Jakarta, CNBC Indonesia – The bankruptcy that gave rise to the economic and political crisis in Sri Lanka has become a great warning to the world. In fact, the threat of the Sri Lankan crisis has also haunted other countries.
This is due to the existence of countries that have an economic situation that is quite similar to that of the country. This can be seen from the large amount of foreign debt and high inflation.
Then which countries are threatened with bankruptcy like Sri Lanka? The following is a summary as quoted by BBC News, Monday (18/7/2022):
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1. Laos
The mainland-locked Southeast Asian nation has been at risk of defaulting on its foreign loans for several months.
Now, rising oil prices due to Russia’s attack on Ukraine have added to pressure on fuel supplies. This pushes up food prices in the country of 7.5 million people
Local media reported long lines for fuel, and said some households could not afford to pay their bills. Lao’s currency, the kip, has fallen and is down more than a third against the US dollar this year.
“Higher interest rates in the US have strengthened the dollar, and weakened local currencies, increasing their debt burden and making imports more expensive,” the media reported.
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Inauguration of the Laos-China high-speed rail project. (AP/Hu Chao)- – |
Laos, already deeply in debt, is struggling to repay the loan and also fund the country’s needs that it must import from other countries. The World Bank said the country had $1.3 billion in reserves as of December last year.
But its total annual external debt obligations are about the same amount until 2025. As a result, Moody’s Investor Services downgraded the communist -ruled country to ‘junk’ last month.
“Laotian public debt amounts to 88% of gross domestic product (GDP) in 2021, with nearly half of that figure owed to China,” the World Bank said.
China itself is quite diligent in providing loans to a country which incidentally is also a neighbor. According to Lao officials who spoke to Chinese state media Xinhua, Beijing executed 813 projects worth more than US$16 billion in the past year.
2. Pakistan
Fuel prices in Pakistan have risen about 90% since late May, after the government ended fuel subsidies. This is one of the country’s steps to continue the bailout program with the International Monetary Fund (IMF).
The economy is struggling with rising prices of goods. In June, the annual inflation rate stood at 21.3%, the highest in 13 years.
Like Sri Lanka and Laos, Pakistan also faces low foreign currency reserves, with nearly half of the country’s foreign exchange earnings declining since August last year.
The country also ended up imposing a 10% tax on large-scale industry for one year to raise $1.93 billion to reduce the gap between government revenue and spending.
 Supporters of an opposition party shout slogans as they celebrate the success of a no-confidence vote against Prime Minister Imran Khan outside the National Assembly, in Islamabad, Pakistan, Sunday, April 10, 2022. Pakistan’s political opposition ousted the country’s prime minister by a vote of no confidence. (AP/Anjum Naveed)-– |
“If they can open this fund, other financial lenders like Saudi Arabia and the UAE [Uni Emirat Arab] may be willing to lend,” said S&P Global Ratings analyst Andrew Wood.
Once again China plays a role here. Pakistan reportedly owes more than a quarter of its debt to Beijing.
“Pakistan appears to have renewed its commercial lending facility vis-a-vis China and this has added to its foreign exchange reserves and there are indications they will be reaching out to China for the second half of the year,” Wood added.
3. Maldives
The Maldives has experienced a swelling in its public debt in recent years. Currently, the debt has exceeded over 100% of its GDP.
Like Sri Lanka, the Covid-19 pandemic has hit the island nation, which relies heavily on tourism.
Countries that rely heavily on tourism tend to have higher public debt ratios. But specifically for the Maldives, the World Bank said the country was particularly vulnerable to higher fuel costs because its economy was not diversified.
US investment bank JPMorgan said the holiday destination was at risk of defaulting on its debt by the end of 2023.
 Tourists at Maldives Airport-– |
4. Bangladesh
Inflation hit an 8-year high in May in Bangladesh, touching 7.42%.
With reserves dwindling, the government has acted quickly to curb non-essential imports, relaxed rules to withdraw remittances from millions of migrants living abroad and cut back on overseas travel for officials.
“For economies with current account deficits – such as Bangladesh, Pakistan and Sri Lanka – governments face serious challenges in increasing subsidies. Pakistan and Sri Lanka have sought financial assistance from the IMF and other governments,” said S&P Global Ratings analyst Kim Eng Tan. .
“Bangladesh should re-prioritize government spending and impose restrictions on consumer activity,” he said.
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