Asia

Sri Lanka's economy shrank 3.1% in the April-June quarter, official data showed on Friday, as the country struggles to claw out of its worst financial crisis in decades. The downturn was driven by high inflation, a depreciating currency and lower purchasing power, the Census and Statistics Department said in a statement. The agriculture sector grew 3.6% from a year earlier, but output from industries contracted 11.5% and services dropped 0.8%, the department said. ri Lanka's central bank projects that gross domestic product (GDP) will shrink by 2% this year, having contracted 7.8% in 2022, after the island's economy fell into a severe foreign exchange crisis that decimated growth. The economy contracted 11.5% in the first three months of this year but activity has gradually st...

As it struggles to secure funds to maintain its operations, Pakistan International Airlines (PIA) has reportedly resorted to grounding several aircraft.  Dawn reports that over the next few months, PIA's core functions and non-core assets are expected to be put up for sale. Just last week, Pakistan's Ministry of Aviation issued a stern warning and told the federal government that the airline is grappling with a severe cash flow crisis.  This, the ministry said, has led to arrears with creditors, aircraft lessors, fuel suppliers, insurers, international and domestic airport operators, and even the International Air Transport Association (IATA). Also read | 'Landmine' explosion in Pakistan's Peshawar injures 11, one FC personnel killed Due to this, Pakistan's n...

Pakistan’s risk of defaulting has receded for now, but it needs more help from the IMF and foreign benefactors for a sustainable economic recovery. In the first half of 2023, Pakistan appeared to be moving toward a catastrophic economic default. An IMF loan program Pakistan entered into in 2019 had gone off track after the Fund found Islamabad’s commitment to reform lacking, leading to a suspension of loan disbursements. The derailment of the IMF program resulted in a significant drop in the country’s foreign exchange reserves — at one point this year, reserves could only cover about two weeks' worth of imports due to concurrent debt repayment pressure. To avoid defaulting, the government imposed stringent import restrictions in an attempt to control dollar outflows. That caused a majo...

Whether in the private sector or government, a debt crisis in one country can and frequently does spread economic pain to other countries. This can happen through a tightening of financial conditions such as a spike in interest rates, a slowdown in trade and economic growth, or merely a steep decline in consumer confidence. This is especially true if the country in crisis is large and intricately linked to the global economy. KEY TAKEAWAYSDebt crises in single nations can affect the economies and people of other countries.Countries can experience financial losses, market turmoil, and sharp slowdowns in trade and economic growth.Even in a small country, a debt crisis can have devastating effects elsewhere if that country is enmeshed in the global financial system and economy.The g...

China’s Evergrande Group, once China’s second-largest property developer has filed for bankruptcy in the US. Chapter 15 bankruptcy protection, allows a US bankruptcy court to step in when an insolvency case involves another country. It is intended to help promote cooperation between US courts, debtors, and other countries’ courts involved in cross-border bankruptcy proceedings. Evergrande, the beleaguered firm, borrowed heavily and defaulted on its debt in 2021, sparking a massive property crisis in China’s economy, which continues till date. The company’s bankruptcy serves as a cautionary lesson about ‘growth-at-all-costs’’ model that underpinned China’s spectacular growth in the past three decades. The company’s default came after Beijing began cracking down, two years ago, on...