The writer is a senior fellow at Brown University and global chief economist at Kroll

The new leaders of Sri Lanka might be forgiven if they wish for a recession in the US. Rate cuts in America and a weaker dollar might make the small Indian Ocean nation’s debt obligations easier to service. Deeply indebted, with foreign exchange reserves exhausted and low on fuel and hope, Sri Lanka’s crisis suggests trouble is coming in emerging markets, and there isn’t much they can do about it.

Aspects of Sri Lanka’s default are specific to its plight. The former president cut value-added and income taxes in 2019, resulting in lost revenue of 2 per cent of GDP. The country’s finances were dealt an additional blow when Covid-19 destroyed the tourism industry. And then last year, a bid to make Sri Lanka’s farms organic led to an official ban on chemical fertilisers. Rice production plummeted, forcing the government to use $450mn of foreign reserves on rice imports.