EXPLAINER: Why Sri Lanka’s economy collapsed and what’s next

EXPLAINER: Why Sri Lanka’s economy collapsed and what’s next
A Buddhist nun falls next to a barricade after inhaling tear gas during a protest against the economic crisis. (AP)
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Updated 24 June 2022

EXPLAINER: Why Sri Lanka’s economy collapsed and what’s next

EXPLAINER: Why Sri Lanka’s economy collapsed and what’s next
  • Sri Lanka seeking help from neighboring India and China and from the IMF

COLOMBO, Sri Lanka: Sri Lanka’s prime minister says the island nation’s debt-laden economy has “collapsed” as it runs out of money to pay for food and fuel. Short of cash to pay for imports of such necessities and already defaulting on its debt, it is seeking help from neighboring India and China and from the International Monetary Fund.
Prime Minister Ranil Wickremesinghe, who took office in May, was emphasizing the monumental task he faces in turning around an economy he said is heading for “rock bottom.”
Sri Lankans are skipping meals as they endure shortages, lining up for hours to try to buy scarce fuel. It’s a harsh reality for a country whose economy had been growing quickly, with a growing and comfortable middle class, until the latest crisis deepened.

How serious is this crisis?
Tropical Sri Lanka normally is not lacking for food but people are going hungry. The UN World Food Program says nearly nine of 10 families are skipping meals or otherwise skimping to stretch out their food, while 3 million are receiving emergency humanitarian aid.
Doctors have resorted to social media to try to get critical supplies of equipment and medicine. Growing numbers of Sri Lankans are seeking passports to go overseas in search of work. Government workers have been given an extra day off for three months to allow them time to grow their own food. In short, people are suffering and desperate for things to improve.

Why is the economy in such dire straits?
Economists say the crisis stems from domestic factors such as years of mismanagement and corruption, but also from other troubles such as a growing $51 billion in debt, the impact of the pandemic and terror attacks on tourism, and other problems.
Much of the public’s ire has focused on President Gotabaya Rajapaksa and his brother, former Prime Minister Mahinda Rajapaksa. The latter resigned after weeks of anti-government protests that eventually turned violent.
Conditions have been deteriorating for the past several years. In 2019, Easter suicide bombings at churches and hotels killed more than 260 people. That devastated tourism, a key source of foreign exchange.
The government needed to boost its revenues as foreign debt for big infrastructure projects soared, but instead Rajapaksa pushed through the largest tax cuts in Sri Lankan history, which recently were reversed. Creditors downgraded Sri Lanka’s ratings, blocking it from borrowing more money as its foreign reserves sank. Then tourism flatlined again during the pandemic.
In April 2021, Rajapaksa suddenly banned imports of chemical fertilizers. The push for organic farming caught farmers by surprise and decimated staple rice crops, driving prices higher. To save on foreign exchange, imports of other items deemed to be luxuries also were banned. Meanwhile, the Ukraine war has pushed prices of food and oil higher. Inflation was near 40 percent and food prices were up nearly 60 percent in May.

Why did the prime minister say the economy has collapsed?
Such a stark declaration might undermine any confidence in the state of the economy and it didn’t reflect any specific new development. Wickremesinghe appeared to be underscoring the challenge his government faces in turning things around as it seeks help from the IMF and confronts criticism over the lack of improvement since he took office weeks ago. He’s also fending off criticism from within the country. His comment might be intended to try to buy more time and support as he tries to get the economy back on track.
The Finance Ministry says Sri Lanka has only $25 million in usable foreign reserves. That has left it without the wherewithal to pay for imports, let alone repay billions in debt.
Meanwhile the Sri Lankan rupee has weakened in value by nearly 80 percent to about 360 to $1. That makes costs of imports even more prohibitive. Sri Lanka has suspended repayment of about $7 billion in foreign loans due this year out of $25 billion to be repaid by 2026.

What is the government doing about it?
Wickremesinghe has ample experience. This latest is his sixth term as prime minister.
So far, Sri Lanka has been muddling through, mainly supported by $4 billion in credit lines from neighboring India. An Indian delegation was in the capital Colombo on Thursday for talks on more assistance, but Wickremesinghe warned against expecting India to keep Sri Lanka afloat for long.
“Sri Lanka pins last hopes on IMF,” said Thursday’s headline in the Colombo Times newspaper. The government is in negotiations with the IMF on a bailout plan and Wickremesinghe said Wednesday he expects to have a preliminary agreement with the IMF by late July.
The government also is seeking more help from China. Other governments like the US, Japan and Australia have provided a few hundred million dollars in extra support.
Earlier this month, the United Nations began a worldwide public appeal for assistance. So far, projected funding barely scratches the surface of the $6 billion the country needs to stay afloat over the next six months.
To counter Sri Lanka’s fuel shortage, Wickremesinghe told The Associated Press in a recent interview that he would consider buying more steeply discounted oil from Russia to help tide the country through its crisis.

Wizz Air launches Rome to Riyadh route

Wizz Air launches Rome to Riyadh route
Updated 10 December 2022

Wizz Air launches Rome to Riyadh route

Wizz Air launches Rome to Riyadh route
  • Scheduled flights will run twice a week from Leonardo da Vinci Fiumicino hub

ROME: WIZZ Air launched this week its first direct flight from Rome to Riyadh.

Scheduled flights will run twice a week from Leonardo da Vinci Fiumicino hub and wil increase the Italian touristic presence in Saudi Arabia, according to a company statement.

The European low cost airline had already opened a regular route from Rome to Dammam and from Milan Malpensa to Jeddah, as part of twenty-three new routes to Saudi Arabia announced in recent months by WIZZ Air,

It confirmed the company's commitment in supporting the country's growing tourism sector, in line with the Vision 2030 program, the company said.

At a launch event in Rome Fiumicino airport Fahd Hamidaddin, Chief Executive Officer and Board Member of Administration of the Saudi Tourism Authority, said that the increase of flights between KSA and Italy was “helping us to create a new exciting destination for the Italian travellers.”

He continued: “We are very pleased and excited as this will allow to more and more Italians to come to Saud Arabia to explore our wonderful country and experience the authentic Arabian hospitality.”

Evelin Jeckel, Network Officer of WIZZ Air said that the new route “will directly link two capitals, all over the world most known for their immense historical and cultural heritage.” 

She thanked the Saudi Ministry of Foreign Affairs, Saudi Tourism Authority, Riyadh International Airport and the Government of Saudi Arabia for their “continued support.”

ACWA Power signs a $1.5bn agreement with Power China: Reuters

ACWA Power signs a $1.5bn agreement with Power China: Reuters
Updated 09 December 2022

ACWA Power signs a $1.5bn agreement with Power China: Reuters

ACWA Power signs a $1.5bn agreement with Power China: Reuters

RIYADH: Saudi Arabia private utility firm ACWA Power has signed a $1.5 billion agreement with Power China, it has been reported by Reuters.

No further details were released, and ACWA Power did not respond to Arab News' request for a comment. 

The deal comes amid a flurry of Memorandums of Understanding signed by the energy provider with Chinese entities to coincide with the visit of China’s President Xi Jinping to the Kingdom.

ACWA Power signed MoUs that relate to financing, investment, engineering procurement and construction contracts and renewable energy equipment procurement in its clean and renewable energy projects. 

The strategic partners from China include Industrial and Commercial Bank of China, Bank of China, SPIC Huanghe Hydropower Development Co,  and China Southern Power Grid International. 

Power China International Group, China Energy International Group, Jinko Solar Co, Sungrow Power Supply Co and Jolywood Solar Technology Co also inked agreements.

The deals will lay the ground for financing, investment and construction of ACWA Power’s global clean and renewable energy projects in Saudi Arabia and Belt and Road Initiative countries. 

Mohammad Abdullah Abunayyan, chairman of ACWA Power, said: “ACWA Power’s solid and growing relationship with major Chinese entities has contributed to our leading position in driving the global energy transition and reflects the valuable ties between Saudi Arabia and China.  

“As a leading developer of power, water and green hydrogen assets worldwide, and being headquartered in a Belt and Road Initiative country, we are in a unique position to support both the energy transition and economic transformation envisioned by Saudi Arabia’s forward-looking and iconic Vision 2030, as well as China’s Belt and Road initiative. 

“We look forward to playing a vital role in each of these national agendas that complement each other.” 

ACWA Power’s track record of collaboration with China started in 2009 when the firm opened an office in Beijing. 

To date, Chinese organizations have a hand in 47 projects within ACWA Power’s portfolio, spread across 12 countries.  

During this time, ACWA Power’s collaboration with Chinese firms have reached a $10billion with investors and financiers, and an additional $33 billion with Chinese EPC and suppliers, covering multiple landmark renewable and seawater desalination projects over the world.

AI and digital economy development key part of Saudi-China partnership plan

AI and digital economy development key part of Saudi-China partnership plan
Updated 09 December 2022

AI and digital economy development key part of Saudi-China partnership plan

AI and digital economy development key part of Saudi-China partnership plan

RIYADH: Saudi Arabia and China will work closely together on developing artificial intelligence as part of a deal struck between the two nations.

The Kingdom’s Minister of Communications and Information Technology Abdullah bin Amer Al-Sawaha signed a strategic partnership plan with the Chinese Minister of Industry and Information Technology Wang Zhigang in a sign of the deepening ties between the governments.

The partnership develops a framework for cooperation, covering the fields of digital economy, communications and information technology, and promoting research and innovation in the field of emerging technologies, according to the Saudi Press Agency.

It will also improve aspects of communications infrastructure, and enable the growth of digital entrepreneurship through emerging business models such as financial technology and e-commerce.

It also covers cooperation in the fields of artificial intelligence, advanced computing and quantum information technology, in addition to robots and smart equipment, and work to develop their technologies and applications for industrial and commercial purposes.

Within the framework of this partnership, the two sides will also cooperate in the field of digital technology applications and radio frequency spectrum management, in addition to their cooperation in developing and building local capabilities in communication and data centers, developing digital platforms and cloud computing services, and expanding submarine cable projects.

The Saudi and Chinese sides will implement the terms of their partnership by exchanging information and experiences, activating visits between experts and specialists from both sides, and organizing conferences, seminars and working sessions.

The agreement comes in the wake of the visit of Chinese President Xi Jinping to the Kingdom.

It follows on from a memorandum of understanding signed with China’s Huawei Technologies on cloud computing and building high-tech complexes in Saudi cities, the government communication office said in a statement.

A statement released to mark the high-level visit said China and Saudi Arabia would explore common investment opportunities in petrochemicals and enhance cooperation in renewable energy, including nuclear, and develop projects for energy supply chains, efficiency and advanced technology.

Riyadh and Jeddah among most improved cities on global urban mobility readiness index

Riyadh and Jeddah among most improved cities on global urban mobility readiness index
Updated 09 December 2022

Riyadh and Jeddah among most improved cities on global urban mobility readiness index

Riyadh and Jeddah among most improved cities on global urban mobility readiness index

RIYADH: Riyadh and Jeddah are among the world’s most improved cities in terms of urban mobility readiness, according to the newest edition of an annual study of 60 cities.

Riyadh moved up five places, from 54 in 2021 to 49 in 2022, and Jeddah rose from 58 to 51, in the ranking compiled by the Oliver Wyman Forum and the University of California, Berkeley Institute of Transportation Studies.

The report concludes that current large-scale investments in mass transit and innovation mean the cities will likely continue to improve their positions.

André Martins, partner India, Middle East and Africa head of transport services and operations at the Oliver Wyman Forum, said: “Because of the consequential growth in both population and tourist numbers, mobility solutions and urban transport infrastructure are a key part of Vision 2030. 

“Mobility is a complex and fast-moving field – and in cities like Riyadh and Jeddah, the solutions need to be multi-fold: from smart use of micro-mobility solutions to accelerated deployment of public transport systems.”

He added: “Meanwhile, Saud Arabia’s giga projects have a unique level of flexibility from an infrastructure and design perspective, meaning they can act as both entry points for innovation into the Kingdom, as well as global pioneers of urban mobility solutions.”

The index highlights that Riyadh’s near-complete mass transit system, which will combine a bus network with six lines of automated metro, will play a key role in the city’s mobility future. 

The findings showed that the city’s current car-centric approach is mitigated by good road infrastructure, strong adoption of ride sharing, and the government’s new investments in connected autonomous vehicle technologies.

Saudi Arabia has also recently announced its first EV manufacturing plant – which will help in achieving their stated goal of 30 percent of all cars within Riyadh being EVs by 2030.

Meanwhile, Jeddah’s strengths include its high-quality road infrastructure and strong regional linkages. Another strength is borne from the seaside city’s proximity to Makkah and Madinah, while its international airport’s connection to the Holy Cities by high-speed rail makes it an important and connected global hub. 

The city also plans to develop a comprehensive public transit system, including a metro that is due to open in 2030.

The report noted that preference for cars across the Middle East contributes to the region’s low utilization of non-motorized transit, however a generally high penetration of shared mobility services, such as car-sharing, helps to lower congestion levels.

The index ranks 57 quantitative and qualitative key performance indicators that measure social impact, infrastructure, market attractiveness, system efficiency and innovation. 

Other measures in the overall Index include electric vehicle charging station network investment and incentives, the number of car-free zones, autonomous vehicle adoption, and public transport ridership and affordability.

Saudi Arabia v Mexico leads World Cup spending: VISA

Saudi Arabia v Mexico leads World Cup spending: VISA
Updated 09 December 2022

Saudi Arabia v Mexico leads World Cup spending: VISA

Saudi Arabia v Mexico leads World Cup spending: VISA

RIYADH: Saudi Arabia’s match against Mexico at the FIFA World Cup saw the highest volume of in-stadium payment transactions of the group stage games, according to data released by Visa.

The payment company has published research showing that consumer spending at the tournament is on course to surpass the total outlay in the previous World Cup.

According to the data, spending by value at Qatar 2022 during the group stages is already at 89 percent of the total seen in Russia 2018.

Compared to the tournament in Brazil in 2014, almost double had been spent by the time the World Cup reached the knock-out rounds in Qatar. 

Between kick-off on Nov. 20 to the final group stage match on December 2, 70% of all consumer spend by value at World Cup venues was on internationally issued Visa cards with the US leading on 18 percent, followed by Mexico on nine percent Saudi Arabia on eight percent.

“For Qatar 2022, Visa enabled more payment terminals in official venues than ever before and are trialing some innovative new ways to pay around Qatar, so paying for things can be less cumbersome and fans can stay in the moment and focus on the beautiful game,” said Saeeda Jaffar, senior vice president and group country manager, Gulf Cooperation Council at Visa.

The average in-stadium transaction amount for all matches during the group stage of the tournament play was $23. During all matches the top three spend categories were merchandise on 47 percent, food and beverages on 36 percent, and ticketing on 11 percent.

The increased spend comes despite lower than anticipated numbers of fans traveling to the event.

According to a report obtained by Reuters, Qatar received just over 765,000 visitors during the first two weeks of the World Cup, falling short of the country’s expectations for an influx of 1.2 million during the month-long event.

The Dec. 7 report was prepared by the Supreme Committee for Delivery and Legacy , which organizes the tournament, and said that the first 17 days of the World Cup saw 765,859 international visitors, more than half of whom have now departed.

The report registered 1.33 million match ticket holders and 3.09 million tickets sold across the eight stadiums in Qatar for the tournament that ends on Dec. 18.