Putin’s war destroys $81 billion economy in Sri Lanka, nation faces “solvency” issues because of risks stemming from unsustainable debt levels.
The International Monetary Fund staff report that Sri Lanka faces “solvency” problems due to risks rising from implausible debt levels that threatens to crash its $81 billion economy due to Putin’s war.
President Gotabaya Rajapaksa had to seek IMF aid due to the surge in oil prices and the loss of tourists because the war in Ukraine exacerbated its foreign exchange crisis.
The IMF said in its Article IV consultation report, released on Friday in Washington, “the country’s “debt overhang,” along with persistent fiscal and balance-of-payments shortfalls, “will constrain growth and jeopardize macroeconomic stability in both the near and medium term.”
It also said, ““Based on staff analysis, the fiscal consolidation necessary to bring debt down to safe levels would require excessive adjustment over the coming years, pointing to a clear solvency problem.”
Commotion reigns as Sri Lankans queue up to buy fuel at a fuel pumps in Colombo.
The full report provides further analysis of the South Asian island nation’s debt and finances. A summary of the report released earlier in the month said Sri Lanka faced unsustainable debt levels and needed a “credible and coherent” strategy to restore stability.
Negotiations on a possible aid package are expected to start in April, when Finance Minister Basil Rajapaksa, a brother of the president, travels to Washington.
The spiraling crisis has also led the country to raise interest rates, devalue the local currency and curb non-essential imports.
Sri Lanka has about $2 billion of reserves against $3.9 billion of foreign-currency debt due for the remainder of 2022, according to Bloomberg calculations based on central bank data. This includes $1 billion of sovereign bonds maturing in July.
Sri Lanka has to be “prepared to manage the negatives,” Central Bank of Sri Lanka governor Ajith Nivard Cabraal said on Thursday, referring to entering an IMF program, but did not explain further.
Sri Lanka’s worsening economic crash may start a mass exodus towards India
It all probably started when the tourism sector got hit due to the COVID-19 pandemic 2019. The exodus could be the beginning. Intelligence officers in Tamil Nadu, the report said, have got information that “around 2,000 refugees” are likely to arrive over the next few weeks.
“Construction workers and daily wagers are struggling due to inflation across the country…More people are likely to leave the country unless the economy stabilises,” said Suresh Premachandran, who heads Sri Lanka‘s political outfit Eelam People’s Revolutionary Liberation Front.
“Construction workers and daily wagers are struggling due to inflation across the country…More people are likely to leave the country unless the economy stabilises,” said Suresh Premachandran, who heads Sri Lanka‘s political outfit Eelam People’s Revolutionary Liberation Front.
Sri Lanka is heavily dependent on imports of essential items such as petroleum, food, paper, sugar, lentils, medicines, and transportation equipment. With the Central Bank of Sri Lanka’s foreign exchange reserves ebbing down to around $2.3 billion (17,536 crore rupees) now—nearly half of what it was a year ago—the country has barely any money to pay for these imports or to service its external debt.
Backlash of Putin’s War
Vladimir Putin’s war on Ukraine still refusing to back down even when Ukraine President Volodymyr Zelensky said that his country should accept that it will not become a member of the US-led NATO is still adamant on war, attacking innocent civilians.
The effects of his war and the global response to it will forever change Russia’s economic future, pulling it back 30 years, experts analyse.
As the country’s economy crashes, with the exodus of global brands, it will cause a shift in how middle-class Rusians will make and spend their money.
Experts say the coming period of Russian economic isolation could last at least five years, but more likely will be measured in decades.
What exactly does Putin want from this war? Is it just a show of power, but at the cost of innocent lives including children? This rightfully can be said of every war waged, where innocent children and civilians have been killed.
You might also want to read https://hamslivenews.com/2022/03/19/un-rights-office-reported-816-confirmed-civilian-deaths-in-ukraine/