A different world, Lebanon and Sri Lanka share economic collapse

BEIRUT (AP) — Lebanon and Sri Lanka may be separate worlds, but they share a history of political upheaval and violence that led to the collapse of once prosperous economies plagued by corruption, patronage, nepotism and incompetence .

Toxic combinations spelled disaster for both: currency collapse, shortages, triple-digit inflation and rising hunger. Long queues for gas. A ruined middle class. An exodus of professionals who may have helped rebuild.

There is usually no moment that marks the devastating breaking point of an economic collapse, although the telltale signs can last for months – if not years.

When this happens, the difficulties that arise are all-consuming, altering everyday life so profoundly that the country may never be the same.

Experts say a dozen countries, including Egypt, Tunisia, Sudan, Afghanistan and Pakistan, could face the same fate as Lebanon and Sri Lanka, as the post-pandemic recovery and the war in Ukraine increase global food shortages and prices. gives rise to.

Roots of Crisis

The crises in Lebanon and Sri Lanka are rooted in decades of greed, corruption and conflict.

Both countries faced a protracted civil war, followed by a hard and rocky recovery, all the while dominated by corrupt warlords and family factions, who accumulated enormous foreign debt and held on to power.

Various popular rebellions in Lebanon have been unable to shake a political class that has long used the country’s sectarian power-sharing system to perpetuate corruption and nepotism. Major decisions remain in the hands of political dynasties, who gained power because of immense wealth or command of the militias during war.

In the midst of factional rivalry, political paralysis and government dysfunction have worsened. As a result, Lebanon is one of the most backward Middle East countries in infrastructure and development, with widespread power cuts that continue 32 years after the civil war ended.

In Sri Lanka, the Rajapaksa family has monopolized politics in the island nation for decades. Even now, President Gotabaya Rajapaksa is still clinging to power, although the family lineage around him has been torn apart amid protests since April.

Experts say the current crisis in both countries is of its own making, involving high levels of foreign debt and little investment in development.

In addition, both countries have repeatedly faced instability and terrorist attacks, which affected tourism, which was the mainstay of their economies. In Sri Lanka, Easter suicide bombings in churches and hotels killed more than 260 people in 2019.

Lebanon has suffered the consequences of neighboring Syria’s civil war, which flooded the country of 5 million with nearly 1 million refugees.

With the onset of the coronavirus pandemic, both the economies were hit again.

tipping points

Lebanon’s crisis began in late 2019, when the government announced new proposed taxes, which included a $6 monthly fee for using WhatsApp voice calls. The measures sparked long-smelling anger against the ruling class and months of mass protests. Unregulated capital controls were instituted, cutting people off their savings as the currency spiraled.

In March 2020, Lebanon defaulted on paying off its massive debt, amounting to about $90 billion or 170% of GDP at the time – one of the highest in the world. In June 2021, with the currency losing nearly 90% of its value, the World Bank said the crisis ranked the world as one of the worst in more than 150 years.

In Sri Lanka, with the economy still fragile after the 2019 Easter bombings, Gotabaya pushed for the biggest tax cut in the country’s history. This sparked a swift response, with creditors downgrading the country’s rating, preventing it from borrowing more money as foreign exchange reserves were depleted.

On the verge of bankruptcy, it has suspended payments on its foreign debt and introduced capital controls amid a severe foreign exchange crunch. Recently the tax cut was reversed.

Meanwhile the Sri Lankan rupee has weakened by about 80% to around $360 to $1, making the cost of imports even more prohibitive.

“Our economy has completely collapsed,” the prime minister said on Wednesday.

updated life

Prior to this latest descent, both Lebanon and Sri Lanka had a middle-income population that allowed most people to live somewhat comfortably.

During the 1980s and 1990s, many Sri Lankans took jobs as domestic workers in Lebanese homes. As Sri Lanka began its post-war recovery, they were replaced by workers from Ethiopia, Nepal and the Philippines.

The recent crisis forced most Lebanese to give up that luxury, among others. Almost overnight, people found themselves with almost no access to their money, vanishing savings and worthless salaries. A month’s salary at minimum wage isn’t enough to buy 20 liters (5 1/4 gallons) of gasoline, or to cover the bill for private generators that power homes a few hours a day.

Once upon a time, there were fights over limited supplies due to acute shortage of fuel, cooking gas and oil – scenes are now repeated in Sri Lanka. Cancer drugs are often out of stock. Earlier this year, the government had also run out of papers for new passports.

Thousands of professionals, including doctors, nurses and pharmacists, have left the country in search of jobs.

Similarly, Sri Lanka is now almost without gasoline and facing acute shortage of other fuels. Authorities have announced power cuts for up to four hours a day across the country and asked state employees not to work on Friday except for essential services.

The United Nations World Food Program says nine out of 10 Sri Lankan households are giving up or otherwise skimping on food to spread their food, while 3 million are receiving emergency humanitarian aid.

Doctors have taken to social media for vital supplies of equipment and medicine. An increasing number of Sri Lankans want to go abroad in search of passport work.

other disasters

In addition to political and financial turmoil, both countries have faced disasters that have added to their woes.

On August 4, 2020, a devastating explosion occurred in the port of Beirut, killing at least 216 people and devastated large parts of the city. The explosion, widely considered to be one of the largest non-nuclear explosions in history, was caused by the explosion of hundreds of tons of ammonium nitrate that had been stored in a warehouse for years. This dangerous material was apparently put to the notice of senior politicians and security officials, who did nothing about it.

There was widespread outrage over the endemic corruption and mismanagement of traditional parties, who were widely blamed for the disaster.

Sri Lanka faced a disaster in early 2021 when a container ship loaded with chemicals caught fire off the coast of the capital of Colombo. It burned for about two weeks before sinking while being taken into deep water.

The burning ship released toxic fumes and spilled more than 1,500 tons of plastic pellets into the Indian Ocean, which were later found in dead dolphins and fish on beaches.

Fishing was banned in the area due to health risks associated with chemicals in the water, affecting the livelihoods of about 4,300 families who are yet to receive compensation.

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Rising was reported from Bangkok. Associated Press writer Krishna Francis in Colombo, Sri Lanka contributed.

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