After Sri Lanka, there are indications that more countries including Pakistan are moving towards economic crisis. According to World Bank figures, the debt burden of low-income, developing countries has been alarmingly high for the past ten years.
The situation in these defaulting countries is dire as fears grow that the world is heading into recession. When a country borrows and implements development projects and is unable to repay it, all sectors of the economy collapse together.
At a time when global inflation, climate change and war combine to create crises, the debt crisis is denying even food to people in developing countries.
Crisis in 69 countries
According to the World Bank, around 12 countries are already in deep recession. 69 countries may face similar consequences as Sri Lanka is currently facing. Of these 69 countries, 19 countries are in Latin America, 25 countries are in Asia-Pacific and 25 countries are in Africa.
The situation in Ukraine, Tunisia, Pakistan, Egypt, El Salvador, Peru, Argentina, Ghana, Kenya, Ethiopia, Turkey, Belarus, Ecuador and Nigeria is also worsening. Budget deficits are increasing in all these countries. Many countries use more than half of their income to pay back interest on borrowings.
Depreciation of Currencies
Not only the debt obligations but also the devaluation of the currencies of these countries is creating a big problem. The devaluation of the Sri Lankan rupee against the dollar is currently the most deplorable. Along with this, the draining of foreign exchange reserves and other reserves of these countries makes the problems uncontrollable. Individuals and economies reach a point where things get out of hand when fuel price hikes lead to inflation.
War-raising crises
Ordinary people in many of the most affluent European countries are facing the cost of living crisis head-on. With the US raising interest rates, even central banks in countries like Canada and Singapore are tightening monetary policy in anticipation of the risk. Uncertainty due to continued war is also stunting the growth of financial institutions globally. Although no one can predict when, how and where the financial crisis will begin, economists predict that the world is headed for a global recession.
English Summary: World is Fell into an Economic Crisis