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Emergency declared in Sri Lanka: Economic crisis looming is south-Asia

Forex reserves of India lowest in a year, Pakistan and Nepal facing similar downfall amid heavy debt as back to back global crisis emerge.

Sri Lankan President Gotabaya Rajapaksa has declared a state of emergency for the second time in two months as protest against the ruling establishment over inflation and economic crisis rages on.

Mr. Gotabaya earlier declared Emergency regulations on April 1, after street protests intensified in Sri Lanka, as citizens struggled to access and afford essential items including food, fuel, and medicines, amid acute shortages and skyrocketing prices. He revoked the Emergency in five days, ahead of a possible vote on it in Parliament.

The Island nation of 22 million people is currently reeling under serious economic crisis with the Rajapaksa leadership unable to figure out the way out as the protests are not weakening and it is quite evident that even a change of PM or government will be able to pacify the public.

While India has given USD 2.5 billion in support, Colombo has gone back to its principal supporter, China, asking for a debt roll-over like Pakistan. Sri Lanka is also in negotiations with the IMF for financial aid to stem the present crisis.

China holds 10% of Sri Lankan total debt with more held by Japan, World Bank, and the Asian Development Bank. India holds nearly 3%t Sri Lankan debt.

The economic situation of India’s other two neighbors and China friends, Nepal, and Pakistan, is also in dire straits due to mess created by poor governance, rising external debt and food-fuel inflation.

All the three countries under severe economic stress are part of Chinese Belt Road Initiative and under serious debt of Beijing on account of commercial loans from Chinese EXIM bank.

India’s foreign exchange (FX) reserves itself fell below $600 billion for the first time in a year, weighed by persistent capital outflows and the rupee’s weakness driven by the dollar’s broad surge in recent months.

Next few months will be tough for the South Asian neighbours, especially Indian bordering countries as India is still in hold of its economic situation unlike Sri Lanka. Pakistan and Nepal who have heavy external debt.

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