With the fall of the Sri Lankan government, will those weak, indebted countries fall like dominoes?
The food, fuel and financial crises triggered or exacerbated by the Russian-Ukrainian conflict could destabilize poorer countries, leading to debt defaults in more than 70 countries or in Sri Lanka's footsteps.
Demonstrators stormed the palace
According to CCTV news, at about 13:00 local time on the 9th, a large number of demonstrators in Sri Lanka rushed into the presidential residence in the capital Colombo. In addition, a large number of demonstrators surrounded the Presidential Secretariat in Colombo.
According to the latest news, at about 14:00 on the same day, demonstrators rushed into the presidential office area. It is reported that President Gotabaya Rajapaksa has left the capital.
Videos uploaded to social media platforms from the president's residence show thousands of protesters surrounding the palace and then storming into it to demand the resignation of President Rajapaksa.
At about 16:00, Sri Lankan demonstrators stormed the Prime Minister's Office in the capital, Colombo.
According to media reports, on the evening of the 9th local time, Sri Lankan demonstrators even set fire to prime minister Viklamasingha's private home.
On the same day, the largest demonstration in recent times broke out in Colombo, and in addition to the citizens of the capital, many people from many places came to Colombo to participate in the demonstration. It is also understood that two demonstrators were shot and wounded near the presidential residence.
Both the President and Prime Minister of Sri Lanka resigned
On July 9, local time, the Office of the Speaker of parliament of Sri Lanka confirmed that President Rajapaksa had informed Speaker Abawadna that he would resign on the 13th of this month.
Sri Lanka's Prime Minister's Office issued a statement earlier in the day saying Prime Minister Vikramasinghe was willing to resign in favor of forming a new government with all parties involved. Vikramasingha then said on social media:
In order to ensure the continued viability of the Government, including the safety of all citizens, I today accept the best advice from the leaders of the parties to make way for a full-party Government. To that end, I will resign as Prime Minister.
Local media quoted Vikramasingha's media advisers as saying that Vikramasingha would resign as prime minister after establishing a full-party government and ensuring a parliamentary majority.
Vikramasingha issued a statement to the media on the evening of the 9th, saying that he had proposed to the president to form an all-party government. When the current Government resigns, Sri Lanka must form a new One. A country without a government is unwise.
Sri Lanka's constitution stipulates that if both Rajapaksa and Vikramasingha resign, the speaker of parliament will be in power for a month.
Sri Lanka has just declared bankruptcy
According to the Global Network quoting Singapore's Lianhe Zaobao website on July 6, Sri Lankan Prime Minister Viklemasingha said that Sri Lanka has gone bankrupt and this unprecedented economic crisis will last at least until the end of 2023.
Viklemasingha told Congress on July 5 that the country would fall into a deep recession this year and that severe shortages of food, fuel and medicine would continue. "We will face many difficulties in 2023. This is the reality we face. ”
Sri Lanka's ongoing bailout talks with the International Monetary Fund depend on a debt restructuring plan with creditors by August, he said. "Since the country is in bankruptcy, we have to submit another sustainable debt servicing plan to them. Only when the (IMF) is satisfied with the plan can we reach an agreement. ”
Inflation is expected to rise to 60 per cent, he said, and the government aims to curb inflation by stopping the printing of rupees.
Sri Lanka, also known as Ceylon, is known as the "Pearl of the Indian Ocean" in this tropical country at the equator, known for its alpine tea plantations and blue sea beaches surrounded by palm trees, and is a wonderland for many foreign travelers.
However, Sri Lanka is in the midst of a severe economic crisis, announcing in April that it would stop paying off its external debt because of the need for foreign exchange reserves to pay for imports. In May, the country had accumulated $78 million in arrears in foreign debt and had no choice but to declare a debt default, becoming the first country to default on foreign debt since the beginning of the century.
In recent months, the 22 million-strong island nation has faced a shortage of foreign exchange, soaring prices, and tight electricity and oil supply, with protesters launching a series of demonstrations demanding that the government quickly resolve the country's economic crisis.
One of the biggest reasons for the popular protests is Sri Lanka's urgent need for fuel and other energy supplies, which has spent all of its foreign currency to buy fuel, bringing its economy to a standstill. Last month the government began rationing goods, resulting in severe shortages. Nearly 5 million people in Sri Lanka are in dire need of food.
As of February, Sri Lanka reportedly had only $2.3 billion in foreign exchange reserves, while the country's external debt needs to be repaid this year is at least three times that amount.
Dominoes fall! Which countries will follow suit?
According to a Wall Street Journal report in May, the United Nations said the food, fuel and financial crises triggered or exacerbated by the Conflict between Russia and Ukraine could destabilize poorer countries, leading to debt defaults in sri Lanka in more than 70 countries.
After Sri Lanka, will Latin America be the second domino of the world debt crisis? Sri Lanka's economy has suffered a major impact on the new crown epidemic, and the Russian-Ukrainian conflict and the Fed's interest rate hikes have accelerated its "thunder" into an economic crisis. At the same time, economic pressures in other emerging countries are intensifying.
Since March, Turkey, Egypt, Tunisia and other countries have seen high inflation, plunging exchange rates and facing debt defaults. In early April, Lebanon declared its central and central government bankrupt.
The situation in Latin American countries is also not optimistic. As of mid-April, Peruvian dollar bonds had become the second worst-performing bond in the world after Sri Lanka, falling more than 10 percent this year, data showed. The external debt ratio of Colombia, Argentina, Ecuador, Uruguay and many other countries in the region has exceeded 50%, far exceeding the international safety line of 20%. Belize and Grenada are among the countries with severe debt problems and may even be unable to repay their external debt by the United Nations Development Programme and the World Bank. The share of external debt in countries such as El Salvador, Dominica and Costa Rica has also continued to increase.
In addition to Latin American countries, these countries are also in extreme difficulties or at the greatest risk.
Pakistan, like Sri Lanka, has been in urgent consultation with the IMF to restart a $6 billion bailout program. Over the past year, pakistan's currency has depreciated by about 30% against the dollar. The country's foreign exchange reserves have fallen sharply, and its foreign exchange reserves are only enough to cover imports for less than two months, and Pakistan faces a looming crisis of international default and bankruptcy.
The deterioration of the Turkish government's finances and the widening trade deficit have exacerbated Turkey's debt, which is about 54% of GDP.
Inflation rose to 191.6 percent in Zimbabwe in June, more than double the increase in consumer prices two months ago. On June 28, local time, Zimbabwe's central bank announced that it would raise interest rates to record levels, raising the benchmark interest rate from 80% to 200%, and raising interest rates by 12,000 basis points. This year, the bank's cumulative rate hike reached 14,000 basis points, the highest in the world.
Since the Withdrawal of the United States and its North Atlantic Treaty Organization (NATO) last year, foreign aid, a long-standing pillar, has left Afghanistan in deep economic crisis when the Taliban returns to power. U.S. President Joe Biden's administration has frozen $7 billion in U.S. foreign exchange reserves in Afghanistan. The recent earthquake has exacerbated the suffering of this country.
Argentina's inflation rate is expected to exceed 70% this year. Millions of Argentines have largely survived on charitable kitchens and state welfare programs, many of them through politically powerful social movements linked to the ruling party. A recent $44 billion debt restructuring deal with the International Monetary Fund (IMF) has been criticized for concessions that would hinder economic recovery.
Inflation soared nearly 15 percent in April, leaving nearly a third of its 103 million people living in poverty. Before that, they had long been victimized by ambitious reform programs such as floating monetary policies and austerity measures such as fuel and hydropower subsidies.
Central banks raised interest rates to curb inflation and allow the currency to depreciate, making it harder for Egypt to repay its huge foreign debt. Egypt's net foreign exchange reserves continue to decline, and Saudi Arabia, Qatar and the United Arab Emirates have pledged to provide assistance such as $22 billion in deposits and direct investment.
In addition, Laos, Lebanon, and Myanmar are also facing many unfavorable conditions such as currency collapse, shortage of goods, severe inflation, increased hunger, long queues for people buying gasoline, and a sharp decline in the number of middle classes. It has also experienced a long civil war, with government incapacitation and terrorist attacks hampering recovery.
The government's proposed introduction of a new tax at the end of 2019 sparked long-running anger against the ruling class, leading to months-long demonstrations. Next, Lebanon's currency began to depreciate, failing to repay about $90 billion in debt that amounted to 170 percent of the country's GDP. Lebanon is one of the most indebted countries in the world.
Background information:
The world's first bankrupt country! Debt 140 billion! Back to the top in less than 10 years!
What is State Bankruptcy?
The concept of "state bankruptcy" was introduced by the International Monetary Fund (IMF) in 2002.
International bankruptcy is usually defined as a country's financial revenues insufficient to pay the foreign exchange necessary for its imported goods, or its sovereign debt is greater than its GDP.
"State bankruptcy" is not the collapse of state power or even the demise of the state, but only a statement of the credit rating of the national economy, which is colloquially speaking, "a country is insolvent", and the accounting term is "sovereign debt is not fulfilled", that is, a country's debts to other countries cannot be repaid when due, or even unable to repay interest.
How serious are the consequences of state bankruptcy? If a government is too much to repay, all citizens will be saddled with debt until someone takes over or pays it off. In the end, all citizens will live in internal and external debt, and their economies will be in danger of collapsing. If a borrowing State controls a bankrupt State in this way, its State will become a vassal or puppet State, losing its economic and political independence, with very serious consequences.
During the 2008 financial crisis, Iceland suffered heavy losses, with a GDP of only $19.37 billion and a foreign debt of more than $138.3 billion, almost seven times its gross national product, which also led to Iceland becoming insolvent and becoming the world's first country to truly go bankrupt.
But Iceland quickly survived the financial crisis, and in the next 10 years, its GDP grew to nearly $25 billion, and its per capita GDP exceeded $70,000, once again occupying a place in the ranks of developed countries.
Synthesized from CCTV News, Overseas Network, Global Network, Global Times, CCTV Network, etc