More than 54% of families are in debt

This is the result of research by the Colombo government. The reduction in average monthly income is seriously affecting families, who are forced to resort to strategies that increase their debt to cover their food needs. In most cases, they cannot guarantee three meals a day.

Colombo () – 54.9% of Sri Lankan families are in debt. A report prepared by the government highlights this clear symptom of the most serious economic crisis that the country has suffered since its independence in 1948. Debt has an inevitable impact on the lives of families, because it affects both their budget and their stability. More than 17% have taken out loans for the construction or repair of homes and due to the situation, most households face various challenges in managing daily activities.

The 2023 “Study on the impact of the economic crisis on families” report shows that since March 2022, 14.2% of people over 15 years of age have lost their jobs and this situation is higher among the male population than among the female population. Unemployment due to job loss has generated financial instability that has forced families to continue to go into debt to cover essential expenses, resulting in an increase in the debt burden.

This situation is seen in all regions of the country, both urban and rural, with the majority pawning their jewellery, selling vehicles and furniture and some mortgaging their properties, including the only house where they live. The report also shows a percentage distribution of households according to the different sources of debt. The highest percentage of debt comes from mortgages (31.0%), followed by banks (21.9%) and credit institutions (9.7%). 22.3% of debt comes from loans obtained to cover daily food needs, indicating the presence of serious financial difficulties in covering basic needs.

The academics from the state universities Nihal Mayadunne, Prashanthi Herath and Sampath Dissanayaka, who are conducting the study on families, explained to that “17.0% of indebted families have taken out loans to build or repair their homes. Last year, the average monthly expenditure of 91% of all households increased and 7% of the population also changed their healthcare system.” The academics also showed that according to 77% of the responses “the main reason why families reduced their average monthly expenditure was to accommodate expenses to the decrease in income. Families have changed their spending patterns to adapt to the reduction in total income.”

In Gampaha, Kandy, Nuwara Eliya and Jaffna districts, “around 600 people lost their jobs a few months ago when a garment factory in the Katunayaka Free Trade Zone closed down.” And although the employees received a meager compensation, it is not enough to cover the family’s expenses for even three months. “As they could not find employment elsewhere, they had to return to their village, but due to the economic crisis, there are no job opportunities even in their villages. So the only alternative is to sell their furniture. Some have also mortgaged their houses,” they added.

The economic crisis has had a significant impact on employment in several sectors of the country, especially construction, garments and small and medium-sized enterprises. According to the Sri Lanka Labour Force Survey, most families, especially in urban areas, have been negatively affected by indebtedness, with many families having reduced their daily meals to two, and in some cases to just one.