- by Yueqing
- 07 30, 2024
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THE ECONOMIC fallout from Russia’s invasion of Ukraine now includes a sovereign default. On April 12th Sri Lanka said that it would suspend payments on the $35bn its government owes foreign creditors. Surging food and energy prices, the result of wartime disruption to commodity markets, have dealt a heavy blow to an economy that was already mismanaged, and brought even erstwhile government supporters onto the streets in protest. Sri Lanka may not be the only country to run aground in the hazardous conditions prevailing in the global economy.Rising inflation and higher interest rates are painful everywhere, but the stakes are particularly high in poor and middle-income countries. Food prices, which are up by nearly 20% this year, make up a greater share of consumer spending. Inflation is more likely to spiral out of control. And policymakers must also worry about capital flight and falling exchange-rates when the Federal Reserve raises interest rates—as it will over the next year.