Explained: the Economic Crisis in Sri Lanka
Sri Lanka is currently in an economic and political crisis of mass proportions, recently culminating in a default on its debt payments. The country is also nearly at empty on their foreign currency reserves, decreasing the ability to purchase imports and driving up domestic prices for goods.
There are several reasons for this crisis and the economic turmoil has sparked mass protests and violence across the country. This visual breaks down some of the elements that led to Sri Lanka’s current situation.
A Timeline of Events
The ongoing problems in Sri Lanka have bubbled up after years of economic mismanagement. Here’s a brief timeline looking at just some of the recent factors.
In 2009, a decades-long civil war in the country ended and the government’s focus turned inward towards domestic production. However, a stress on local production and sales, instead of exports, increased the reliance on foreign goods.
Unprompted cuts were introduced on income tax in 2019, leading to significant losses in government revenue, draining an already cash-strapped country.
The COVID-19 pandemic hit the world causing border closures globally and stifling one of Sri Lanka’s most lucrative industries. Prior to the pandemic, in 2018, tourism contributed nearly 5% of the country’s GDP and generated over 388,000 jobs. In 2020, tourism’s share of GDP had dropped to 0.8%, with over 40,000 jobs lost to that point.
Recently, the Sri Lankan government introduced a ban on foreign-made chemical fertilizers. The ban was meant to counter the depletion of the country’s foreign currency reserves.
However, with only local, organic fertilizers available to farmers, a massive crop failure occurred and Sri Lankans were subsequently forced to rely even more heavily on imports, further depleting reserves.
In early April this year, massive protests calling for President Gotabaya Rajapaksa’s resignation, sparked in Sri Lanka’s capital city, Colombo.
In May, pro-government supporters brutally attacked protesters. Subsequently, Prime Minister Mahinda Rajapaksa, brother of President Rajapaksa, stepped down and was replaced with former PM, Ranil Wickremesinghe.
Recently, the government approved a four-day work week to allow citizens an extra day to grow food, as prices continue to shoot up. Food inflation increased over 57% in May.
Additionally, the increasing prices on grain caused by the war in Ukraine and rising fuel prices globally have played into an already dire situation in Sri Lanka.
The Key Information
“Our economy has completely collapsed.”
Prime minister Ranil Wickremesinghe to Parliament last week.
One of the main causes of the economic crisis in Sri Lanka is the reliance on imports and the amount spent on them. Let’s take a look at the numbers:
- 2021 total imports = $20.6 billion USD
- 2022 total imports (to March) = $5.7 billion USD
In contrast, the most recent reported foreign currency reserve levels in the country were at an abysmal $50 million, having plummeted an astounding 99%, from $7.6 billion in 2019.
Some of the top imports in 2021, according to the country’s central bank were:
- Refined petroleum = $2.8 billion
- Textiles = $3.1 billion
- Chemical products = $1.1 billion
- Food & beverage = $1.7 billion
Of course, without the cash to purchase these goods from abroad, Sri Lankans face an increasingly drastic situation.
Additionally, the debt Sri Lanka has incurred is huge, further hampering their ability to boost their reserves. Recently, they defaulted on a $78 million loan from international creditors, and in total, they’ve borrowed $50.7 billion.
The largest source of their debt is by far due to market borrowings, followed closely by loans taken from the Asian Development Bank, China, and Japan, among others.
What it Means
Sri Lanka is home to more than 22 million people who are rapidly losing the ability to purchase everyday goods. Consumer inflation reached 39% at the end of May.
Due to power outages meant to save energy and fuel, schools are currently shuttered and children have nowhere to go during the day. Protesters calling for the president’s resignation have been camped in the capital for months, facing tear gas from police and backlash from president Rajapaksa’s supporters, but many have also responded violently to pushback.
India and China have agreed to send help to the country and the the International Monetary Fund recently arrived in the country to discuss a bailout. Additionally, the government has sent ministers to Russia to discuss a deal for discounted oil imports.
A Foreshadowing for Low Income Countries
Governments need foreign currency in order to purchase goods from abroad. Without the ability to purchase or borrow foreign currency, the Sri Lankan government cannot buy desperately needed imports, including food staples and fuel, causing domestic prices to rise.
Furthermore, defaults on loan payments discourage foreign direct investment and devalue the national currency, making future borrowing more difficult.
What’s happening in Sri Lanka may be an ominous preview of what’s to come in other low and middle-income countries, as the risk of debt distress continues to rise globally.
The Debt Service Suspension Initiative (DSSI) was implemented by G20 countries, suspending nearly $13 billion in debt from the start of the pandemic until late 2021.
Some DSSI and LIC countries facing a high risk of debt distress include Zambia, Ethiopia, and Tajikistan, to name a few.
Going forward, Sri Lanka’s next steps in managing this situation will either serve as a useful example for other countries at risk or a warning worth heeding.
Since this article was published the situation has changed significantly in Sri Lanka. Protesters have received their original demand calling for president Rajapaksa to step down — both he and prime minister Wickremesinghe have agreed to resign. This comes after protesters stormed the president’s palace causing him to flee the country.
Note: The debt breakdown in the main visualization represents total outstanding external debt owed to foreign creditors rather total debt.
All of the World’s Money and Markets in One Visualization (2022)
From the wealth held to billionaires to all debt in the global financial system, we look at the vast universe of money and markets in 2022.
All of the World’s Money and Markets in One Visualization
The era of easy money is now officially over.
For 15 years, policymakers have tried to stimulate the global economy through money creation, zero interest-rate policies, and more recently, aggressive COVID fiscal stimulus.
With capital at near-zero costs over this stretch, investors started to place more value on cash flows in the distant future. Assets inflated and balance sheets expanded, and money inevitably chased more speculative assets like NFTs, crypto, or unproven venture-backed startups.
But the free money party has since ended, after persistent inflation prompted the sudden reversal of many of these policies. And as Warren Buffett says, it’s only when the tide goes out do you get to see “who’s been swimming naked.”
Measuring Money and Markets in 2022
Every time we publish this visualization, our common unit of measurement is a two-dimensional box with a value of $100 billion.
Even though you need many of these to convey the assets on the balance sheet of the U.S. Federal Reserve, or the private wealth held by the world’s billionaires, it’s quite amazing to think what actually fits within this tiny building block of measurement:
Our little unit of measurement is enough to pay for the construction of the Nord Stream 2 pipeline, while also buying every team in the NHL and digging FTX out of its financial hole several times over.
Here’s an overview of all the items we have listed in this year’s visualization:
|SBF (Peak Net Worth)||$26 billion||Bloomberg||Now sits at <$1B|
|Pro Sports Teams||$340 billion||Forbes||Major pro teams in North America|
|Cryptocurrency||$760 billion||CoinMarketCap||Peaked at $2.8T in 2021|
|Ukraine GDP||$130 billion||World Bank||Comparable to GDP of Mississippi|
|Russia GDP||$1.8 trillion||World Bank||The world's 11th largest economy|
|Annual Military Spending||$2.1 trillion||SIPRI||2021 data|
|Physical currency||$8.0 trillion||BIS||2020 data|
|Gold||$11.5 trillion||World Gold Council||There are 205,238 tonnes of gold in existence|
|Billionaires||$12.7 trillion||Forbes||Sum of fortunes of all 2,668 billionaires|
|Central Bank Assets||$28.0 trillion||Trading Economics||Fed, BoJ, Bank of China, and Eurozone only|
|S&P 500||$36.0 trillion||Slickcharts||Nov 20, 2022|
|China GDP||$17.7 trillion||World Bank|
|U.S. GDP||$23.0 trillion||World Bank|
|Narrow Money Supply||$49.0 trillion||Trading Economics||Includes US, China, Euro Area, Japan only|
|Broad Money Supply||$82.7 trillion||Trading Economics||Includes US, China, Euro Area, Japan only|
|Global Equities||$95.9 trillion||WFE||Latest available 2022 data|
|Global Debt||$300.1 trillion||IIF||Q2 2022|
|Global Real Estate||$326.5 trillion||Savills||2020 data|
|Global Private Wealth||$463.6 trillion||Credit Suisse||2022 report|
|Derivatives (Market)||$12.4 trillion||BIS|
|Derivatives (Notional)||$600 trillion||BIS|
Has the Dust Settled Yet?
Through previous editions of our All the World’s Money and Markets visualization, we’ve created snapshots of the world’s assets and markets at different points in time.
For example, in our 2017 edition of this visualization, Apple’s market capitalization was only $807 billion, and all crypto assets combined for $173 billion. The global debt total was at $215 trillion.
|Asset||2017 edition||2022 edition||Change (%)|
|Apple market cap||$807 billion||$2.3 trillion||+185%|
|Crypto||$173 billion||$760 billion||+339%|
|Fed Balance Sheet||$4.5 trillion||$8.7 trillion||+93%|
|Stock Markets||$73 trillion||$95.9 trillion||+31%|
|Global Debt||$215 trillion||$300 trillion||+40%|
And in just five years, Apple nearly quadrupled in size (it peaked at $3 trillion in January 2022), and crypto also expanded into a multi-trillion dollar market until it was brought back to Earth through the 2022 crash and subsequent FTX implosion.
Meanwhile, global debt continues to accumulate—growing by $85 trillion in the five-year period.
With interest rates expected to continue to rise, companies making cost cuts, and policymakers reining in spending and borrowing, today is another unique snapshot in time.
Now that the easy money era is over, where do things go from here?
Ranked: The World’s 100 Biggest Pension Funds
The world’s 100 largest pension funds are worth over $17 trillion in total. Which ones are the biggest, and where are they located?
Ranked: The World’s 100 Biggest Pension Funds
View the high-resolution of the infographic by clicking here.
Despite economic uncertainty, pension funds saw relatively strong growth in 2021. The world’s 100 biggest pension funds are worth over $17 trillion in total, an increase of 8.5% over the previous year.
This graphic uses data from the Thinking Ahead Institute to rank the world’s biggest pension funds, and where they are located.
What is a Pension Fund?
A pension fund is a fund that is designed to provide retirement income. This ranking covers four different types:
- Sovereign funds: Funds controlled directly by the state. This ranking only includes sovereign funds that are established by national authorities.
- Public sector funds: Funds that cover public sector workers, such as government employees and teachers, in provincial or state sponsored plans.
- Private independent funds: Funds controlled by private sector organizations that are authorized to manage pension plans from different employers.
- Corporate funds: Funds that cover workers in company sponsored pension plans.
Among the largest funds, public sector funds are the most common.
The Largest Pension Funds, Ranked
Here are the top 100 pension funds, organized from largest to smallest.
|1||Government Pension Investment Fund||🇯🇵 Japan||$1.7T|
|2||Government Pension Fund||🇳🇴 Norway||$1.4T|
|3||National Pension||🇰🇷 South Korea||$798.0B|
|4||Federal Retirement Thrift||🇺🇸 U.S.||$774.2B|
|6||California Public Employees||🇺🇸 U.S.||$496.8B|
|7||Canada Pension||🇨🇦 Canada||$426.7B|
|8||National Social Security||🇨🇳 China||$406.8B|
|9||Central Provident Fund||🇸🇬 Singapore||$375.0B|
|11||California State Teachers||🇺🇸 U.S.||$313.9B|
|12||New York State Common||🇺🇸 U.S.||$267.8B|
|13||New York City Retirement||🇺🇸 U.S.||$266.7B|
|14||Local Government Officials||🇯🇵 Japan||$248.6B|
|15||Employees Provident Fund||🇲🇾 Malaysia||$242.6B|
|16||Florida State Board||🇺🇸 U.S.||$213.8B|
|17||Texas Teachers||🇺🇸 U.S.||$196.7B|
|18||Ontario Teachers||🇨🇦 Canada||$191.1B|
|19||National Wealth Fund||🇷🇺 Russia||$180.7B|
|21||Labor Pension Fund||🇹🇼 Taiwan||$168.9B|
|22||Washington State Board||🇺🇸 U.S.||$161.5B|
|23||Public Institute for Social Security||🇰🇼 Kuwait||$160.0B|
|25||Wisconsin Investment Board||🇺🇸 U.S.||$147.9B|
|26||Future Fund||🇦🇺 Australia||$147.9B|
|28||Employees' Provident||🇮🇳 India||$145.0B|
|29||New York State Teachers||🇺🇸 U.S.||$144.4B|
|30||North Carolina||🇺🇸 U.S.||$137.1B|
|32||GEPF||🇿🇦 South Africa||$129.1B|
|33||California University||🇺🇸 U.S.||$125.3B|
|34||Bayerische Versorgungskammer||🇩🇪 Germany||$122.0B|
|35||Ohio Public Employees||🇺🇸 U.S.||$121.6B|
|37||Public Service Pension Plan||🇨🇦 Canada||$117.9B|
|38||National Federation of Mutual Aid||🇯🇵 Japan||$117.1B|
|39||Metaal/tech. Bedrijven||🇳🇱 Netherlands||$115.8B|
|41||Universities Superannuation||🇬🇧 UK||$111.2B|
|42||Virginia Retirement||🇺🇸 U.S.||$110.0B|
|43||Pension Fund Association||🇯🇵 Japan||$109.8B|
|44||Raytheon Technologies||🇺🇸 U.S.||$108.9B|
|45||Michigan Retirement||🇺🇸 U.S.||$108.0B|
|46||Aware Super||🇦🇺 Australia||$107.5B|
|47||New Jersey||🇺🇸 U.S.||$104.5B|
|48||Minnesota State Board||🇺🇸 U.S.||$102.9B|
|49||PFA Pension||🇩🇰 Denmark||$102.7B|
|51||Georgia Teachers||🇺🇸 U.S.||$100.9B|
|52||Oregon Public Employees||🇺🇸 U.S.||$100.4B|
|53||Massachusetts PRIM||🇺🇸 U.S.||$98.5B|
|55||General Motors||🇺🇸 U.S.||$96.1B|
|56||Ontario Municipal Employees||🇨🇦 Canada||$95.7B|
|57||Ohio State Teachers||🇺🇸 U.S.||$95.1B|
|58||AP Fonden 7||🇸🇪 Sweden||$94.4B|
|59||Healthcare of Ontario||🇨🇦 Canada||$90.5B|
|60||General Electric||🇺🇸 U.S.||$90.5B|
|61||Employees' Pension Fund||🇮🇳 India||$89.5B|
|64||United Nations Joint Staff||🇺🇸 U.S.||$86.2B|
|65||Lockheed Martin||🇺🇸 U.S.||$85.7B|
|66||Quebec Pension||🇨🇦 Canada||$81.4B|
|67||National Public Service||🇯🇵 Japan||$79.9B|
|68||Tennessee Consolidated||🇺🇸 U.S.||$79.0B|
|69||Royal Bank of Scotland Group||🇬🇧 UK||$78.3B|
|70||Bank of America||🇺🇸 U.S.||$76.3B|
|71||BT Group||🇬🇧 UK||$74.3B|
|75||Los Angeles County Employees||🇺🇸 U.S.||$72.7B|
|76||Quebec Government & Public||🇨🇦 Canada||$72.4B|
|78||Northrop Grumman||🇺🇸 U.S.||$72.0B|
|79||Pennsylvania School Employees||🇺🇸 U.S.||$70.4B|
|80||Lloyds Banking Group||🇬🇧 UK||$69.7B|
|82||Colorado Employees||🇺🇸 U.S.||$68.6B|
|83||Maryland State Retirement||🇺🇸 U.S.||$68.5B|
|84||AMF Pension||🇸🇪 Sweden||$67.3B|
|86||Wells Fargo||🇺🇸 U.S.||$66.0B|
|89||Illinois Teachers||🇺🇸 U.S.||$64.0B|
|90||J.P. Morgan Chase||🇺🇸 U.S.||$62.8B|
|91||Electricity Supply Pension||🇬🇧 UK||$62.5B|
|93||Nevada Public Employees||🇺🇸 U.S.||$58.8B|
|94||B.C. Municipal||🇨🇦 Canada||$58.7B|
|95||AP Fonden 4||🇸🇪 Sweden||$57.7B|
|96||Missouri Schools & Education||🇺🇸 U.S.||$57.0B|
|97||AP Fonden 3||🇸🇪 Sweden||$55.9B|
|98||Social Insurance Funds||🇻🇳 Vietnam||$55.7B|
|99||Organization for Workers||🇯🇵 Japan||$55.6B|
|100||Illinois Municipal||🇺🇸 U.S.||$54.9B|
U.S. fund data are as of Sep. 30, 2021, and non-U.S. fund data are as of Dec. 31, 2021. There are some exceptions as noted in the graphic footnotes.
Japan’s Government Pension Investment Fund (GPIF) is the largest in the ranking for the 21st year in a row. For a time, the fund was the largest holder of domestic stocks in Japan, though the Bank of Japan has since taken that title. Given its enormous size, investors closely follow the GPIF’s actions. For instance, the fund made headlines for deciding to start investing in startups, because the move could entice other pensions to make similar investments.
America is home to 47 funds on the list, including the largest public sector fund: the Thrift Savings Plan (TSP), overseen by the Federal Retirement Thrift Investment Board. Because of its large financial influence, both political parties have been accused of using it as a political tool. Democrats have pushed to divest assets in fossil fuel companies, while Republicans have proposed blocking investment in Chinese-owned companies.
Russia’s National Wealth Fund comes in at number 19 on the list. The fund is designed to support the public pension system and help balance the budget as needed. With Russia’s economy facing difficulties amid the Russia-Ukraine conflict, the government has also used it as a rainy day fund. For instance, Russia has set aside $23 billion from the fund to replace foreign aircraft with domestic models, because Western sanctions have made it difficult to source replacement parts for foreign planes.
The Future of Pension Funds
The biggest pension funds can have a large influence in the market because of their size. Of course, they are also responsible for providing retirement income to millions of people. Pension funds face a variety of challenges in order to reach their goals:
- Geopolitical conflict creates volatility and uncertainty
- High inflation and low interest rates (relative to long-term averages) limit return potential
- Aging populations mean more withdrawals and less fund contributions
Some pension funds are turning to alternative assets, such as private equity, in pursuit of more diversification and higher returns. Of course, these investments can also carry more risk.
Ontario Teachers’ Pension Plan, number 18 on the list, invested $95 million in the now-bankrupt cryptocurrency exchange FTX. The plan made the investment through its venture growth platform, to “gain small-scale exposure to an emerging area in the financial technology sector.”
In this case, the investment’s failure is expected to have a minimal impact given it only made up 0.05% of the plan’s net assets. However, it does highlight the challenges pension funds face to generate sufficient returns in a variety of macroeconomic environments.
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