LKA financial crisis: Mismanaged loans
Sri Lanka may mean “resplendent island” but right now the troubled nation of 22 million – some 500 of them Filipinos – is boiling in a cauldron of foreign loans gone awry, soaring prices, shortage of food, fuel, and astute economic managers.
The island-nation off the southern tip of India in the Bay of Bengal is 4,500 air kilometers west of the Philippines, but the crisis traced by some analysts to mismanaged foreign debt flashes a red light to the Marcos administration as it prepares to take on a P12.68-trillion debt burden.
While it is not the fault of president-elect Ferdinand Marcos Jr. (who will only inherit it from his predecessor) that the national debt has risen beyond what is regarded as a safe and sound level, managing the issue and avoiding a Sri Lanka situation will soon be his responsibility.
Marcos’ tapping Benjamin Diokno as finance secretary and Arsenio Balisacan as head of the National Economic and Development Authority gives us reassurance that competent authorities will tackle the debt trap into which many a government has fallen.
Meantime, the foreign office and the labor department are preparing repatriation flights for Filipinos in Sri Lanka who may want to return home. Each of those opting to stay despite the worsening situation there will be given US$300 as cash aid.
Foreign Secretary Teddy Locsin Jr. reportedly ordered his people, “Get them home. We have the money.” Affected Filipinos can coordinate with the consulate in Colombo, or the embassy in Dhaka, Bangladesh, through +88 01735349427 and email@example.com.
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The crisis gripping Sri Lanka is largely a consequence of its lack of foreign currency with which to pay for its importation of food, fuel, and other essentials, leading to acute supply shortages and very high prices.
Cash-strapped Colombo has defaulted on its US$51-billion foreign debt. The Sri Lankan rupee has depreciated by 44.2 percent against the US dollar this year, while inflation hit a record high of 33.8 percent last month.
It stopped subsidies on fuel, pushing prices to a record high. Then to raise revenue, it is expected to hike electricity and water tariffs!
The tricky chase has forced Colombo to appoint international consultants to help restructure its international sovereign bonds and other bilateral loans.
As supply dwindled, the price of gasoline there went up 137 percent in the last six months and diesel by 230 percent. Motorists have had to line up, sometimes for days, at the pump. Bus and taxi fares have risen by up to 50 percent, pushing up prices of almost all goods and services.
Airlines are urged to fly in full-tank or fill up elsewhere. There is increased refueling at southern Indian airports by flights to and from Colombo to beat the shortage.
Since Sunday, even the nation’s flag carrier SriLankan Airlines has been flying down for refueling at India’s Thiruvananthapuram international airport.
Without foreign currency, Sri Lanka has not been able to import essential goods, including such life-saving drugs as blood-thinners for heart attack and stroke patients to antibiotics, rabies shots, and cancer chemotherapy drugs.
Crucial surgical equipment and anesthesia are running out so fast that only emergency surgeries, mostly on cardio and cancer patients, are being allowed. Routine procedures have been put on hold and some government hospitals admit only emergency patients.
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The World Bank is reportedly planning to disburse US$700 million to Sri Lanka by re-purposing its existing loans. That is expected to give the nation breathing space till a bailout package with the International Monetary Fund is worked out.
On the brink of bankruptcy, Sri Lanka is experiencing severe shortages of essentials from food, to fuel, medicines, and cooking gas. For months now, citizens have had to wait in long lines to buy the limited stocks. The time wasted by otherwise productive individuals is staggering.
Around 11.7 percent of Sri Lankans earn less than US$3.20 per day, the international poverty line for lower-middle-income countries, up from 9.2 percent in 2019, the World Bank said in its Spring update on the South Asian region.
The WB Country Manager Chiyo Kanda assured Sri Lankan Foreign Minister last week that the agency will work with the Asian Development Bank, the Asian Infrastructure Investment Bank, and the UN office to re-purpose their already committed projects.
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For a quick comparison between the Philippines (PHL) and Sri Lanka (LKA), whose land area is five times that of the province of Isabela (area: 13,102 sq. km.) in Northern Luzon, here is basic information we culled from WorldData.info:
Area: LKA (Sri Lanka), 65,610 sq. km.; PHL, 300,000 sq. km.
Population: LKA, 21,919,000; PHL, 109,681,000.
Pop. density: LKA, 334.1/sq. km.; PHL, 365.3/sq. km.
Life expectancy (males): LKA, 74 years; PHL, 67 years.
Life expectancy (females): LKA, 80 years; PHL, 76 years.
Average age: LKA, 33.7 years; PHL, 24.1 years.
Birth rate: LKA, 15.25‰ (per mille); PHL, 19.89‰.
Death rate: LKA, 6.85‰; PHL, 5.98‰.
Political stability (0-100 scale): LKA, 53; PHL, 54.
Unemployment: LKA, 5.4%; PHL, 2.4%.
Inflation rate: LKA, 6.15%; PHL, 2.64%.
Cost of living (US=100%): LKA, 29.75%; PHL, 41.26%.
Corruption index: LKA, 37 (bad); PHL, 33 (bad).
Religions: LKA, 70% Buddhism; PHL, 92% Christianity.