What happens when a country runs out of money?
As well as not being able to buy goods it needs from abroad, in May Sri Lanka failed to make a payment on its foreign debt for the first time in its history.
The country had been given 30 days to come up with $78m (£63m) to cover interest payments, but central bank governor P Nandalal Weerasinghe said it could not pay.
Two of the world's biggest credit rating agencies also confirmed Sri Lanka had defaulted on its debt payments.
Failure to pay debt interest can damage a country's reputation with investors, making it harder for it to borrow the money it needs on international markets. This can further harm confidence in its currency and economy.
Is there a plan to solve the crisis?
Sri Lanka's government has more than $51bn (£39bn) in foreign debt, $6.5bn of which is owed to China, and the two countries are in negotiations about how to restructure the debt.
The G7 group of leading industrial countries - Canada, France, Germany, Italy, Japan, UK and the US - has said it supports Sri Lanka's attempts to reduce its debt repayments.
The Sri Lankan government is also in talks with the International Monetary Fund (IMF) about a possible $3bn (£2.5bn) loan.
The IMF - which works with its 190 member countries to stabilise the world economy - has said the government would have to raise interest rates and taxes as a condition of any deal.
It would also require a stable government to be in place, so it is unclear what can be done until the president officially steps down and a new government is in place.
The World Bank has agreed to lend Sri Lanka $600m, and India has offered at least $1.9bn.
A woman in a protest against food price hikes bangs dishes together.Image source, Getty Images
Image caption,
Banging dishes together to protest at the food price hikes.
Prime Minister Wickremesinghe has said the government will print money to pay employees' salaries, but has warned this is likely to boost inflation and lead to further price hikes.
He also said state-owned Sri Lankan Airlines could be privatised.
The country has asked Russia and Qatar to supply it with oil at low prices to help reduce the cost of petrol.
Why is Sri Lanka in economic crisis?
The government blames the Covid pandemic, which affected Sri Lanka's tourist trade - one of its biggest foreign currency earners.
It also says tourists were frightened off by a series of deadly bomb attacks in 2019.
However, many experts blame economic mismanagement.
Sri Lankans shout slogans demanding the Sri Lankan president Gotabaya Rajapaksa to step down during a protest at Colombo, Sri Lanka. Monday, 4 April 2022.
President Rajapaksa faced widespread calls to step down
At the end of its civil war in 2009, Sri Lanka chose to focus on providing goods to its domestic market, instead of trying to boost foreign trade.
This meant its income from exports to other countries remained low, while the bill for imports kept growing.
Sri Lanka now imports $3bn (£2.3bn) more than it exports every year, and that is why it has run out of foreign currency.
At the end of 2019, Sri Lanka had $7.6bn (£5.8bn) in foreign currency reserves, which have dropped to around $250m (£210m).
President Rajapaksa has also been criticized for big tax cuts he introduced in 2019, which lost the government income of more than $1.4bn (£1.13bn) a year.
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The switch to organic fertilizers resulted in widespread crop failure, exacerbating foreign currency shortages
When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertilizer.
It told farmers to use locally sourced organic fertilizers instead.
This led to widespread crop failure. Sri Lanka had to supplement its food stocks from abroad, which made its foreign currency shortage even worse.
Looks like some one we might take notice of in Washington now!
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