The Head of the International Monetary Fund (IMF) of Kristalina Georgieva has quoted an example of an unprecedented economic crisis in Sri Lanka to warn other countries that they can also face the same situation in dealing with high levels of debt and limited policy space.
“I hope that the global economic view is as bright as the sky in Bali, but unfortunately, no. The view has become significantly dark, and the uncertainty is very high. The risk of the decline that has been warned by the IMF has previously been warned,” International Director of the Monetaline Fund Implementing Georgieva said at the meeting at the meeting Minister of Finance G20 and Governor of the Central Bank in Indonesia.
“Countries with high levels of debt and limited policy space will face additional strains. It is no longer seen from Sri Lanka as a warning sign,” Georgieva said on Saturday.Comments from IMF MD came when Sri Lanka was experiencing the toughest economic crisis and was in a difficult position where he could not pay important imports, fuel, food, and medicines due to the acute forex crisis.
The government declared bankruptcy in mid -April by refusing to respect its international debt.President Gotabaya Rajapaksa was forced out of power last week because of poor economic handling.MS Georgieva said that developing countries have also experienced a sustainable outflow of capital for four consecutive months, placing their dreams to catch up with the advanced economy in risk.
Although he did not directly show any names of the country, the same global headwind – the increase in inflation and the increase in interest rates, the depreciation currency, the high level of debt and the fraud of foreign currency reserves – had influenced other economies in the region, the BBC report.
Pakistan is one of the countries, who has witnessed an unsteady economy for some time now.The price of fuel in Pakistan has increased by around 90 percent since the end of May, after the government ended fuel subsidies. This tries to control expenses when negotiating with the IMF to continue the bailout program, the report said.
The economy is struggling with the increase in the cost of goods. In June, the annual inflation rate reached 21.3 percent, the highest in 13 years, the report added.Maldives and Bangladesh are two countries that are on the verge of witnessing the economic crisis if the situation is not controlled.
Maldives has seen his public debt swell in recent years and is now far above 100 percent of his GDP.Like Sri Lanka, Pandemi is the Maldives economy which is very dependent on tourism.On the other hand, in Bangladesh inflation has reached the highest 8 years in May in Bangladesh, touched 7.42 percent, the report said.
With thinning reserves, the government has acted quickly to curb unnecessary imports, casual rules to withdraw money from millions of migrants who live abroad and reduce foreign trips for officials, the report said.