Sri Lanka and other developing countries count cost of Ukraine war
South China Morning Post
5 min read
Developing countries are feeling the effects of Russia's invasion of Ukraine, with a noodle crisis in Indonesia, unsold tea piling up in Sri Lanka, and acute food shortages across much of Africa.
The Ukraine war is driving up the costs of fuel, cooking oil and food across the world through a combination of the impact of wide-ranging sanctions against Russia and a disruption of trade.
Russia is Sri Lanka's third-largest market for its tea, after Iraq and Turkey, but exports have become difficult, according to Palitha Kohona, the Sri Lankan ambassador to Beijing.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
"Even if you manage to get the tea across, we couldn't get paid for it because Russia is now not part of the Swift system," he said.
Seven Russian banks, including the country's second-largest institution VTB, were blocked from the Swift global banking system last month as part of the European Union's sanctions aimed at pressing Moscow to end the war.
Kohona said the trade blockage was exacerbating his country's foreign reserves crisis. According to official figures, Sri Lanka exported 287 million kilograms (632 million pounds) of tea last year, worth about US$1.3 billion, with more than 10 per cent going to Russia.
In January, Russian purchases of Sri Lankan tea amounted to 2.5 million kilograms, making it the second largest buyer that month.
Ukraine's biggest wheat buyer Indonesia has seen production of its Indomie instant noodles take a hit, as supplies of its main ingredient have dried up.
The brand, which regularly features in top 10 lists around the world, is sold in some 100 countries, with more than 15 billion packets produced each year.
Indomie noodles are so popular in Africa they have even been used alongside cellular credit and e-money to lure young girls into the sex trade, according to research from Ghana in 2020.
The food crisis is at its most acute in Africa, where at least 14 countries import half or more of their wheat from Russia and Ukraine, according to the Food and Agriculture Organization.
Persistent drought has combined with the disrupted supply chains caused by the Ukraine conflict to push up food prices.
In its latest warning on Tuesday, the International Committee of the Red Cross said some 346 million people - from Mauritania in the west to the Horn of Africa in the east - were suffering from "alarming" hunger.
The Horn of Africa is likely to be the hardest-hit region on the continent, according to the International Federation of Red Cross and Red Crescent Societies which said 14 million people in Ethiopia, Kenya, and Somalia were severely food insecure.
Acute malnutrition rates had increased considerably, affecting 5.5 million children, the federation said.
In Southeast Africa, landlocked Zimbabwe has also felt the squeeze of the Ukraine war, with inflation running out of control in a country already struggling with widespread poverty.
Zimbabwe's central bank raised its main lending rate on Tuesday, from 60 per cent to a record 80 per cent - the highest in the world - in its latest attempt to contain inflation. Rising oil, gas and fertiliser prices were "inevitably having a negative impact on production costs" and "destabilising the foreign exchange market", it said.
Tourist destinations that were hoping for a swift recovery after the international restrictions caused by the pandemic, are also feeling the pain.
Russian and Ukrainian visitors ranked top and third place, respectively for Sri Lanka in January, with that momentum now expected to stall.
And in Thailand, which only recently waived quarantine for vaccinated arrivals, Russian tourists topped the list of its international holiday arrivals in February.
Any further visitors from Russia are unlikely. Even if they can leave the country, they may not be able to pay for their travel. Not only are roubles worth less after devaluation, many exchange centres in Thailand no longer accept them. Payment gateways such as Mastercard or Visa have also been closed.
There are now deep concerns the war in Ukraine may also discourage visitors from other parts of Europe.
Many European airlines have cancelled or detoured flights to Asia to avoid Russian and Ukrainian airspace, cutting off the European travellers who usually spend more than their short-haul Asian counterparts.
Paul Pruangkarn, chief of staff of the Pacific Asia Travel Association, said consumer confidence could take a bigger knock if inflation persisted and fuel prices continued to rise - possibly also leading to higher airline ticket prices.
"A luxury activity like travelling would be affected because people's savings for travel will be getting eaten up by higher prices of goods, and the disruption in supply chains and a higher oil price are going to affect people's wallets," he said.
"If they're spending more money on purchasing necessary items, like food and clothing, they would have less savings to take trips that they wanted to do with the family."
