, travel, etc. By keeping a track record of all your expenses, you can maintain a decent balance in life. 

 #4 Savings are Essential

Saving is the left money after allocating money for our monthly or essential expenses. It is well said that no matter how small your income is, one must save some portion from it. Make it a habit, and it will benefit you in hard times or for long-term investments. Do savings, and in this way, you can build a safe and secure future.

#5 Investing

Many people think investing and saving are similar, but that's not correct. Saving and investing are different components. Investing is like getting money, i.e., stock, mutual funds, etc., to make your money increase. Investing is generating money from money. One of the best investing options is mutual funds. And some other options are fixed deposits, real estate, stocks, etc.

Final Verdict

To build a safe and robust future, all these aspects are must to consider. With these, one can draw a perfect picture of a financial future. Do personal finance now to make better plans and decisions for the future. A correct balance between expense, income, saving, and investment is necessary to optimize a person's financial management.

Credit Card Balance Transfer- Money Market Blog

When someone transfers a massive amount of payment from one credit card to another, then we call it a credit card balance transfer. In this case, a new credit card is necessary. It is because the bank will credit the amount to this new card account. People who want to transfer money at a low-interest rate can use this mode. They can get many advantages like some exciting rewards, cashback offers, and so on by using this method.

What do you mean by credit card balance transfer?

It implements a money transfer procedure from a credit card to another credit card of a different bank. The entire process doesn't consume so much time. However, you can't transfer money also if both the credit cards are of similar banks. It is an essential thing that you should remember.

You can see multiple credit card associations enticing money transfer fees to mislead customers. However, if you are a cardholder, you can get many promotional offers. The companies offer their customers a specific time about 6-18 months when they won't take any interest charge.

Benefits of Balance Transfer

Reduced Financial Strain – The interest rate of transfer money in the credit card balance transfer is significantly lower. The finance charge of credit cards is around 3.5% every month. But for the balance transfer, the interest rate becomes 1.8% per month. A few card providers are there who offer 0% interest rates. It is the most exciting offer that you can get.

Stabilize Credit Score – If the interest rate charged to you is significantly lower, then it becomes easier for you to make payments. As a result, you can maintain the credit card score also. Besides, you can pay the balance in proper time.

Interest-Free Period – You can get an interest-free period from the credit card providers. Therefore, it becomes beneficial for credit cardholders.

Other Benefits – Besides, the cardholders can get introductory offers from credit card providers. The offers they provide, such as interest-free periods, low-interest rates, and so on are exciting. It is the most attractive benefit that they offer to the cardholders.

Fees & Interest Rates on Credit Card Balance Transfer

Processing Fee - In the case of balance transfer money, you need to pay an extra fee. The range of these processing fees is between 1% and 3%. Apart from this, a few banks are also there who charge a flat fee. Interest Rate – Usually, the interest rate for a balance transfer is 0.75%. However, the interest rate of credit card balance transfer may be 0% also for a limited period.

Who can apply for Balance Transfer?

The credit card balance transfer is advantageous for people who want to transfer money at a low-interest rate. So, they must take assistance from balance transfer credit card. Using it, they don't need to give additional interest rates or processing charges.

But you need to remember that it is suitable when you can pay the entire money within a few months. If you see that it may take a year or more than that, then you must go for a personal loan.

How to apply for the Credit Card Balance Transfer?

Do you know how to transfer money with a credit card? A new credit card comes with a 0% interest on balance transfer. You need to check whether the interest rate is automatic or it relies on a credit score.

You can apply for it through Netbanking, contacting customer care, through SMS, etc. But for this, you should be a credit cardholder.

If you need a new credit card for money transfer, then you need to check a few things. Verify whether you fit with the eligibility criteria set by the specific bank or not. Here, you can know the necessary details related to it from a particular bank. Proof of identity, address, income source- are some essential documents. You may need these documents while applying for the credit card balance transfer.

Conclusion:

Credit card balance transfer is a method that helps you to send money easily with a low amount of interest rate. It doesn't change your credit card rating or credit score.

Frequently Asked Questions:

Q. What is a Zero Balance Card?

Zero balance card implements a credit card by which one credit cardholder can pay any balance owed in full. In this case, the cardholder doesn't need to add any extra charges.

Q. Should you use the secured credit card for your credit?

A secured credit card can act as collateral. This type of credit card is mainly used for a cash deposit.

Q. How can you get money by a balance transfer from the bank?

NEFT, cheques or demand draft are the processes that a bank uses for a balance transfer.

Q. How long does the balance transfer request take time?

At first, you need to check the card, whether it is new or not. If the credit card is not new, then it may consume up to one week. But if you have a new credit card, the balance transfer request may take up to one month.

Q. Which of these is beneficial– a balance transfer or a personal loan?

First, thou should think about whether you will be able to pay the amount within a few months or not. If you cannot pay the balance at the right time, then a personal loan is the best choice for you. Otherwise, if you can pay the amount within a few months, then you must choose credit card balance transfer. You should choose the personal loan instead of a balance transfer. You can do this if you see that the time may require one year or more than that to pay off the money.

Q. What to do if you have applied for a balance transfer on your credit card but haven't got any notification?

If you have faced such issues, then you need to contact customer care.

Q. Can a credit cardholder transfer money from one credit card to another of the similar bank?

No. One cannot transfer any money to a credit card account of the same bank. The credit card account must be of a different bank.

Money Market Blog: Personal budgeting Tips to Know!

When it comes to money management and getting things right the first time around, you have to know how to budget. You don’t need to be an accounting genius to do this. It’s just a simple case of knowing what comes in and what goes out. The latter is the tricky part. But all in all once you have budgeting down to the T, money management becomes so much easier. I don’t say you won’t have any problems but you’ll be well on your way to recovery. In this post we’ll be taking you through some personal budgeting tips. So without taking up much of your time, let’s begin!

Personal Budgeting Tips

First of all is Budgeting for you?

Heck Yeah! Big Companies don’t do them for nothing you know. If big companies have a budget drawn up they’re doing it for a reason. Budgeting tells you where you’re going to put the money after you receive it every month. Without knowing this you may spend it on all and sundry not knowing whether you’re left with something or are in the negative.

Besides this, budgeting is the first step in attaining your goals. Your goals could range from getting out of debt to retiring early to owning your own house. By taking care of what you earn you can have something leftover to help in meeting your goals.

The next advantage of budgeting is that it makes you feel good. Once you’ve planned on spending on something and you go to spend on it, you don’t feel the pinch. At the end of the process if you have something left, you think of it as extra cash. But don’t go spending it now! Save it.

Start with the Basics: 

The first in this list of personal budgeting tips is to start with the basics. This means take out all your expenditure and start justifying it. Well some are essentials there’s no doing away with them but what about others. During this process you’d notice that there are certain things you don’t really need spending on. This where the saving process begins. This is also known as a zero based budgeting. Ok enough of the lingo over here. Keeping it simple.

Get your Partner into the budgeting process: 

If you’re living with your spouse get them in on the budgeting process too. Sit down once a month preferably the beginning of it and note down all your combined expenses. This is one of the most important personal budgeting tips to know. You need to be on the same page when it comes to spending things and setting of goals. It makes no sense that one saves while the other spends like there’s no tomorrow.

Budget Month to Month: 

While some expenses occur every month like groceries there are others that you have to pay only at certain times like an insurance premium. This where month to month budgeting will come in handy.
The most important of all personal budgeting tips is to STICK TO THE PLAN! Happy budgeting!