Bangkok (AFP) – Sri Lanka desperately needs help surmounting the worst crisis in recent memory. Its schools are closed due to a lack of fuel to take children and teachers to classrooms. His prime minister said his efforts to arrange a rescue plan from the International Monetary Fund were hampered by the severity of his financial crisis.
But it’s not the only economy in serious trouble as the prices of food, fuel and other basic items have skyrocketed with the war in Ukraine. Alarm bells are ringing for many economies around the world, from Laos and Pakistan to Venezuela and Guinea.
About 1.6 billion people in 94 countries face at least one dimension of the food, energy and financial systems crisis, and about 1.2 billion of them live in “perfect storm” countries, highly vulnerable to the cost of living crisis as well as others. In the long term, according to a report last month by The Global Crisis Response Group of the United Nations Secretary-General.
The exact causes of their problems are varied, but they all share the growing risk of rising food and fuel costs, spurred by Russia’s war on Ukraine. That hit just as disruptions to tourism and other business activities from the coronavirus pandemic were fading away. As a result, the World Bank estimates that per capita income in developing economies will be 5% below pre-pandemic levels this year.
Economic pressures are fueling protests in many countriesMeanwhile, short-term borrowing and higher interest to help fund pandemic relief packages has piled more debt on countries already struggling to meet repayment obligations. According to the United Nations, more than half of the world’s poorest countries are in debt distress or at high risk
Some of the worst crises occur in countries that have already been devastated by corruption, civil war, coups, or other disasters. They are confused, but with an undue burden of suffering.
Here’s a look at a few of the economies in dire distress or at greater risk.
Afghanistan was suffering from a severe economic crisis Since the Taliban seized control of the United States and its NATO allies, they withdrew their forces last year. Foreign aid – which had long been a mainstay – practically ceased overnight and governments piled on sanctions, halting bank transfers, crippling trade and refusing to recognize the Taliban government. The Biden administration froze $7 billion of Afghanistan’s foreign exchange reserves held in the United States. About half of the country’s 39 million people face life-threatening levels of food insecurity, and most civil servants, including doctors, nurses and teachers, have not been paid in months. Recently killed an earthquake More than 1,000 people add to that misery.
About four in 10 Argentines are poor and their central bank is seriously declining on foreign reserves as its currency weakens. Inflation is expected to exceed 70% this year. Millions of Argentines live largely thanks to soup kitchens and government welfare programmes, many of which are channeled through politically powerful social movements linked to the ruling party. A recent deal with the International Monetary Fund to restructure $44 billion in debt faces questions about concessions that critics say will hamper recovery.
Inflation rate in Egypt It rose to nearly 15% in April, depriving nearly a third of its 103 million people living in poverty. They were already suffering from an ambitious reform program that includes painful austerity measures such as floating the national currency and reducing fuel, water and electricity subsidies. The central bank raised interest rates to curb inflation and devalue the currency, which made it more difficult to pay off Egypt’s huge foreign debt. Egypt’s net foreign reserves declined. Saudi Arabia, Qatar and the United Arab Emirates pledged $22 billion in deposits and direct investments as assistance.
Small, landlocked Laos was one of the fastest growing economies until the pandemic. Its debt levels have risen and like Sri Lanka, it is in talks with creditors about how to repay billions of dollars in loans. This is an urgent issue given the weak financial resources of the government in the country. The World Bank says its foreign reserves are equivalent to less than two months of imports. The 30% drop in the Lao currency, the kip, has exacerbated those problems. Rising prices and job losses due to the pandemic threaten to exacerbate poverty.
Lebanon shares Sri Lanka A toxic combination of a currency collapse, shortages, punishing levels of inflation and rising hunger, gas queues and a crumbling middle class. She also suffered from a long civil war, as government dysfunction and terrorist attacks hampered her recovery.
The proposed taxes in late 2019 sparked long-standing anger against the ruling class and months of protests. The currency started to slide and Lebanon defaulted on nearly $90 billion at the time, or 170% of GDP – one of the highest rates in the world. In June 2021, after the currency lost nearly 90% of its value, the World Bank said the crisis was classified as one of the worst the world has seen in more than 150 years.
The epidemic and political instability have ravaged Myanmar’s economy, especially after the military seized power In February 2021 from the elected government of Aung San Suu Kyi. This led to Western sanctions on the commercial properties controlled by the military and which dominate the economy. The economy shrank by 18% last year and is expected to barely grow in 2022. More than 700,000 people have fled or been forced from their homes due to armed conflicts and political violence. The situation is very uncertain, the latest global economic update from the World Bank has ruled out the forecast for Myanmar for the period 2022-2024.
Like Sri Lanka, Pakistan is in urgent talks with the International Monetary Fund, hoping to revive a $6 billion rescue package that was suspended after the government of Prime Minister Imran Khan was toppled in April. Higher crude oil prices drove up fuel prices which in turn drove up other costs, pushing inflation over 21%. A plea by a government minister to cut back on tea to cut the $600 million bill for imported tea angered many Pakistanis. The Pakistani rupee has fallen by about 30% against the US dollar in the past year. To get IMF support, Prime Minister Shahbaz Sharif raised fuel prices, removed fuel subsidies and imposed a new 10% surcharge on key industries. To help repair the country’s dilapidated finances. As of late March, Pakistan’s foreign exchange reserves had fallen to $13.5 billion, equivalent to just two months of imports. The World Bank warned in its latest assessment that “macroeconomic risks are strongly tilted to the downside”.
Deteriorating government finances and growing trade and capital deficits have exacerbated Turkey’s problems with high and spiraling debt, inflation – more than 60% – and high unemployment. The central bank resorted to using foreign reserves to stave off a currency crisis, after the embattled lira plunged to an all-time low against the US dollar in late 2021. Tax cuts and fuel subsidies to mitigate inflation have weakened the government’s public finances. Families struggle to buy food and other goods, while Turkey’s external debt is around 54% of its GDP, an unsustainable level given the high level of government debt.
Zimbabwe’s inflation rate has soared to more than 130%, raising fears that the country will return to hyperinflation in 2008 that reached 500 billion percent and caused problems for its already fragile economy. Zimbabwe is struggling to generate enough green currency needed for its largely dollarized domestic economy, which has suffered from years of deindustrialization, corruption, low investment, low exports and high debt. Inflation distrusted Zimbabweans in the currency, which increased the demand for the US dollar. Many skip meals because they struggle to make ends meet.
Associated Press writers Munir Ahmed in Islamabad, Pakistan and Krishan Francis in Colombo, Sri Lanka contributed to this report.