DUMA GQUBULE: Sri Lanka suffers for losing its monetary sovereignty
Once a country commits the ‘original sin’ of borrowing in foreign currency, the walk to hell is short
Over the past four decades, every developing country currency crisis — including Mexico (1982 and 1994), East Asia (1997), Russia (1998), Brazil (1999), Argentina (2002 and 2018), Turkey (2018), Lebanon (2019) and Zambia (2020) — arose because of a loss of monetary sovereignty after the accumulation of foreign currency loans or futile attempts to defend a currency peg.
The first of these currency crises was probably the worst. After Mexico defaulted on its debt in 1982 as a result of soaring interest rates in the US, the crisis spread to more than 40 developing countries in Latin America and Africa, which had also taken dollar-denominated loans. In Latin America, the crisis resulted in a lost decade — La Década Perdida. José Antonio Ocampo, a Columbia University economics professor says the crisis was “the most traumatic event in Latin American history”...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.