Sri Lanka is in the midst of an unprecedented economic crisis. This sparked massive protests and the president's resignation after fleeing the country. But other countries could be in similar trouble, according to the head of the International Monetary Fund.
Sri-lanka-cises
“Countries with high debt and limited policy space will face additional pressure, and Sri Lanka is a warning,” IMF Managing Director Kristalina Georgieva said on Saturday (July 16). Day) said so. Developing countries have also experienced four consecutive months of capital outflows, putting their dream of catching up with advanced economies at risk,
she said. Sri Lanka is struggling to pay for critical imports for its 22 million people, including food, fuel and medicines, while struggling with a foreign exchange crisis. Inflation has soared by about 50 percent, and food prices are 80 percent higher than a year ago. Sri Lanka's currency, the rupee, has also fallen sharply this year against the dollar and other major global currencies.Many blamed former President Gotabaya Rajapaksa's disastrous policies on dealing with the economy, and the Covid-19 pandemic has only exacerbated its damage. Sri Lanka has accumulated huge debts over the years. Last month, it became the first country in the Asia-Pacific region to default on its foreign debt in 20 years. Officials have been negotiating a $3bn (£2.5bn) bailout with the IMF, but those talks have stalled again amid the political crisis.
But the world faces the same headwinds — rising inflation, soaring interest rates, currency devaluations, high debt and dwindling foreign exchange reserves — all affecting other economies in the region. China has been a big creditor to several of these developing countries, and can therefore control their fortunes in crucial ways. Still, it is largely unclear what the terms of Beijing's previous borrowings, and how those debts can be restructured.Alan Keenan, a researcher at the International Crisis Group, believes that China's fault lies in encouraging and supporting expensive infrastructure projects that have not yielded significant economic returns.
"Equally important is that they are politically active in supporting the Rajapaksa family's rule and policies... These political failures are at the heart of Sri Lanka's economic collapse, which is being remedied through constitutional changes and a more democratic political culture. Sri Lanka has never been able to escape its current nightmare before." READ MORE...https://ayanazvs.blogspot.com/2022/07/Sri-Lanka-crisis.html