It is said that the noose of debt is such that the longer the distance, the better. A new example of this is Sri Lanka, which is so caught in the debt trap of China that it is almost completely bankrupt. The situation is such that the Sri Lankan government on Monday itself admitted that it has run out of cash even to buy fuel and most of the petrol pumps in the country have run out of fuel.
on the verge of bankruptcy
Looking at the situation in Sri Lanka, it would not be wrong to say that Sri Lanka has reached the verge of bankruptcy. Significantly, due to the foreign exchange crisis, the condition of the economy of this island country has become very bad. The economic condition of the country has become so bad that it does not even have the amount to pay for two consignments of fuel. Last week, Sri Lanka's state-run refinery Ceylon Petroleum Corporation (CPC) also said it did not have the cash to buy supplies from overseas. Explain that Sri Lanka is mainly dependent on imports for fuel. Today the energy sector of Sri Lanka has been badly affected due to the foreign exchange crisis.
Trapped badly in a Chinese debt trap
Let us tell you that the reason for the situation that Sri Lanka has become today is debt. Foreign debt, especially the debt taken from China, is responsible for this condition of the country. China owes Sri Lanka more than $5 billion in debt. Last year, it took another $1 billion loan from China to tide over the financial crisis in the country. In the next 12 months, the country needs about $ 7.3 billion to pay off domestic and foreign loans. As of November, the foreign exchange reserves in the country were only $ 1.6 billion. The government has to print money to pay off domestic loans and foreign bonds and seek loans from other countries.
More than 80 countries have gone bankrupt
The story of bankruptcy is not new at all. According to an earlier report, 83 countries of the world have gone bankrupt within the last two centuries. Many developed countries are also included in this list, which has the largest economy in the world. The US, Germany, Japan, and the UK are the big countries that have gone bankrupt. Let us tell you that when a country goes bankrupt, its basic system gets disturbed. When power companies stop their operations, gas and petrol stations are closed there. Apart from this, if the locks hang on the banks, then the salary of government employees is stopped there.
What is bankruptcy?
According to experts, the bankruptcy of a country means that your credit rating is continuously deteriorating. Like what is happening with Sri Lanka right now. International financial institutions lose confidence in that country and lenders refuse to extend the loan repayment date. The biggest loss of the country when it goes bankrupt is that it loses its credibility in the market. To improve his condition, any other country is afraid to invest money by helping. Simply put, if the credit rating of the country is bad, then no one will be ready to lend it.
Why is foreign exchange important?
The foreign exchange plays an important role in any economy. By foreign currency, specifically the US dollar. Dollar and Euro are quite popular and accepted in international trade. US dollars account for 64 percent of the foreign exchange reserves held by central banks around the world. In such a situation, the dollar is considered the global currency. If we look at the International Standard Organization list, there are a total of 185 currencies in circulation around the world. However, most of these currencies are used within the country. Talking about the dollar, about 85 percent of the world's trade is done in dollars only. Apart from this, international loans are also given in dollars only.
foreign exchange depreciation
How strong a country's national currency is about the dollar, also depends on how many dollars are in that country's foreign exchange reserves. According to experts, the balance of foreign exchange reserves is the most important thing to keep the exchange rate under control. If the price of a country's currency starts falling, then dollars from foreign exchange reserves are put in the market so that the exchange rate does not increase much. Due to the exhaustion of foreign exchange, a country also fails to import essential goods. India had also faced this situation in 1991. In June 1991, the country's foreign exchange reserves were almost exhausted. Sri Lanka is going through the same situation today.
Things get worse in Sri Lanka
According to a report, the situation of India in 1991 is the same as that of Sri Lanka today. Although India had recovered from this, it is becoming difficult for Sri Lanka to get rid of this problem. Here the price of food items has increased by 20 percent in the last few months. In a report recently, it was said that the price of 100 grams of green chilies in Sri Lanka reached 71 Sri Lankan rupees, the price of potatoes reached 200 rupees per kg. It was told that Sri Lanka's foreign exchange reserves stood at $ 7.6 billion at the end of 2019. The Sri Lankan rupee was under pressure since the beginning of 2020. Sri Lanka's foreign exchange reserves declined to $5.7 billion by the end of 2020 and fell to $1.6 billion in November 2021.
Greece and Argentina are in bad condition
America, the world's largest economy, has been in the grip of bankruptcy not once or twice but 5 times. It was declared bankrupt for the first time due to the non-payment of foreign loans. So, four times, America had to bear this brunt due to drowning in internal debt. Britain, which is the world's largest economy after America, has been declared bankrupt 4 times. Apart from this, Greece was declared bankrupt in the year 2015 due to the non-payment of 12 thousand crore rupees to the International Monetary Fund. The Latin American country Argentina has defaulted twice between 2000 and 2020. Apart from this, Russia in 1998, Uruguay in 2003, the Dominican Republic in 2005 have also been declared bankrupt.
These countries went bankrupt the most times
Venezuela 11 times
Ecuador 10 times
Brazil 9 times
Chile 9 times
Costa Rica 9 times
Spain 8 times
Germany 8 times
America 5 times
UK 4 times
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