Sri Lanka in the Barrel

Sri Lanka last week nearly defaulted on its foreign obligations, according to reports in the financial media, barely avoiding it by obtaining a loan from neighboring India. “Sri Lankan economists,” gzeromedia.com reported, “are asking the government to temporarily suspend payments, and use its scarce cash reserves to buy food, fuel, and medicine. But the unintended consequences of a default could be far worse. It could trigger a bigger crisis by cutting off Sri Lanka from the international financial system. When foreign credit dries up, it’ll just be a matter of time before there’s a run on banks, and social unrest follows.”