Our completely unnecessary Covid measures and our blind panic and our feeding of the American disinformation machine and Big Pharma have caused harm and distress all over the globe.
Well here’s another example I just read about today. Sri Lanka isn’t too rich and it is not too smartly handled (sounds like a lot of other places) and it depends heavily on tourism.
Which our covid madness destroyed. And that has destroyed Sri Lanka.
Which means the fat cats there are fine. But the people are going to be impoverished, lose homes etc, go into debt, get hungry, even starve and govt services will be rundown often to nothing, nowhere, which, you understand means such things as hospitals and medicine generally.
Done a right good job, eh, while we were walking around with our useless masks and poisoning ourselves with a dangerous injection.
Here, this is from ‘boomfinanceandeconomics’ but I’ve extracted this story to make it easier.
SRI LANKA DEFAULTS
COVID PANIC IS CAUSING COVID CHAOS
If you look at the Wikipedia entry for “Politics of Sri Lanka” you will find this summary –“Civil society participation in decision-making and opinion-shaping is very poor in Sri Lanka. Professionals, civil society groups, media etc. do not play a significant role in Sri Lankan politics and, as a result, many aspects of the lives of ordinary citizens are politicized.” They should pay more attention.
Last week, Sri Lanka has reneged on its bond coupon repayments, effectively putting the nation into default on its sovereign bonds issued to foreign investors. The panic reaction to Covid in 2020 from the governments of many nations has caused this terrible predicament. Over the last 2 years, since the Covid panic erupted, the Sri Lanka’s critical tourism industry has been devastated. Thus, it has been unable to earn sufficient foreign currency which it needs to repay its debt commitments to external investors. Its balance of trade, which has been in strong deficit for the last 20 years, has declined markedly this year. As well as being unable to repay its external debts, Sri Lanka cannot now pay for many essential imported items such as fuel, food and medical supplies. At least 50 % of its energy is sourced from external nations who expect and demand payment in currencies other than the Sri Lankan currency.
Recently, the governor of Sri Lanka’s central bank, P. Nandalal Weerasinghe said — “We need to focus on essential imports and not have to worry about servicing external debt. It has come to a point where making debt payments is impossible.” So Sri Lanka is now seeking a loan from the IMF (International Monetary Fund).
Poor leadership has consequences. Let’s look at the economic situation.
Sri Lanka’s annual CPI inflation rate is rapidly rising and is now at 18.7 %. The central bank has had to raise its key interest rate from below 6 % to almost 14 % in the last month. Its foreign exchange reserves are falling rapidly towards Zero.
The country has foreign debt payments of around $4 billion due this year, including a $1 billion international sovereign bond maturing in July. A coupon payment of $ 78 million is due on Monday 18th April (tomorrow) for two of its bonds that mature in 2023 and 2028, (though there is a 30-day grace period). Its current Debt to GDP ratio is 100 %. Sri Lanka has never previously defaulted on its debt. Prior to the crisis, Sri Lanka’s annual GDP (expressed in US Dollars) was approximately US$ 82 Billion.
The government has run a budget deficit persistently for many years spending more than it receives in taxation revenues and covering the gap by issuing bonds to investors. So it has run a large budget deficit and a large trade deficit while borrowing endlessly. This would be OK if there was great confidence in its currency and confidence in the nation’s ability to generate better economic prospects in the future. So let’s look at confidence in its currency. This is, as they say, where the rubber meets the road.
The Sri Lankan currency, the SL Rupee known as the LKR, has been in steady decline against the US Dollar for over 40 years. In 1980, 15 Rupees purchased one US Dollar. Early this year, 200 Rupees were required in exchange for one Dollar. In the last month, it has dramatically collapsed by a further third in price due to a devaluation by the Government. Now, 325 Rupees are required to purchase one US Dollar in the foreign exchange market.
The Sri Lankan share market has now ceased trading (presumably only for 5 days). The 22 Million people of Sri Lanka are now experiencing a dramatic collapse of their living standards. Lack of food, energy and medicines is imminent. Electricity supplies are haphazard because imports of oil have stopped and oil is needed to run its thermal power plants which supply about 40 % of the national electricity supply. Coal and oil are the major sources of energy with Hydro contributing about 18% of the total. Total energy generation has plunged by 22.7 % since January.
In March, school examinations had to be cancelled due to a lack of paper. On 1st April, protestors attempted to break into the President’s house. On 4th April, the entire Cabinet of the Government resigned. Protestors are demanding the resignation of the President.
China is the largest holder of Sri Lankan sovereign bonds but appears to own only 10 % of the total on issue.
In BOOM’s estimation, Sri Lanka must now decide between the IMF (a US Proxy) and China/Russia/India to ensure its future. BOOM expects it to choose the China team because that will help solve its perpetual energy crisis. The energy super suppliers of Russia and Iran can come to its aid rapidly in return for Sri Lankan currency if Sri Lanka and China request such aid.
At the end of the day, no economy can function without a reliable energy supply and without confidence in its financial management and its currency. Without those, every economy plunges from complexity back into an agrarian situation based upon agriculture and dependent upon manual labor