Sri Lanka It is currently experiencing its worst economic crisis since its independence in 1948. The shortcomings in economic matters led to massive demonstrations and a deep political crisis that broke out yesterday with the resignation of the prime minister. However, that of the Asian country may not be an isolated case.
The main factor of the economic crisis is the lack of foreign exchange. The coronavirus pandemic paused tourism in the island country and, with it, the income of dollars. Also, remittances from Sri Lankans living abroad stopped arriving. As reported by The Guardian, Sri Lanka it only has $50 million in reserves.
As if this wasn’t enough, foreign debt of Sri Lanka reaches 51 billion dollars. Of course, you can’t afford it. For this reason, in April he suspended debt payments and decreed a moratorium.
The first signs of deterioration were seen at the end of 2021, when the Government began to prohibit some imports to prevent the outflow of foreign currency and closed the only refinery in the country also to avoid spending on fuel imports.
Nevertheless, all this led to food and medicine shortages. At the same time, the lack of fuel caused the government to order power outages of up to 13 hours a day. The inhabitants of the South Asian country said enough is enough and the consequences can be seen right now: yesterday, a violent day resulted in 8 deaths and 218 injuries.
The first domino
It is possible that the fall Sri Lanka It is not an isolated case, but only the first. The economic crisis derived from the coronavirus pandemic caused prices to rise worldwide, something that worsened with the war in Ukraine. This affected, above all, the poor and emerging countries, which also have fiscal pressures due to their external debts.
This was stated last month by World Bank President David Malpass: “I am really concerned about developing countries. They are facing sudden increases in the prices of energy, fertilizers and food, and the probability that interest rates will rise. Every one of them hits them hard.”
According to a recent report from the United Nations Conference on Trade and Development, 107 countries are experiencing one of three problems: rising energy prices, rising food prices, or tighter financial conditions. Of this total, 69 suffer all three at the same time; 19 are in Latin America and the Caribbean.
In this way, according to the economic editor of The Guardian, both the World Bank and the IMF (International Monetary Fund) know that the economic crisis in Sri Lanka it is more than just the inefficient management of a country. the island nation it could be the first domino to fall.