Case: Sri Lanka's Economic Crisis 2022 Sri Lanka's annual inflation rate surged to more than 70% in August as it struggles with its worst economic crisis in over seventy years. Official data also showed food prices rose by 85% compared to a year ago - which means that when it comes to buying food, the local currency (Sri Lankan Rupee) has lost nearly half its value or purchasing power. The South Asian nation of 22 million people was plunged into financial chaos this year as it faced a shortage of foreign currencies. As a result, the country has been unable to afford key imports - including fuel, fertiliser, food, and medicine. To make matters worse, US$1 exchanges for 200 Sri Lankan Rupees back in 2021, but since May 2022, the Rupee has drastically declined - needing 360 Rupees to buy US$1. Official figures released last week showed that the economy had contracted by 8.4% in the three months to the end of August. Before the Covid-19 pandemic, Sri Lanka was heavily reliant on tourism for foreign currencies, including the US dollar. However, border closures aimed to slow the spread of Covid-19 kept tourists away and took a major toll on the country's economy. In addition to tourism, Sri Lanka's main exports include garments (with 1000+ contract manufacturers for fashion labels globally) and its world-renowned Ceylon tea. The country is the third largest tea exporter in the world. Sri Lanka now imports US$3 billion 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 US$7.6 billion in foreign currency reserves, which have now dropped to around US$250 million. That, along with years of financial and economic mismanagement, led to Sri Lanka defaulting on its debts earlier this year. Experts have warned that rising food prices mean that economic woes for Sri Lankans will continue for some time to come. Food security remains a huge concern for the country, especially because fertiliser shortages - due to a lack of foreign currencies - have significantly affected agricultural production. According to some estimates food production has nearly halved. Adapted from: https://www.bbc.com/news/business-62990385 and https://www.bbc.com/news/world-61028138 Question: You are an Australian company which has been successfully exporting a range of up-market frozen dairy products to Sri Lanka for the past 10 years. As an exporter, you can invoice (bill) the buyer in any currency. Given the current and on-going economic crisis in that country, how could your business be affected? Discuss. [Hint: you should address the issues identified in the above case, such as foreign currency reserves, exchange rate, inflation, etc.]