Sri Lanka is facing one of the worst economic crisis in the history. Politicial Instability has further aggravated the situation. The factors that led to the economic crisis in the region were insufficient financial sector regulation, stagnating real wages, significant tax cuts which drained the revenues of the government.
One of the major reasons for the crisis was the shortage of Foreign currency which led to the decrease in the imports of essential goods. Being a nation which is highly dependent on imports, the country had no revenue/money to buy the essential items such as milk, petrol etc.
The country saw unprecedented violence as well as deep turmoil in the political spheres. Sri Lanka had a lot of debts with which it was surviving till 2019. People struggled to buy essential items such as food, fuel and medicine.
Srilanka ran out of fuel. The shift of the policy of the country towards organic farming and banning the use of fertilisers and agro-chemicals fertilisers further created chaos. It further elevated the agricultural crisis in the country.
The reduction in the tea production also became a factor of the crisis. There have been major power cuts and the inflation of the country was above 50% recorded for the month of June. The governor of the Central Bank even warned that the inflation could go to 70% in the times to come.
There have been many external factors such as the war between Ukraine and Russia, and depreciation of the currency that has been added to the Problem of the island-nation.
India has helped Sri Lanka in a big way. From providing economic assistance to providing essential items to help the citizens, India is playing a key role in bringing stability in the country and is serious with achieving economic recovery of the country.
What happened in Pakistan?
Our neighbour Pakistan has been in the grip of an economic turmoil leading to high inflation as well as depreciation in the country’s currency. With rising poverty, low investment and higher debts-Pakistan is likely to go the Sri Lanka way.
The public debt stood at 83% in 2019. According to the Economic report of Pakistan, the country’s GDP growth will stand at 5.97% for the year 2021-22.
The prices of essential commodities soared high! It is now being fully dependent on imports With Srilanka already going through the economic as well as political crisis and other neighbouring countries facing similar circumstances, it becomes necessary to ponder over the events that led to the crisis.
In a month’s time, most of the countries neighbouring India have started facing an economic crisis. This Economic crisis in South Asian countries will be affecting the region as well as the world at large. Countries like Sri Lanka and Pakistan have been facing economic turmoil for a long time now.
From Bangladesh to China and from Srilanka to Myanmar and Pakistan, all these countries are facing economic crises. There are different reasons for the crisis in all the neighbouring countries.
of essential commodities. The Trade deficit also increased during the pandemic.
The recent political turmoil and the degrading security situation in the country has resulted in the decrease in the investment in the country. The country has even hiked the electricity tariff by 7.91 Pakistani Rupee per unit.
The Pakistani rupee hit a record low at 228 per $. The stocks continue to fall. The Finance Minister has blamed it on the politics of the country that has caused depreciation in the value of Pakistani Rupee.
What is happening in Bangladesh?
A fortnight back, Bangladesh brought in restrictions on energy and also hiked the fuel prices. The fear of Bangladesh entering into an economic crisis has risen because of the massive foreign loans the country has taken.
The rise in prices as well as the soaring inflation reminds us of the circumstances that led to the crisis in Sri Lanka. The country has already been facing shortages of essential commodities and running out of fuels.
The country’s imports have risen while the foreign reserves have gone down. The Exports have reduced as compared to the imports in the country. The country has taken a big loan for the ‘White Elephant Project’.
The country has taken several steps in order to avoid an economic crisis, the government has slashed spending and also increased taxes on luxurious items. They have started saving the currency reserves.
In a recent statement, Nazneen Ahmed, Bangladesh economist at the United Nations Development Programme office in Dhaka said that in order to avoid the economic crisis the government will have to complete all the projects without additional costs and delay.
What is happening in Myanmar?
Since the Military coup that took place in 2021, the country has embraced an economic crisis. It is estimated that the country’s growth rate will be 1%. The economic activities have suffered and there are cash flow shortages caused due to lack of access to banking activities.
The official data show that in the year 2021, the country’s economy shrunk by almost 20%. The infighting between the Military and the democratic front has been one of the causes of the delayed recovery from the pandemic.
Power cuts along with inflation is yet another common reason for the financial instability of the country that has further driven the country’s economy backward. The shortage of foreign currency and imposition of restrictions on the country can be said as one of the important causes of the economic crisis.
What is happening in China?
The banking crisis in the country has driven forward the slow growth and has increased the fear of the economic crisis of the country.
China’s Henan province witnessed clashes between police and public after Bank of China’s Henan branch announced that the deposits were investments and therefore, could not be withdrawn!
This has shown that the country is facing a risk of an economic crisis.
It is noteworthy that India’s economy is set to grow at 7.5% in the year 2022 and has been one of the fastest growing major economies of the world. India’s economic recovery post pandemic has certainly been remarkable.
While India’s neighbours are struggling through the economic crisis, India stands tall with a promising future.