The situation in Sri Lanka has worsened due to the economic crisis. President Gotabaya Rajapaksa has fled the country. The people of Sri Lanka have come out on the streets. Due to inflation, the price of food and drink has increased significantly. The poor have been forced to sleep hungry.
There are long lines of people for petrol and diesel. Sri Lanka was steeped in heavy foreign debt. Many times got time to pay off foreign debt, but Sri Lanka could not. In the end Sri Lanka declared itself bankrupt.
Sri Lanka is not the only country facing such an economic crisis. Such situations have already happened in many such countries in the world. Many of these are neighboring countries of India. Let us know which countries are surrounded by economic crisis? What is the situation in these countries?
Before Sri Lanka, the American country Argentina has gone bankrupt twice between 2000 and 2020. Greece in 2012, Russia in 1998, Uruguay in 2003, Dominican Republic in 2005 and Ecuador in 2001 have also gone bankrupt. Apart from this, 83 countries like Germany, Japan, UK have been declared bankrupt at different times.
According to a BBC report, this year apart from Sri Lanka, Lebanon, Russia, Suriname and Zambia also failed to repay loans on time and declared bankruptcy. Countries like Belarus, Myanmar, Pakistan, Argentina, Tunisia, Ukraine are also on the same brink.
You have to walk back a decade to understand this. The thing is from the year 2009. Sri Lanka emerged from a 26-year civil war. Its post-war GDP growth remained at a suitably high level of 8-9% per annum until 2012, but with declining global commodity prices, a slowdown in exports and an increase in imports, its average GDP growth rate declined after 2013. Almost half left.
Sri Lanka’s budget deficit was huge during the civil war in 2008. From above there was also a period of global recession. Due to this, Sri Lanka’s foreign exchange reserves were almost exhausted, due to which the country had to take a loan of $ 2.6 billion from the IMF in the year 2009. The effect of this loan was seen after 2013. GDP was declining rapidly and debt was increasing continuously. In 2016, Sri Lanka once again approached the IMF for a loan of $ 1.5 billion, but the terms of the IMF made Sri Lanka’s economic situation worse.
Well, the main source of income of Sri Lanka is tourism and agriculture. In 2019, it also suffered a major setback. After April 2019, there were several attacks on various churches in Colombo. Tourism suddenly declined by 80 per cent and this affected the foreign exchange reserves. Gotabaya Rajapaksa’s government, which came to power in 2019, reduced taxes to fulfill its election promises. Many concessions were also given to the farmers, due to which the economy suffered a lot. At the same time, Sri Lanka took more debt from China than the IMF, which completely broke the country.
Right now Sri Lanka was struggling with old losses that in the year 2020, the Corona epidemic completely worsened the situation. The export of tea, rubber, spices and clothing was affected due to Corona. Tourists did not come, causing a tremendous decline in Sri Lanka’s revenue and foreign exchange earnings. The increase in government expenditure led to fiscal deficit exceeding 10 per cent in 2020-21 and the ‘debt-GDP ratio’ increasing from 94% in 2019 to 119% in 2021. On the other hand, the government completely banned the use of chemicals in agriculture. Due to this, agricultural production was badly affected and income from agriculture also decreased.
Sri Lanka was completely submerged in these two years of Corona. On the one hand, the interest of the loan had to be paid and on the other hand, fuel and other essential goods had to be imported for the country. Gradually, the foreign exchange with Sri Lanka was completely exhausted, after which Sri Lanka declared itself bankrupt in April 2022.
Like Sri Lanka, these neighboring countries are also on the verge of bankruptcy.
Like Sri Lanka, foreign exchange is running out in Pakistan too. Pakistan’s foreign exchange reserves have fallen to $ 9.8 billion.
This week Pakistan has signed a deal with the International Monetary Fund (IMF). IMF has again agreed to lend to Pakistan, but due to rising oil prices in the global market, there is heavy pressure on Pakistan’s foreign exchange reserves, which is pushing it to the brink of crisis.
The foreign exchange left with Pakistan is not enough for even five weeks of imports. The Pakistani rupee has weakened to a record low. Pakistan rupee has reached around 210 against a dollar. The government of Pakistan has asked the people to cut expenditure.
As of today, petrol is available at Rs 263 per liter and diesel at Rs 276 per liter in Pakistan. Due to the crisis of petrol and diesel in many states of Pakistan, the pumps have also started shutting down. Due to the cost of fuel, the prices of food items, fruits and vegetables, medicines and other essential products have also seen an increase. According to a report by Numbers, at present the cost of one liter of milk in Pakistan is Rs 129. One packet of bread is getting up to Rs.90. The cost of one kg of rice is Rs 167. Tomato 98, Potato 56, Onion 56, Apple is getting Rs 194 per kg. At the same time, people have to pay Rs 111 for a dozen bananas.
The threat of economic crisis has also come in Myanmar. Myanmar’s central bank has issued orders for local companies and banks to bring foreign exchange reserves under control here. The order has asked to defer the payment of foreign debt and make late payments. The central bank has issued this order on July 13.
“In accordance with the Foreign Exchange Act and the Foreign Exchange Management Rules, the repayment of foreign debt, including the principal amount and interest amount, should be suspended,” the central bank statement said. Simultaneously, licensed banks should re-arrange payments with their customers.
The depreciation of Myanmar’s currency Kyat against the dollar has added to the already deepening crisis in the country. There has been a huge jump in the prices of oil and food. Last year, the military seized power in Myanmar in a coup. Due to this, many types of crises have increased here.
Myanmar’s central bank has issued a series of orders to deposit and exchange foreign currency in local banks within a day. Ministries and local government have also been ordered not to use foreign exchange for domestic transactions.
The official exchange rate for the Kyat, Myanmar’s currency, is set at 1850 Kyat per dollar, but it is well below the unofficial black market.