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Economies in Shambles

The devastating hyperinflation in the post COVID world

The devastating hyperinflation in the post COVID world COVID19 has had a devastating impact on the economies of the world. Many economically fragile nations got ruined post-COVID. The world is going through an uncertain passage where hyperinflation, depreciating currencies, wars between countries, internal protests/riots and debt traps are taking the center stage. Here is a case study on how different countries of the world are faring in terms of inflation and currency depreciation in the post COVID19 world presented by our analyst David May. First, we will see the list of the countries with inflation rates soaring to over three figures. The world-affected nations are Zimbabwe 257% (Jul/22) Lebanon 210% (Jun/22) Sudan 149% (Jun/22) Syria 139% (Aug/21) Venezuela 137% (Jul/22) Causes of the crisis: Zimbabwe is stifling under climbing international debt as it begins to pay the price for borrowing heavily from China for infrastructure projects at the tail end of Robert Mugabe’s regime. Ongoing giant infrastructure projects funded by Chinese financiers include the expansion of the Hwange Thermal Station with a loan of $1.2 billion, the upgrading of Robert Mugabe International Airport, and the construction of dams. Zimbabwe owes $13.5billion to multilateral financial institutions, bilateral partners, and other creditors. Due to extreme inflation in the country post COVID19 pandemic, 61% of people in Lebanon reported challenges in accessing food and other basic needs at the end of 2021 according to the World Food Program (WFP). Causes of the crisis: One of the worst Debt to GDP ratios in the world and huge depreciation in the currency. The refugee crisis of over 1.5 million refugees from the Syrian civil war. Collapse of the Ponzi scheme led to the steady decline of the Lebanese lira. Devastating double blast at the port of Beirut on 4th August, 2020: In addition to killing more than 200 and injuring 7,000, the explosion ruined businesses and the port infrastructure, including giant wheat silos. Dependence on Ukraine for the import of wheat in the country. Sudan had the worst impact of COVID19 and geopolitical tensions since 2020.  Sudan’s inflation rate for 2019 was 50.99%. For 2020 it was 150.32%, a 99.33% increase from 2019. For 2021 it galloped to 382.82%, a massive 232.49% increase from 2020. But now in 2022, it is coming down but still is in three digits. Causes of the crisis: Military Coup and political instability has resulted in protests and economic instability in Sudan. Furthermore, Sudan’s government pursued a policy of economic liberalization that has enabled a tiny group of traders, influential people, and capitalists to regulate the majority of Sudanese commercial activity. As a result, monopolistic practices have spread in primary commodities like sugar and building materials, and a significant proportion of the import and export sectors. All this coupled with the Ukraine-Russia war leading to extreme food insecurity has led to extreme inflation in Sudan. Sudan has undertaken a huge debt from France, Austria, the United States, Kuwait, Saudi Arabia, and China along with the International Monetary Fund (IMF). Reasons : Historical civil wars, the ISIS crisis,  drought in North-Eastern Syria and increase in global commodity prices as a result of the Russia-Ukraine war has led to hyperinflation in Syria. Syria is seeking debts from China out of misery to rebound from the steady and sharp plunge in its economy since 2011, the year the civil war amplified. However, joining hands with China will come with the risk of a vicious #DebtTrap that countries like Srilanka, Zimbabwe, Djbouti, and Pakistan are already suffering from. Causes of the crisis: The crisis in Venezuela is an ongoing socioeconomic and political crisis that began in Venezuela during the presidency of Hugo Chávez and worsened during Nicolás Maduro’s presidency. It has been marked by hyperinflation, escalating starvation, disease, crime, and mortality rates, resulting in massive emigration from the country. More than 6 million refugees, asylum-seekers, and migrants from Venezuela have left the country seeking food, work, and a better life. COVID19 however, exacerbated the crisis in Venezuela. Venezuelan migrants who returned to the homeland after losing their jobs abroad in the wake of the pandemic have been unable to earn wages back home. Deficiencies of fuel, electricity and clean water have flared riots and left many migrants with no option but to flee again. The country was once believed to be the most affluent in Latin America, thanks to holding the most extensive petroleum reserves in the globe. But more than a decade of plunging oil revenue and flawed administration led to the descent of the national economy, and the government has not been able to provide sufficient social services. The next group of countries whose economies are facing the heat due to the geopolitical crisis, food insecurity, debt traps, and hyperinflation in the post-COVID world are as follows Turkey 79.6% (Jul/22) Argentina 71% (Jul/22) Sri Lanka 60.8% (Jul/22) Suriname 55.6% (May/22) Iran 54% (Jul/22) The currency of Turkey has lost more than 20% of its value against the US dollar since the start of 2022. The inflation rate which was just over 8% in October 2019, reached 80% in July 2022. Other than global issues concerning all the nations, following the causes of the crisis in Turkey: President Recep Tayyip Erdogan’s flawed monetary policy. (like decreasing the cost of borrowing to increase the demand instead of cooling it down) Irrational hikes in the minimum wages. (A massive hike of over 50%) An all-time high External Debt reached $451.2 billion in March 2022, compared with $442.5 billion in the previous quarter. A woman displays her electricity bill during a protest against high energy prices in Turkey. Protests have erupted in various parts of Turkey to protest against the rising prices. Over hundred thousand people participated in a march for employment and fair wages and against hunger and poverty on the Plaza de Mayo in the center of Buenos Aires organized by the workers movement Unidad Piquetera (Picketers Union), as part of widespread protests across Argentina.  After the year 2020, inflation galloped past 70%. Analysts surveyed by Argentina’s central bank raised their inflation estimate for 2022 to 90.2%.  The primary…

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