Ukraine’s future after war, Sri Lanka’s worst economic crisis

Even what should be the simplest issue in concluding a war – negotiating the terms of disengagement and military withdrawals – is guaranteed to be fiendishly complicated in the case of Ukraine.

This is why the Ukrainians will engage in an often frustrating and aimless process of potential withdrawal negotiations with the Russians – only if they can be sure they can obtain security guarantees from the West, the correspondent says to Global Affairs Jonathan Eyal in his commentary.

The simplest security guarantee that can be offered to Ukraine is NATO membership.

But it is also the least likely option, because Ukraine’s joining the alliance would mean an explicit NATO guarantee for the recovery of all Ukrainian territory. This will put NATO on a path of direct and gradual confrontation with Russia.

For obvious reasons, it is therefore now a matter of offering Ukraine other forms of security guarantees. Yet even these are riddled with complications.

According to Eyal: “An offer of Ukraine’s inclusion in the European Union would give the country a huge security boost… The problem here is that membership requires a high degree of bureaucratic and economic compatibility , which will take at least a decade from now to complete.”

Extreme populism and economic catastrophe

With increasing frequency over the past few weeks, there have been harrowing stories of what Sri Lanka’s worst economic crisis looks like.

Thirteen-hour power cuts; people are dying because life-saving drugs are running out; goods pile up in ports because importers cannot get dollars to pay for them; a monetary crash; soaring prices for basic necessities, long queues for food, petrol and gas cylinders; the resignation of the entire Cabinet; then last week, the very first default on external debt.

Populist measures such as deep tax cuts have decimated tax revenue by around a quarter of a hit – and that was before the pandemic, says deputy editor Vikram Khanna in his commentary.

After the arrival of the pandemic, other revenue-eroding measures were adopted. “The government has exempted many sectors, including IT services and hotels, from tax, extended tax payment deadlines, announced forbearance from corporate tax arrears, and lavished spending on tax programs. immunization and health as well as cash transfers,” he wrote.

“With revenues at rock bottom, the government had no choice but to increase borrowing to maintain spending.”

He notes how, on several occasions during its short tenure, the government ignored the advice of experts, ranging from agronomists to business leaders to economists.

External funding per se, which is not new to Sri Lanka, will not be a silver bullet. To achieve sustainable growth, Sri Lanka also needs far-reaching reforms, including stronger rule of law, less centralized decision-making in government, overhaul of state-owned enterprises, new technology and education and stronger minority rights.

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