The Countries which may Face Sri Lanka Like Economic Crisis
The world is seeing the situation in Sri Lanka and wondering if there are more countries which may face such an economic crisis. Then let us tell you-the answer is yes! The economic crisis is not limited to Sri Lanka but many other countries from Europe to Asia to Africa are slipping into chaos. Here we bring you a brief analysis of “The Countries which may Face Sri Lanka Like Economic Crisis.”
Sudan
Early in March, cash-strapped Sudan declared it will float the country’s currency as economic conditions worsen. This announcement came four months after a military coup further tore the African nation apart. The value of the Sudanese pound will be decided by banks and exchange companies based on supply and demand, according to the Central Bank of Sudan. Yahai Hussein Ganqoul, governor of the central bank, declared that the institution will not interfere. As a result of the action and a decline in the value of the pound, prices of goods and services are likely to rise quickly. The exchange rate has been constant since Sudan’s currency was lowered in February of last year, yet it recently soared on the black market once more.
Afghanistan
Since the Taliban seized control in August, Afghanistan’s economic and humanitarian crises have worsened. Acute malnutrition, which is producing food scarcity and endangering food security, has been raging throughout Afghanistan since the US military withdrew. According to the United Nations, by March 2022, at least 55% of the population is “likely to be in crisis or emergency levels of food insecurity.” As the crisis worsens and more Afghan children die from starvation every day, a number of humanitarian organisations have repeatedly voiced warnings about its immense scope.
Bangladesh
In Bangladesh, the inflation reached 7.42 percent in May which is an 8-year high. Due to declining reserves, the government has taken quick action to reduce non-essential imports by easing regulations to attract remittances from millions of migrants residing abroad and limiting official travel abroad.
“Governments have significant challenges when trying to increase subsidies for countries with current account deficits such as Bangladesh, Pakistan, and Sri Lanka. The IMF and other nations have been approached by Pakistan and Sri Lanka for financial support ” S&P Global Ratings sovereign analyst Kim Eng Tan told the BBC.
He claimed that Bangladesh has to put constraints on consumer behaviour and reprioritize government spending.
The world economy is in peril due to rising food and energy costs after the epidemic. Now that they have been borrowing heavily for years, developing countries are learning that their fragile foundations make them particularly vulnerable to global shockwaves.
Pakistan
Since the government stopped providing fuel subsidies at the end of May, fuel costs in Pakistan have increased by about 90%. While negotiating to restart a bailout programme with the IMF, it is attempting to control spending.
The economy is being negatively impacted by the rising cost of goods. In June, the annual inflation rate rose to 21.3 percent, the highest amount in 13 years.
Pakistan, like Sri Lanka and Laos, has low foreign exchange reserves, which have practically halved since August of last year.
In an effort to close the gap between government revenue and spending—one of the primary demands of the IMF—it has slapped a 10% tax on large-scale industries for a year in order to earn $1.93 billion.
According to Andrew Wood, sovereign analyst at S&P Global Ratings, “if they are able to unlock these monies, other financial lenders like Saudi Arabia and the UAE [United Arab Emirates] may be willing to give loans.”
Arab World
According to reports, the Middle East situation has dramatically worsened in more nations and in more ways during the past two years. Lebanon, Syria, Iraq, Libya, and Yemen are on the verge of a humanitarian catastrophe due to the region’s spiralling poverty and the impending collapse of its economy, which threatens to plunge the region into even greater unrest. Not too long ago, conflicts and protests in the Arab world dominated the discussion at the U.N. General Assembly meetings in New York.
Ukraine
Heavy hitter investors like Morgan Stanley and Amundi warn that in light of Russia’s incursion, Ukraine would likely need to restructure its debt load of $20 billion or more.
When $1.2 billion in bond payments are due in September, things really get tight. Kyiv may be able to pay thanks to aid funds and reserves. Investors believe the government will follow Naftogaz’s lead after the state-run company requested a two-year debt freeze this week.
Kenya
Kenya spends almost 30% of its income on interest payments.
This situation is serious because it now lacks access to the capital markets and owes more than $500 million in obligations that mature in 2024.
Regarding Kenya, Egypt, Tunisia, and Ghana, Moody’s David Rogovic said, “These governments are the most susceptible simply owing to the quantity of debt coming due relative to reserves, and the fiscal challenges in terms of stabilising debt burdens.”
Maldives
The Maldives’ national debt has risen over the past few years and now exceeds its GDP by a wide margin.
Similar to Sri Lanka, the pandemic decimated a country with a strong reliance on tourism.
Despite the fact that countries that rely so heavily on tourism often have higher public debt ratios, the World Bank cautions that the island nation is particularly vulnerable to rising gasoline costs since its economy is not properly diversified.
According to the US investment bank JPMorgan, the vacation spot could default on its debt by the end of 2023.
Laos
More than 7.5 million people live in this landlocked country in South East Asia, and it has been months since it first faced the possibility of defaulting on its foreign loans.
In a nation where an estimated one-third of the population lives in poverty, the Russian invasion of Ukraine has caused oil prices to rise, further straining fuel supplies.
Long lineups for fuel have been reported by local media, and it has been stated that some homes are having financial difficulties.
The kip, the currency of Laos, has been declining and has lost over a third of its value this year when compared to the US dollar.
Higher US interest rates have made the dollar stronger and local currencies weaker, increasing their debt loads and raising the price of imports.
Laos, which is already deeply in debt, finds it difficult to make loan payments and cover imports like petrol. According to the World Bank, as of December 2017, the nation owes $1.3 billion in reserves.
China has provided Laos with sizable loans in recent years to help finance large-scale projects including a hydroelectric plant and a railroad. Beijing started 813 projects worth more than $16 billion last year alone, according to Laotian authorities who spoke with the Chinese state news agency Xinhua.
According to the World Bank, Laos’ public debt in 2021 was 88 percent of its GDP, with China responsible for about half of that amount.
In the nation, where one party, the Lao People’s Revolutionary Party, has held control since 1975, experts point to years of economic mismanagement.
Venezuela
Venezuela has had a protracted economic crisis. The World Food Programme estimates that one in three Venezuelans experience food insecurity and are in need of immediate food assistance (WFP). The country’s humanitarian and economic crises have only gotten worse as a result of the Covid-19-induced pandemic. Numerous riots over the course of years were caused by a persistent lack of clean water, electricity, and fuel, which forced hundreds of migrants to leave again. Hugo Chávez was president when the issue was first noticed, and it has since gotten worse as a result of a rise in political opposition to him.
Final Words:
The Countries which may Face Sri Lanka Like Economic Crisis have followed the footsteps of Sri Lanka. But many other nations are following Sri Lanka’s example. Europe’s Germany, Greece, Spain, and Portugal have promised tax rebates and energy subsidies to quell unrest. Zambia and Nigeria have followed the same in Africa. Asia’s Philippines, Singapore, and Indonesia are increasing social spending and providing direct financial assistance. However, experts believe that the rush to use such measures to soften the damage may only increase the chaos.
FAQs
Q.1- Which is the most indebted country in the world?
Japan
With a debt-to-GDP ratio of 234.18 percent, Japan, a country with a population of 127,185,332, is the country with the highest national debt in the world, following only Greece (181.78).
Q.2- What are the Countries which may Face Sri Lanka Like Economic Crisis
Following are some of the countries which are prone to economic crisis
∙ Sudan
∙ Afghanistan
∙ Bangladesh
∙ Pakistan
∙ Arab World
∙ Ukraine
∙ Kenya
∙ Maldives
∙ Laos
∙ Venezuela
Q.2- Which are 10 most indebted countries in the world
- Japan- National Debt $9.087 trillion
- Greece- National Debt $379 billion
- Portugal- National Debt $264 billion
- Italy- National Debt $2.48 trillion
- Bhutan- National Debt $2.33 billion
- Cyprus- National Debt $21.64 billion
- Belgium- National Debt $456.18 billion
- United States of America- National Debt $19.23 trillion
- Spain- National Debt $ 1.24 trillion
- Singapore- National Debt $ 350 billion
