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Sri Lanka desperately needs help to survive the worst crisis in recent memory. Its schools were closed for lack of fuel to keep children and teachers in class. Its prime minister said its efforts to arrange an IMF bailout were hampered by the severity of the financial crisis.
Alarm bells are sounding in many economies around the world, from Laos and Pakistan to Venezuela and Guinea.
Some 1.6 billion people in 94 countries face crises in at least one aspect of their food, energy and financial systems, with some 1.2 billion people living in “perfect storm” countries and highly vulnerable to cost-of-living and other crises, according to the UN Secretary-General Global A report last month by the Crisis Response Team, Chronic Stress.
The exact reasons for their woes vary, but all are at risk of soaring food and fuel costs Ukrainewhich has been hit just as much as the disruption to tourism and other business activities coronavirus The epidemic is fading.
As a result, the World Bank estimates that per capita incomes in developing economies will be 5% below pre-pandemic levels this year.
Economic stress has fueled protests in many countries, while short-term, high-interest borrowing to help fund pandemic relief programs has added more debt to 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 take place in countries already ravaged by corruption, civil war, coups or other disasters. They get along, but carry an undeserved burden of pain.
Here are some of the economies that are struggling or most at risk.
Afghanistan:
Since the Taliban took control of the United States and its NATO The Allies withdrew their troops last year.
Foreign aid — a longtime mainstay — stopped almost overnight, as governments stepped up sanctions, halted bank transfers, crippled trade and refused to recognize the Taliban government.
The Biden administration froze $7 billion in foreign currency reserves held by Afghanistan in the United States. About half of the country’s 39 million people face life-threatening food insecurity, and most civil servants, including doctors, nurses and teachers, have been without pay for months.
A recent earthquake killed more than 1,000 people, exacerbating those suffering.
Argentina:
About 4 out of 10 Argentines are poor, and as the currency depreciates, its central bank’s foreign exchange reserves are woefully short. inflation It is expected to exceed 70% this year.
Millions of Argentines have survived, thanks in large part to soup kitchens and state welfare programs, many of which are provided through powerful political-social movements linked to the ruling party.
A recent deal with the International Monetary Fund to restructure $44 billion in debt has faced questions, with critics saying the concessions will hamper economic recovery.
Egypt:
Inflation in Egypt soared to nearly 15 percent in April, driving poverty, especially among nearly a third of its 103 million poor.
They are already suffering from an ambitious reform plan that includes painful austerity measures such as floating the national currency and cutting subsidies for fuel, water and electricity.
The central bank has raised interest rates to curb inflation and devalue the currency, making it more difficult to repay Egypt’s huge foreign debt.
Egypt’s net foreign exchange reserves have fallen. Its neighbors Saudi Arabia, Qatar and the United Arab Emirates have pledged $22 billion in deposits and direct investment as aid.
Laos:
Before the pandemic hit, the small landlocked country of Laos had one of the fastest-growing economies. Its debt levels have soared and, like Sri Lanka, it is in talks with creditors over how to repay billions of dollars worth of loans.
This is a pressing issue given the country’s weak government finances. The World Bank said its foreign exchange reserves were equivalent to less than two months’ worth of imports.
These woes were exacerbated by the 30 percent devaluation of the Lao currency, the kip. Rising prices and job losses from the pandemic have the potential to exacerbate poverty.
Lebanon:
Lebanon shares with Sri Lanka a toxic mix of currency collapse, shortages, high inflation and starvation, queues to buy gasoline and a plummeting middle class.
It has also endured a protracted civil war, and its recovery has been hampered by a dysfunctional government and terrorist attacks. The proposed tax in late 2019 sparked prolonged anger against the ruling class and months of protests.
The currency began to depreciate, and Lebanon defaulted on about $90 billion in debt at the time, or 170 percent of GDP—one of the highest in the world. In June 2021, as the currency lost nearly 90% of its value, the World Bank said the crisis was one of the worst in the world in more than 150 years.
Myanmar:
The pandemic and political turmoil have helped Myanmar’s economy, especially after the army seized power from Aung San’s democratically elected government in February 2021.
This has led the West to impose sanctions on military-controlled business holdings that dominate the economy. The economy contracted 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 conflict and political violence.
The situation is so uncertain that the World Bank’s recent global economic update has ruled out Myanmar’s forecast for 2022-2024.
Pakistan:
Like Sri Lanka, Pakistan has been in emergency talks with the International Monetary Fund to revive a $6 billion bailout package shelved after the prime minister. Imran KhanThe government was overthrown in April.
Soaring crude oil prices pushed up fuel prices, which in turn drove up other costs, pushing inflation above 21%. A government minister has angered many Pakistanis by calling for less tea drinking to cut the $600 million bill for imported tea.
Pakistan’s currency, the rupee, has lost about 30 percent against the dollar in the past year. To gain support from the International Monetary Fund, Prime Minister Shahbaz Sharif raised fuel prices, scrapped fuel subsidies and imposed a new “super tax” of 10 percent on key industries to help repair the country’s tattered finances.
At the end of March, Pakistan’s foreign exchange reserves had fallen to $13.5 billion, equivalent to just two months’ worth of imports. “Macroeconomic risks are strongly skewed to the downside,” the World Bank warned in its latest assessment.
turkey:
Deteriorating government finances and widening trade and capital account deficits have exacerbated Turkey’s problems with high and rising debt, inflation (over 60%) and high unemployment.
After the troubled lira fell to an all-time low against the dollar and euro in late 2021, central banks turned to foreign exchange reserves to fend off currency crises. The blow from tax cuts and fuel subsidies to cushion inflation has weakened government finances.
Households are struggling to buy food and other goods, and Turkey’s foreign debt stands at about 54 percent of its GDP, an unsustainable level given high government debt.
Zimbabwe:
Inflation in Zimbabwe has soared above 130%, raising fears the country could return to the 500 billion percent hyperinflation seen in 2008 and create problems for its already fragile economy.
Zimbabwe struggles to generate sufficient dollar inflows for its largely dollarized local economy, which has been hit by years of deindustrialization, corruption, low investment, low exports and high debt.
Inflation has made Zimbabweans distrust the currency, increasing demand for dollars. Many people skip meals as they struggle to make ends meet.
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