Sri Lanka’s crisis rings alarm for other troubled economies, from Lebanon to Pakistan

An investor monitors indexes on the big screen at the Pakistan Stock Exchange (PSE), in Karachi, Pakistan, June 24, 2022. (AP)
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Updated 06 July 2022

Sri Lanka’s crisis rings alarm for other troubled economies, from Lebanon to Pakistan

  • Like Sri Lanka, Pakistan has been in urgent talks with the IMF, hoping to revive a $6 billion bailout package 
  • Soaring crude oil prices pushed up fuel prices which in turn raised other costs, pushing inflation to over 21 percent

BANGKOK: Sri Lanka is desperate for help with weathering its worst crisis in recent memory. Its schools are closed for lack of fuel to get kids and teachers to classrooms. Its effort to arrange a bailout from the International Monetary Fund has been hindered by the severity of its financial crisis, its prime minister says.

But it’s not the only economy that’s in serious trouble as prices of food, fuel and other staples have soared with the war in Ukraine. Alarm bells are ringing for many economies around the world, from Laos and Pakistan to Venezuela and Guinea.

Some 1.6 billion people in 94 countries face at least one dimension of the crisis in food, energy and financial systems, and about 1.2 billion of them live in “perfect-storm” countries, severely vulnerable to a cost-of-living crisis plus other longer-term strains, according to a report last month by the Global Crisis Response Group of the United Nations Secretary-General.

The exact causes for their woes vary, but all share rising risks from surging costs for food and fuel, driven higher by Russia’s war on Ukraine, which hit just as disruptions to tourism and other business activity from the coronavirus pandemic were fading. As a result, the World Bank estimates that per capita incomes in developing economies will be 5 percent below pre-pandemic levels this year.




A daily wage laborer waits for work at a wholesale market in Colombo, Sri Lanka, Sunday, June 26, 2022. (AP)

The economic strains are fueling protests in many countries, as meanwhile, short-term, higher interest borrowing to help finance pandemic relief packages has heaped more debt on countries already struggling to meet repayment obligations. More than half of the world’s poorest countries are in debt distress or at high risk of it, according to the UN.

Some of the worst crises are in countries already devastated by corruption, civil war, coups or other calamities. They muddle along, but with an undue burden of suffering.

Here’s a look at a few of the economies that are in dire straits or at greatest risk.

PAKISTAN

Like Sri Lanka, Pakistan has been in urgent talks with the IMF, hoping to revive a $6 billion bailout package that was put on hold after Prime Minister Imran Khan’s government was ousted in April. Soaring crude oil prices pushed up fuel prices which in turn raised other costs, pushing inflation to over 21 percent. A government minister’s appeal to cut back on tea drinking to reduce the $600 million bill for imported tea angered many Pakistanis. Pakistan’s currency, the rupee, has fallen about 30 percent against the US dollar in the past year. To gain the IMF’s support, Prime Minister Shahbaz Sharif has raised fuel prices, abolished fuel subsidies and imposed a new, 10 percent “super tax” on major industries to help repair the country’s tattered finances. As of late March, Pakistan’s foreign exchange reserves had fallen to $13.5 billion, equivalent to just two months of imports. “Macroeconomic risks are strongly tilted to the downside,” the World Bank warned in its latest assessment.


AFGHANISTAN

Afghanistan has been reeling from a dire economic crisis since the Taliban took control as the US and its NATO allies withdrew their forces last year. Foreign aid — long a mainstay — stopped practically overnight and governments piled on sanctions, halted bank transfers and paralyzed trade, refusing to recognize the Taliban government. The Biden administration froze $7 billion in Afghanistan’s foreign currency reserves held in the United States. About half the country’s 39 million people face life-threatening levels of food insecurity and most civil servants, including doctors, nurses and teachers, have been unpaid for months. A recent earthquake killed more than 1,000 people, adding to those miseries.




A man stands among piles of humanitarian food supplies in Kabul, Afghanistan, Wednesday, Feb. 16, 2022. (AP/FILE)

ARGENTINA

About four of every 10 Argentines are poor and its central bank is running perilously low on foreign reserves as its currency weakens. Inflation is forecast to exceed 70 percent this year. Millions of Argentines survive largely thanks to soup kitchens and state welfare programs, many of which are funneled through politically powerful social movements linked to the ruling party. A recent deal with the IMF to restructure $44 billion in debt faces questions over concessions that critics say will hinder a recovery.

EGYPT

Egypt’s inflation rate surged to almost 15 percent in April, causing privation especially for the nearly one-third of its 103 million people living in poverty. They were already suffering from an ambitious reform program that includes painful austerity measures like floating the national currency and slashing subsidies for fuel, water and electricity. The central bank raised interest rates to curb inflation and devalued the currency, adding to difficulties in repaying Egypt’s sizable foreign debt. Egypt’s net foreign reserves have fallen. Its neighbors Saudi Arabia, Qatar and the United Arab Emirates have pledged $22 billion in deposits and direct investments as assistance.




People crowd a msjor street in Cairo, Egypt, April 14, 2020. (AP/FILE)

LAOS

Tiny, landlocked Laos was one of the fastest growing economies until the pandemic hit. Its debt levels have surged and like Sri Lanka, it is in talks with creditors on how to repay billions of dollars worth of loans. That’s an urgent issue given the country’s weak government finances. Its foreign reserves are equal to less than two months of imports, the World Bank says. A 30 percent depreciation in the Lao currency, the kip, has worsened those woes. Rising prices and job losses due to the pandemic threaten to worsen poverty.

LEBANON

Lebanon shares with Sri Lanka a toxic combination of currency collapse, shortages, punishing levels of inflation and growing hunger, snaking queues for gas and a decimated middle class. It, too, endured a long civil war, its recovery hampered by government dysfunction and terror attacks.




Residents raise their hands as they cross a street during a protest against rising prices of consumer goods and the crash of local currency in Beirut, Lebanon, Monday, Nov. 29, 2021.  (AP/FILE)

Proposed taxes in late 2019 ignited longstanding anger against the ruling class and months of protests. The currency began to sink and Lebanon defaulted on paying back worth about $90 billion at the time, or 170 percent of GDP — one of the highest in the world. In June 2021, with the currency having lost nearly 90 percent of its value, the World Bank said the crisis ranked as one of the worst the world has seen in more than 150 years.

MYANMAR

The pandemic and political instability have buffeted Myanmar’s economy, especially after the army seized power in February 2021 from the elected government of Aung San Suu Kyi. That brought Western sanctions targeting commercial holdings controlled by the army, which dominate the economy. The economy contracted by 18 percent last year and is forecast to barely grow in 2022. More than 700,000 people have fled or been forced from their homes by armed conflicts and political violence. The situation is so uncertain, a recent global economic update from the World Bank excluded forecasts for Myanmar for 2022-2024.

TURKEY

Worsening government finances and a growing trade and capital account deficit have compounded Turkey’s troubles with high and rising debt, inflation — at over 60 percent — and high unemployment. The Central Bank resorted to using foreign reserves to fend off a currency crisis, after the beleaguered lira fell to all-time lows against the US dollar euro in late 2021. Tax cuts and fuel subsidies to cushion the blow from inflation have weakened government finances. Families are struggling to buy food and other goods, while Turkey’s foreign debt is about 54 percent of its GDP, an unsustainable level given the high level of government debt.




A man buys bread in Ulus district of the capital Ankara, Turkey, Thursday, May 5, 2022. (AP/FILE)

ZIMBABWE

Inflation in Zimbabwe has surged to more than 130 percent, raising fears the country could return to the hyperinflation of 2008 that reached 500 billion percent and heaping problems on its already fragile economy. Zimbabwe struggles to generate an adequate inflow of greenbacks needed for its largely dollarized local economy, which has been battered by years of de-industrialization, corruption, low investment, low exports and high debt. Inflation has left Zimbabweans distrustful of the currency, adding to demand for US dollars. And many skip meals as they struggle to make ends meet.


CASA-1000 power line, connecting Pakistan with Central Asia, stalled over Afghanistan turmoil

Updated 19 August 2022

CASA-1000 power line, connecting Pakistan with Central Asia, stalled over Afghanistan turmoil

  • The project aims to allow Tajikistan and Kyrgyzstan to sell excess energy to Pakistan and Afghanistan in summer months
  • Tajik official says work on project, scheduled to be completed next year, continued in three states but not in Afghanistan

DUSHANBE: A $1.2 billion Western-backed project to build a power line between Central Asia and South Asia has been stalled by turmoil in Afghanistan, a project official told Reuters on Friday. 

The CASA-1000 project aims to allow Tajikistan and Kyrgyzstan, former Soviet republics with an extensive network of hydroelectric power plants, to sell excess energy to Pakistan and Afghanistan in the summer months. 

Faizali Samiyev, the head of the Tajik project implementation office, said work on the project, originally scheduled to be completed next year, continued in three countries, but not in Afghanistan. 

While the World Bank, a key CASA-1000 backer, continues financing projects in Afghanistan, it has decided to focus on urgently needed education, agriculture, health and family programmes and bypass sanctioned Taliban authorities by disbursing the money through United Nations agencies and international aid groups. 

Funding for the CASA-1000 project - which was designed to provide Pakistan with 1,000 megawatts (MW) of power and Afghanistan with 300 MW - has been suspended, Samiyev said. 

"(We hope that) contacts will be established with the Afghan side and ways to implement the project will be worked out," he said. 

The project could be a boon for the two Central Asian nations which have excess power in the summer but suffer from shortages in the winter unless they can buy fuel or power from neighbours. 

The United States was involved in financing the project when it was launched in 2016 as part of its New Silk Road initiative to integrate Afghanistan with Central Asia. Other project sponsors have included the Islamic Development Bank, the UK Department for International Development, and the European Bank for Reconstruction and Development. 


Roadside bombing kills two policemen in northwestern Pakistan

Updated 19 August 2022

Roadside bombing kills two policemen in northwestern Pakistan

  • Police say bomb was remotely detonated, search for perpetrators was underway
  • No one has claimed responsibility for attack in Bajaur district bordering Afghanistan

PESHAWAR: A roadside bombing on Friday killed two policemen in a former militant stronghold in northwestern Pakistan, police said. 

No one immediately claimed responsibility for the attack in Bajaur, a district in Khyber Pakhtunkhwa province that borders Afghanistan. The district’s police chief, Abdus Samad Khan, said the bomb was remotely detonated. A search for perpetrators was underway, he added. 

Bajaur has long served as a sanctuary for the Pakistani Taliban militant group — known as Tehreek-e-Taliban Pakistan, or TTP — until the military declared the region was cleared of local and foreign militants following a series of military operations in 2010. 

However, isolated militant attacks have continued in the region, though the Pakistani Taliban have not claimed responsibility for any of the attacks since May, when talks started between the TTP and Pakistani government officials in Kabul. A cease-fire has also been in place since then. 

The talks in Kabul are hosted by the Afghan Taliban, a separate group but allied with the Pakistani Taliban. The Taliban seized power in Afghanistan a year ago as the US and NATO troops were in the final stages of their pullout from the country. 

That takeover has emboldened the Pakistani Taliban, whose fighters and leaders, officials say, have been hiding in Afghanistan. 


Islamabad police deny allegation of 'sexual abuse' of ex-PM Khan aide in custody

Updated 19 August 2022

Islamabad police deny allegation of 'sexual abuse' of ex-PM Khan aide in custody

  • Islamabad police deny allegation of 'sexual abuse' of ex-PM Khan aide in custody
  • Gill has been in custody since last Tuesday for comments deemed as ‘seditious’ by the authorities

ISLAMABAD: The Islamabad police on Friday denied the allegations of “torture” of former Pakistan prime minister Imran Khan’s chief of staff, Dr Shahbaz Gill, which Khan’s Pakistan Tehreek-e-Insaf (PTI) party says also included “sexual abuse” and has announced a protest rally against it in Islamabad on Saturday. 

Gill, a senior member of Khan’s PTI party, has been under arrest since last Tuesday for comments he made during a news bulletin that the national electronic media regulator dubbed as “seditious.” 

The PTI leader was admitted to Islamabad's Pakistan Institute of Medical Sciences (PIMS) for a check-up late Wednesday, while a district court in Islamabad on Friday suspended his physical remand and ordered police to keep him in hospital until Monday. 

In a Twitter post on Friday evening, Khan accused the Islamabad police of subjecting Gill to "sexual abuse," but the police denied the allegation and described it as “absurd.” 

"We have repeatedly rejected all these allegations," Taqi Jawad, Islamabad police director for public relations, told Arab News Friday evening. 

"Shahbaz Gill isn't tortured in police custody and allegation of sexual abuse is totally absurd. These allegations should be avoided as they can cause public unrest." 

On Friday evening, Khan and other senior members of his party tried meeting Gill at the hospital, but they were barred by the police. It followed an announcement by Khan of the rally to protest alleged torture of his chief of staff. 

"I want to convey a message to my entire nation that tomorrow, I am holding a rally in Islamabad for Shahbaz Gill," the former premier told reporters outside the PIMS hospital. 

"I invite all the people of Islamabad to my rally because if a political worker can be subjected to such torture, then anyone can be subjected to it." 

In a Twitter post, Khan said the Islamabad police had subjected Gill to "sexual abuse" in order to “break him down.” 

"All the pictures & videos show clearly Gill was tortured both mentally & physically incl sexual abuse - most too gruesome to relate. He was humiliated to break him down. I now have full detailed info," the former premier said. 

 

Also on Friday, Amnesty International, a human rights watchdog headquartered in the United Kingdom, said it was "concerned" about the torture allegations levelled by Gill's lawyers and called for an impartial inquiry into the matter. 

"Amnesty International is concerned about the allegations of torture being made by the lawyers of @SHABAZGIL, and calls for an immediate, effective and impartial inquiry investigating these claims," the global watchdog said on Twitter. 

 

Last Friday, after Gill had been in police custody for two days, a court sent him to jail on judicial remand, rejecting a request by the police to extend the suspect’s physical remand. But in a rare move on Wednesday, a local court remanded Gill back into police custody. 

A government prosecutor had argued that Gill needed to be remanded in police custody for an additional two days so that police could complete their investigation into a sedition case filed against him. The PTI leader was admitted to PIMS hospital after the Islamabad police took over his custody following the court order.  

Earlier today, the Islamabad police said on Twitter Gill was "pretending to be ill under false pretences." 

 

“After reviewing the reports and opinions from cardiologist and psychiatrist, patient [Gill] is clinically stable,” a six-member medical board of senior doctors said in its report dated August 18. “Although he is a known case of bronchial asthma, currently he has no signs of exacerbation of acute asthma.” 

“Pulmonologist advised and discharged on medication,” the report, a copy of which is available with Arab News, said. 

Video footage made outside a local court on Friday and widely shared on social media showed Gill in a wheelchair, surrounded by policemen, and saying “I can’t breathe.” 

The case against the Khan aide relates to comments made on ARY News last Monday asking army officers not to follow orders of their top command if they were “against the sentiments of the masses.” 

The country’s national media regulator described the statement as “seditious” and said it was tantamount to inciting revolt within the military. The regulator also issued a show-cause notice to the channel, ARY News, for airing the “illegal” content. The channel has since been off air.


Pakistani currency, stocks stabilize after IMF deal and financing assurances from friendly states

Updated 19 August 2022

Pakistani currency, stocks stabilize after IMF deal and financing assurances from friendly states

  • Pakistan’s weekly inflation recorded an increase of 3.35 percent on Friday, mainly due to hike in food item prices
  • Analysts say taming inflation, shoring up forex reserves will be key challenges for incoming central bank governor

KARACHI: Pakistan’s currency and stocks have stabilized after months of poor performance as the country expects to receive $1.17 billion from the International Monetary Fund (IMF) and $4 billion inflows from Saudi Arabia and the United Arab Emirates (UAE), traders and analysts said on Friday, hoping for further consolidation in the coming days. 

The Pakistani currency appreciated by 0.14 percent as the US dollar closed at Rs214.65 in the interbank market on Friday. The local currency has appreciated by 11.7 percent since July 28, when it had hit an all-time low of Rs239.94 against the greenback. 

“The development at the IMF front and the arrangement of financing from friendly countries to fill financing gap of $4 billion played a key role in rupee's stabilization during the recent trading sessions,” Samiullah Tariq, research director at the Pakistan-Kuwait Investment Company, told Arab News.   

After a staff-level agreement in July, the IMF has scheduled its executive board meeting for August 29 for the combined seventh and eight reviews of the $6 billion Extended Fund Facility (EFF) Pakistan availed in 2019. The South Asian country is expecting $1.17 billion from the Fund after its board's approval that would unleash further funding from multilateral donors. 

Pakistan’s finance minister, Miftah Ismail, on Thursday reiterated that all actions had been taken to meet the IMF conditions for the revival of $6 billion loan program, which was halted in March this year. 

The finance minister confirmed that $4 billion for bridging the budget financing gap had been arranged through Saudi Arabia and the UAE, ahead of the IMF meeting.   

In another move ahead of the IMF board meeting, the government on Friday appointed Jameel Ahmad as the central bank’s new governor for next five years.  

The appointment on the post, which had been vacant since the retirement of Reza Baqir in early May, comes at a time when the South Asian nation is battling historic inflation. 

Analysts say the key challenges the incoming central bank governor would be facing include taming high inflation and shoring up forex reserves.   

“The top most challenge the governor of central bank would face is to control inflation as in July 2022 it was recorded at 24.9 percent and it is expected that it would remain high in August,” Tahir Abbas, research head at the Karachi-based Arif Habib Limited brokerage firm, told Arab News. 

“The second top most challenge would be to build up country’s forex reserves that are at very low level [barely enough] to cater imports of less than two months. The third challenge would be setting a monetary policy that enables to counter inflation by avoiding recession,” he said. 

“The fourth challenge would be to review the schemes announced by the central bank, including the Roshan Digital Accounts to reverse the withdrawal trend with attractive rate offerings.”          

Pakistan’s weekly inflation rose by 3.35 percent to reach 42.31 percent on a yearly basis, mainly due to hike in food prices, according to data released by the country's statistics bureau on Friday. 

Amid higher inflationary trend, the central bank is scheduled to announce on August 22 its monetary policy for the next two months. 

According to a survey conducted by Topline Securities brokerage house, 56 percent of the participants expect no change in the policy rate, which stands at 15 percent. Around 43 percent participants anticipate an increase, whereas 1 percent expect a decrease in policy rate. 

Pakistan’s stock market also stabilized during the week though it closed bearish with 210 points down on Friday, mainly due to profit-taking and investors remaining on the sidelines ahead of the monetary policy announcement on Monday. 

“Continuing its momentum, KSE-100 Index gained 0.96 percent on WoW (week-on-week) basis, which can be attributed to the news that the IMF has scheduled its board meeting for August 29 after getting confirmation from bilateral friends such as Saudi Arabia, the UAE, and Qatar for bridging the financing gap of $4 billion,” the Topline Securities report said. 

Pakistan's stock index increased by 6.74 percent over the course of first two weeks of August and recorded a gain of 376 points during the week ending on Friday. 


PM launches cash relief program as death toll from Pakistan rains tops 670

Updated 19 August 2022

PM launches cash relief program as death toll from Pakistan rains tops 670

  • Monsoon downpours have ravaged large swathes of land across Pakistan since June
  • Government will distribute $171 million among 1.5 million families affected by floods

ISLAMABAD: Prime Minister Shehbaz Sharif on Friday distributed compensation cheques among families affected by the recent floods in Pakistan as the death toll from monsoon downpours exceeded 670 in the South Asian country. 

Torrential rains have triggered flash floods in several parts of Pakistan since June 14. At least 674 people have died and 1,128 injured in various incidents across the country so far, according to the National Disaster Management Authority (NDMA). 

Pakistan’s southwestern Balochistan province has been worst hit by rains, with 202 rain-related casualties. Sindh has reported 149 deaths, Punjab 144, Khyber Pakhtunkhwa 135, Azad Kashmir 34, Gilgit-Baltistan nine, and the federal capital of Islamabad has reported only one death. 

On Friday, a ceremony was held at the Prime Minister’s Office (PMO) in Islamabad, at which the premier said a total of 1.5 million families in the country will be entitled to Rs37 billion ($171 million) in cash aid. 

“We have decided to issue this instalment of Rs25,000 [per family],” PM Sharif said at the event. 

“Within the next three days, Rs37 billion will be given to every household in Pakistan that has been affected by floods.” 

The cash assistance will be disbursed to flood-hit families through the Benazir Income Support Programme (BISP) — a federal cash transfer program for poverty alleviation — in coordination with the NDMA.  

Sharif said after the distribution of cash, an assessment of damages in flood-hit areas would be carried out with the help of provincial governments and international partners. 

During the first phase of cash distribution, the government would provide cash assistance to people in 724 worst-affected union councils across Pakistan, said Shazia Marri, federal minister for poverty alleviation and social safety. 

“The Benazir Income Support Program is going to ensure that whatever is announced and whatever has been allocated for the relief work is disbursed to the victims of the recent floods transparently,” she added.