Financial war, broken supply chains, food shortages, skyrocketing prices lead to the first countries going bankrupt
RIO DE JANEIRO, BRAZIL – Just a few days ago, the South Asian island nation of Sri Lanka declared a default. Foreign exchange reserves of US$1.6 billion are offset by payments due of more than US$7 billion. In total, the foreign debt of the country of 22 million people amounts to more than US$50 billion.
This is a hard blow for the island’s economy south of India. The country is dependent on imports for fuel and food, which have to be paid for in hard currency (especially U.S. dollars). The result: skyrocketing prices for basic foodstuffs such as rice and milk and gasoline and diesel.
(In recent days, several people have died while waiting in line for fuel. School exams have been canceled for millions of students due to a lack of paper and ink as the crisis and shortages affect more and more sectors in Sri Lanka)
If the covid lockdowns had already disrupted logistics chains and plunged many people further into poverty, the previously booming tourism industry – an industry that helped lift many people out of poverty – also suffered.
In recent weeks, rising commodity and food prices, coupled with continued weak tourism numbers, have not improved the situation. While debt (and thus debt service) grew, the economy and government revenues have not matched it.
Now the government is seeking help from the International Monetary Fund (IMF), knowing that its conditions will not bring any long-term improvements.
The situation is not much better in Lebanon, which just two years ago narrowly avoided national bankruptcy. About a week ago, for example, the government of the Middle Eastern country raised US$15 million to prevent a food crisis.
(Demonstrations and road blockades in Sri Lanka.
Drying up wheat supplies and homegrown problems have left warehouses empty and long lines forming outside bakeries and stores. But the lack of supplies from Russia and Ukraine, as well as rising fuel prices, make it difficult to bring in enough replacement supplies in time.
Meanwhile, Iran has offered to supply food and fuel for Lebanese Liras instead of dollars and euros – both currencies that are in short supply in Lebanon because of the country’s dependence on imports.
Drastic increases in global food and energy prices due to the war in Ukraine are hitting developing countries hard, and better coping mechanisms for sovereign debt will be needed to avoid defaults, the IMF said.
(People are protesting the freezing of their bank accounts in Lebanon and are throwing stones at cars of lawmakers, including a Mercedes of the deputy speaker, near the parliament’s building in Beirut.)
“The war in Ukraine is raising public borrowing risks to unprecedented levels, while the pandemic continues to strain many sovereign budgets,” Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, and Ceyla Pazarbasioglu, head of the organization’s Strategy Department, wrote in a new blog post.
“As sovereign debt risks have risen and financial constraints have returned to the center of political attention, a global cooperative approach is needed to achieve an orderly resolution of debt problems and prevent unnecessary defaults.”
(Police fire live ammunition at protesters in Sri Lanka. One person was killed and others are in critical condition in Rambukkana as protests and blockades against shortages and price hikes gained momentum on the island today.)
THE GREAT RESET OF THE FINANCIAL SYSTEM?
Critics point out that this development is quite deliberate. A “creative destruction,” so to speak, for the “Great Reset” that Klaus Schwab’s World Economic Forum (WEF) wants to push. In March of last year, the Financial Times addressed this in an article titled “Time for a ‘Great Reset’ of the Financial System.” It stated:
-Now is a good time for the major economies of the West (and ideally the world) to sit down and work out a new international monetary order. As part of this, there should be complete debt cancellation, especially of sovereign debt held by central banks.
We estimate that this amounts to about $25 trillion in the significant regions of the world economy (…) Whether debt relief goes beyond that should be the focus of negotiations among policymakers on the construction of the new system – ideally some kind of debt jubilee (…) Recapitalization of parts of the financial system should be included in constructing the new international monetary order.
If we see a cascade of defaults around the globe in the coming months, this may well serve to bring us closer to the goal of the “Great Reset.” With new Digital Central Bank Currencies (and the accompanying abolition of cash) in the affected countries and the introduction of a “Universal Basic Income” paid directly to citizens by central banks.
Of course, this is the perfect leverage for the powerful to make “inconvenient” people compliant. So are we all just experiencing the first steps in this direction?
This article was produced by The Rio Times’ automated AI newsroom. Editorial responsibility: Matthias Camenzind, Publisher and Editor-in-Chief. How we use AI · Report an error