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Sri Lanka has moved closer to securing a crucial $2.9 billion loan from the International Monetary Fund after India extended financing assurances that Colombo needs from its major foreign creditors to get the bailout package. 

The IMF loan is critical for the tiny island country to begin a slow recovery process from its worst economic crisis in decades. 

Indian External Affairs Minister Subrahmanyam Jaishankar announced that the ministry would facilitate the IMF loan Friday in Colombo, where he met President Ranil Wickremesinghe and other senior Sri Lankan ministers.    

“India decided not to wait on others, but to do what we believe is right. We extended financing assurances to the IMF to clear the way for Sri Lanka to move forward,” Jaishankar said in a statement. “Our expectation is that this will not only strengthen Sri Lanka’s position but ensure that all bilateral creditors are dealt with equally.”  

India is the first of Sri Lanka’s major creditors to agree to restructuring the country’s debt. Colombo needs the same assurances from China, its largest lender, to clear the way for the disbursement of the loan, which the IMF had agreed to grant in August but which remains contingent on the support of its lenders.   

Sri Lankan officials expressed optimism that they will also get Beijing’s backing soon.  

“We can say that discussions with China are at the final stage and we expect their assurances in the next few days,” Sri Lanka’s deputy treasury secretary, Priyantha Ratnayake, told reporters. “Once China also gives assurances soon, then Sri Lanka will work to get [IMF] approval as soon as possible.”  

Sri Lanka went virtually bankrupt last year as it grappled with severe foreign exchange shortages to pay either for essential imports or its foreign creditors. Since then, it has grappled with runaway inflation of food and fuel prices. It also suspended repayment of $7 billion in foreign debt due last year.  

The Indian foreign minister also expressed New Delhi’s commitment to increase investment flows to hasten Sri Lanka’s economic recovery.

“India will encourage greater investments in the Sri Lankan economy, especially in core areas like energy, tourism, and infrastructure,” Jaishankar said.   

India has extended assistance of about $4 billion since Sri Lanka’s economy sank. “For us, it was an issue of the neighborhood first and not leaving a partner to fend for themselves,” he said. 

The two countries are expected to sign a memorandum of understanding for a renewable power project for three islands in Sri Lanka. 

Sri Lanka, which will have to implement stringent reforms to get the IMF loan, has raised taxes and tightened government spending. It has also announced deep cuts in its defense expenditure, saying it will slash its army by one third.  

Political stability has returned to the country after it was rocked by widespread citizen protests that led to the resignation of former president Gotabaya Rajapaksa, who was widely blamed for the crisis.  

The severe fuel and food shortages have also eased and tourists are returning to the county, helping the recovery of its tourist-dependent economy. But the dramatic rise in the cost of living continues to pose a challenge to millions in the country. 
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Alphabet Inc., the parent company of tech giant Google, announced Friday it is laying off 12,000 workers across the entire company — cuts reflecting six percent of the company’s total workforce.

In an email to employees Friday, Chief Executive Officer Sundar Pichai said the company saw dramatic growth over the past two years and hired new employees “for a different economic reality than the one we face today.” He said he takes full responsibility for the decisions that led to where the company is today.

In his email, Pichai said the layoffs come following “a rigorous review across product areas and functions” to ensure the company’s employees and their roles are aligned with Google’s top priorities. “The roles we’re eliminating reflect the outcome of that review,” he said.

In the email, Pichai said U.S. employees to be laid off already have been notified, while it is going to take longer for employees in other countries because of different laws and regulations.

Google’s decision comes the same week other big tech companies, Meta Platforms Inc. – the parent company of Facebook and Instagram, Twitter Inc., Microsoft and Amazon, announced they were laying off thousands of employees.

Some information for this report was provided by The Associated Press and Reuters. 

 
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The U.S. has begun taking “extraordinary measures” to avoid spending that would breach the country’s $31.4 trillion debt ceiling, Treasury Secretary Janet Yellen told lawmakers Thursday, touching off a Washington debate on how to avoid a default on the government’s financial obligations and calamity for the global economy.

The Treasury chief said she has started to suspend investments in the Civil Service retirement fund for government workers and a retiree health plan for postal workers that weren’t immediately needed to pay beneficiaries but warned those measures were only a stopgap until June 5.  

Yellen told key congressional leaders they need to increase the government’s debt ceiling, which has been done 78 times since 1960 — or, less likely — do away with any spending limit, which is the practice in most countries throughout the world.

The U.S. government routinely fails to balance its annual budget, often spending $1 trillion or more than it collects in taxes, and then reaches its debt ceiling set by Congress and agreed to by sitting presidents.

The U.S. has never defaulted on its worldwide financial commitments, such as to China, Japan and other countries that have bought its debt, or on obligations to some taxpayers, such as pension and health care payments to older Americans.

But the political debate in the U.S. over increasing the debt limit to make payments on spending already approved by Congress and a succession of presidents has often intertwined with heated discussions over future spending, leading to a standoff as spending approaches the debt ceiling.  

Once such stalemate occurred in 2011, when Democratic President Barack Obama eventually reached agreement with Republican congressional opponents to increase the debt ceiling while also curbing spending for much of the past decade.

Now, the newly empowered but narrow Republican majority in the House of Representatives is similarly calling for future spending cuts to keep 2024 discretionary federal spending for government agencies at 2022 levels.  

House Speaker Kevin McCarthy told reporters this week, “I don’t see why you would continue the past behavior.”

But the White House is balking and instead demanding a “clean vote” on increasing the federal debt ceiling that is not linked to new spending totals. President Joe Biden said he will not curb pension and health care assistance for older Americans.

“Americans have every right to expect that Congress will come together as they have dozens and dozens and dozens of times before in a bipartisan fashion to make sure we keep the American economy on this stable path,” White House spokeswoman Olivia Dalton told reporters aboard Air Force One as they accompanied Biden to California to view storm damage in the state.  

No negotiations have been held with congressional leaders.

If the government defaults — essentially running out of money to pay its debts — payments to U.S. bond holders, foreign governments and individual Americans alike, would be delayed until a new debt ceiling is reached. So could paychecks to government workers and monthly payments to pensioners and health care providers.

In addition, the credit rating of the U.S. could be cut, and stock markets destabilized, as occurred in 2011.

Yellen warned that Congress needs to act to avoid such financial turmoil.     

“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” she told congressional leaders. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
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Software giant Microsoft on Wednesday became the latest major company in the tech sector to announce significant job cuts when it reported it would lay off 10,000 employees, or about 5% of its workforce.

Microsoft’s job cuts come just as e-commerce leader Amazon begins a fresh round of 18,000 layoffs, extending a wave of other major cuts at Twitter, Salesforce and dozens of smaller technology firms in recent weeks.

The phenomenon of job losses in the tech sector has global reach but has been keenly felt in Silicon Valley and other West Coast tech hubs in the United States. The website layoffs.fyi, which tracks job cuts in the tech industry, has identified well over 100 tech firms announcing layoffs since January 1 across North and South America, Europe, Asia and Australia. In all, the website has counted more than 1,200 firms making layoffs since the beginning of 2022.

Changing environment

In an interview at the World Economic Forum in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella appeared to suggest that retrenchment in the tech sector was a result of reduced consumer demand.

“During the pandemic, there was rapid acceleration,” Nadella said. “I think we’re going to go through a phase today where there is some amount of normalization in demand.”

He said the company would seek to drive growth by increasing its own productivity. The interview took place before Microsoft officially announced the layoffs.

One major focus of the layoffs, according to multiple media reports, was the division of the company that makes augmented reality systems, including the company’s HoloLens goggles and the Integrated Visual Augmentation System, which until recently were being developed in cooperation with the U.S. Army.

Later in the day in an email to employees, Nadella wrote, “These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts.”

However, he signaled the company would continue hiring in areas such as artificial intelligence that management believes are strategically important.

Also on Wednesday, Doug Herrington, head of Amazon’s global retail business, said his company was restructuring to meet consumers’ demands but would continue to invest in areas where it saw the potential for growth, including its grocery delivery business.

Stronger, perhaps

Wayne Hochwarter, who teaches business administration at Florida State University, described the layoffs at Microsoft and Amazon as examples of businesses making adjustments to their workforces in the face of a changing business climate.

“I think they overestimated the trends in personal purchasing patterns, and they thought, ‘OK, we’re going to make sure we’re not shorthanded,’” he told VOA. “And then when things softened a little bit, they realized they had hired too many people.”

He also warned against reading too much into the latest layoffs.

“I don’t think the tech sector is going to heck in a handbasket,” he said. “They may have reevaluated where things are going to go, but I don’t see this as a catalyst for sending us into economic deterioration, or anything that’s going to put a crimp on the economy.”

Looking to the future, Hochwarter said, the workforce changes are “probably going to make them stronger companies.”

Weathering the storm

Margaret O’Mara, author of the book The Code: Silicon Valley and the Remaking of America, told VOA that the current run of layoffs in the U.S. was just the latest chapter in a long cycle of booms and busts in the tech sector.

In some important respects, she said, it’s a story about more than just a misreading of trends in consumer preferences.

“It’s similar to other downturns, and there have been many — for every boom there was a bust — in that their macro[economic] conditions have shifted,” she said. “Tech is an industry that’s very much fueled by investment capital and the stock market.”

O’Mara said that over the last 10 years, with low interest rates and large amounts of cash flowing through the economy, conditions have been “extraordinary” for the growth of U.S. tech companies. As those conditions change, so does the amount of money investors want to put into tech firms.

However, O’Mara, a professor of American history at the University of Washington, said it was important not to look at conditions today as similar to the catastrophic dot-com bust of 2000.

“Tech is many orders of magnitude larger than it ever has been before,” she said. “We are talking about platform companies that are unlike the dot-coms, which were very young and very frothy, and it was easy for their value to collapse. They weren’t providing the essential services … fundamental to the rest of the economy.”

By contrast, she said, companies like Microsoft and Amazon have deep connections to the broader U.S. economy and should be able to withstand the current economic headwinds.

Difficult for H-1B visa holders

A disproportionate share of workers in the U.S. technology sector are non-citizens who hold H-1B visas, which allow companies to sponsor them. Layoffs are particularly difficult for visa holders — the overwhelming majority of whom are from India — because once their employment is terminated, they have just 60 days to find a new sponsor. Otherwise, they are required to leave the country.

Hochwarter said he thought companies would pull back on hiring H-1B visa workers, at least for the time being.

“My sense is that because that takes a great deal of effort and energy on the part of the employing organization, they’re probably going to start cutting down on those because they’re just not quite as needed,” he said.

On Wednesday, U.S. Secretary of Labor Martin Walsh, speaking at Davos, bemoaned the state of U.S. immigration law, saying it denies the U.S. the workers it needs to drive economic growth.

“We need immigration reform in America. America has always been a country that has depended on immigration. The threat to the American economy long term is not inflation, it’s immigration,” he said. “It’s not having enough workers.”
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