In the Bangla Academy Modern Bengali Dictionary, the literal meaning of ‘bankrupt’ is ‘unable to pay debts’, or ‘destitute’. The English synonym of the word bankruptcy is ‘bancrafci’ which comes from the Italian word-pair. It means ‘broken bench’.
The term bankruptcy is also used for an individual organization or a country. Greece was first declared bankrupt in 377 AD. Lebanon’s Deputy Prime Minister Sadeh al-Shami declared Lebanon a “bankrupt state” in an interview with the Al Jadeed channel on April 4. The country has been in political and economic instability for a long time. As a result, the country was declared bankrupt.
Lebanon’s economy has been in decline since the end of the country’s long civil war in October 2019. The leaders of the warring parties in the civil war emerged as the political leaders of the country and competed for power. As a result, even though the civil war ended, another war started in the country over politics. Meanwhile, another country in South Asia, Sri Lanka, has received the title of bankruptcy.
When is a country bankrupt?
According to the Institute of Corporate Finance, ‘A state becomes insolvent when its government fails to pay its debts and other bills on time.’
Usually, a military coup or revolution in a country can lead to bankruptcy. Questioning the validity of the outgoing government’s financial activities, the new government may declare the state bankrupt by canceling the payment of outstanding loans and dues.
A country can also go bankrupt due to a liquidity crisis. Maybe that country has a lot of assets but cannot convert them into liquid money. In that case, a liquidity crisis may also arise.
Another reason for state bankruptcy can be insolvency. Due to a lack of sufficient financial solvency, the state may become bankrupt if the debt defaults.
There are also several other reasons. Such as rising debt levels, failure to take cost-saving measures to repay debt, rising unemployment, and increasing government control over financial institutions, etc.
When a country goes bankrupt, there is severe unemployment and food shortages in the country. They do not have money in their reserves to pay salaries and allowances to government officials. If the country has a huge amount of foreign debt, it cannot pay the interest every month on that debt. Besides, all the money needed for the welfare of national life is not in the treasury of the country. Rising inflation and food shortages made public life miserable. The prices of daily necessities are increasing by leaps and bounds.
Previously bankrupt countries
It is not only Lebanon or Sri Lanka that has brought the issue of state bankruptcy to the fore. Brazil declared bankruptcy of the state in 2021, unable to overcome the coronavirus epidemic. Almost half of European countries, 40 percent of African countries, and about 30 percent of Asian countries have gone bankrupt at various times in the last two centuries. The list also includes the United States, Germany, Japan, the United Kingdom, and China. But until now, Ecuador has gone bankrupt the most. A total of 10 times the country has declared itself bankrupt. Russia declared bankruptcy in 1990 and 2001. But one thing should be remembered – the bankruptcy of an individual or organization and the declaration of bankruptcy of the state are not the same thing. If a company goes bankrupt, the international court can seize all its movable and immovable assets. However, if the state is bankrupt, the court does not have that jurisdiction.
