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Is Sri Lanka’s bankruptcy leading to its doom?
The economic crisis in Sri Lanka is now the most talked about topic across the globe. The country entered the phase of the economic crisis in 2015 yet it chose to turn a blind eye to that which now has turned out to be the worst in its 70 years of history. Sri Lanka has yet to pay out $7 billion despite its foreign reserves of only $2 billion. Sri Lanka has banned chemical fertilizers and that has resulted in a significant loss in their GDP due to reduced production of agricultural goods to be exported. Moreover, the precious assets of their tourism industry- previously contributing greatly to government revenue and foreign reserves have collapsed and shrunk amid the pandemic. The Sri Lankan government is now planning to request the IMF for a bailout and only time can answer these burning questions.
https://www.thedailystar.net/views/editorial/news/real-tragedy-unfolding-sri-lanka-2998051
Impacts of the Western sanctions on Russia's economy
Russia's economy suffered a massive blow amidst its ongoing war against Ukraine when the Western countries decided to place sanctions on Russian products like oil and gas, and even vodka. For an economy that relies so heavily on exports, low demand for its goods in the global market is causing Russian exports to collapse. The fall in exports is directly affecting Russia’s unemployment to rise with the fall of businesses and the fall in the demand for Russian goods. Moreover, as the Russian Ruble keeps becoming weaker, and as more Russians expect a further drop in its value, inflation is expected to hit an astounding 20% in 2022. If these rates of unemployment and inflation persist, stagflation is bound to occur.
https://www.cbsnews.com/amp/news/sanctions-russia-economy-effect/
Australia- India virtual trade agreement to open economic doors
The Commonwealth of Australia formally signed a trade agreement with India, intending to bolster closer trade ties. The agreement shall open economic doors as Australia plans to diversify its export market and reduce dependence on its biggest trading partner, China. The action came into the plan after the diplomatic spats with China, which led Beijing to sanction certain Australian products. Nevertheless, trading deals would bring higher economic prosperity as India plans to remove tariffs on more than 85% of Australian goods exported to India, worth A$12.6 billion, rising to almost 91% over 10 years. In short, the comprehensive economic partnership is expected to foster economic well-being for both countries.
Vaccine crisis affecting the US economy
One-fourth of the US population remains unvaccinated even after a year of Covid vaccines being made freely available to citizens. For individuals forgoing vaccination, the risks can include layoffs and ineligibility to collect unemployment, higher insurance premiums, growing out-of-pocket medical costs, or loss of academic scholarships. Individual employers are also at risk of running short-staffed businesses while taxpayers might face the loss of government-funded programs like Medicare. When it comes to the economy, the US has already spent a considerable amount of money on preventable hospitalizations and deaths due to vaccine hesitancy. Furthermore, this hesitance is also expected to stunt the US's economic recovery by limiting GDP growth, employment level, and economic activity.
Skyrocketing fertilizer prices leading to global food shortage
The price of fertilizers skyrocketed due to the recent Russia-Ukraine crisis leading to farmers' inefficiency in their utilization of farmlands. This signals a food shortage due to the disrupted supply chain from Russia leading to global inflation. Accordingly, farmers are using fewer fertilizers while others are stockpiling and speculating higher prices while switching to crops that need fewer nutrients to grow to bring down production costs. Russia and Ukraine account for about 50% of the world's total grain export thus the food chain is facing a serious crisis due to severe inflation levels. Farmers are speculating higher prices leading to the increased prices expected and thus, more inflation.
https://thefinancialexpress.com.bd/economy/fertiliser-shortage-imperils-world-food-supply-1648130070
Quantitative Tightening approach at the Federal Reserve
The Federal Reserve is planning to use Quantitative Tightening (QT) to cool off the economy amidst an inflationary gap. This will have the opposite effect of Quantitative Easing (QE) where the government buys bonds from the public to inject money into the circular flow to promote real GDP growth. Coupled with a rise in interest rates, QT will be able to slow down the growth of the economy. QT works by making the central bank drain reserves by refraining from reinvesting as bonds mature. This policy will also affect hot spots of the credit market, such as mortgages, so we can expect a high impact. The loss of liquidity due to QT will not be much of a problem because this time there is much more cash in the economy, to begin with. The only concern is that this policy may take a long time to take effect, even decades.
https://www.economist.com/finance-and-economics/2022/04/09/the-federal-reserve-prepares-for-quantitative-tightening
A record-breaking national trade deficit
Having the balance of trade rise by 80% would result in an increased burden on the foreign reserves and might lead to the government taking a loan in order to finance this deficit thus leading to a rise in debt. Moreover, a rising trade deficit also suggests that our exports are suffering in the global market. This could have an adverse effect on the country’s economic growth. However, for several months a high demand for US dollars has resulted in the depreciation of the taka. The depreciation of the currency will ultimately result in giving exports a boost and rein back import levels.
https://www.thedailystar.net/business/economy/news/trade-deficit-heads-historic-high-3000651
Bangladesh’s foreign reserves hit $44B
Due to rising inward remittances, Bangladesh's foreign reserves increased to $44.30 billion after slackening in March. Since February, the government has increased its efforts to encourage authorized channels and redirect illegitimate channels by increasing the cash incentive to 2.5 percent, costing Tk 102.5 for a Tk 100 remittance sent through a legal channel. That endeavor is possibly responsible for the consistent increase in remittance inflow. This may also illustrate how ensuring expats can transmit money safely, efficiently, and inexpensively through banking channels may have a direct influence on our foreign currency reserves. Investment in our financial infrastructure must be encouraged to maintain momentum in terms of import bill payment and foreign reserve growth.
Future Shows Limited Hope For People With Limited Income
Despite the monitoring of oil prices by the government, it had no significant effect on providing respite to citizens of limited income. According to the local traders, demand-pull inflation caused the prices of vegetables and fish to throttle up by 20-50 taka per kilogram. Essential Ramadan staples such as Brinjals are now traded for 40-50 taka more than previously. Despite a fall in the price of some essential goods, the rising rate of inflation in the country offsets the effects of the fall of a few essentials leading to the low-income citizens demanding the government’s attention.
https://epaper.thedailystar.net/Home/ShareArticle?OrgId=2439dd2f68&imageview=1
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