The South Asian Island nation of Sri Lanka is currently going through an extreme economic crisis. Foreign exchange reserves have fallen so low that some school examinations have been closed indefinitely due to a lack of imported paper. In addition to cooking gas, there has been a shortage of kerosene and petrol.
The situation is so dire that due to inflation, high unemployment, and shortages of almost all necessities, many Sri Lankans are fleeing their country in the hope of a better life abroad. Countless Sri Lankans are now being forced to do something other than their main occupation as not everyone can afford to leave the country.
The country has never been in such a bad situation since Independence in 1947. To cope with the situation, the Sri Lankan Government has asked for a new loan of US$ 1.5 billion from neighbouring India. When Sri Lanka faced problems, Bangladesh provided US$ 250 million for the first time. This was the first loan from Bangladesh for any country. They have again asked for a loan from Bangladesh. Besides, they have been repaying loans of different countries through the exchange of goods.
Foreign Exchange Reserves
Sri Lanka was quite capable of human resources and internal prosperity. Then why their situation? Sri Lanka has undertaken several mega projects in their country for more than a century. These include seaports, airports, roads, and other projects that are currently considered unnecessary and redundant. Different governments of Sri Lanka have taken loans from different sources at home and abroad. As a result, their foreign exchange reserves gradually ran out. Instead of foreign investment, various governments have focused on borrowing.
The country’s government has issued sovereign bonds since 2007 to raise money. This type of sovereign bond is sold when the expenditure is more than the income of a country. Such bonds are sold in the international capital market to raise money. That is what Sri Lanka has done.
The once-self-sufficient country is also in dire straits due to tax cuts, reduced income from tourism remittances, and unplanned decisions in agriculture. Different countries including Bangladesh have to learn from this situation. The world economic situation has begun to change rapidly since the Russia-Ukraine war, at which time any country could fall into a new crisis. We are hopeful that friendly Sri Lanka will soon be able to return to normalcy with the help of various countries and organisations around the world.
Political unrest
The economy of Pakistan is also in turmoil. Pakistan is in debt, amounting to US$ 130 billion. At the same time, inflation seems to have picked up speed (12 percent). Over the past three years, Pakistan’s progress has stalled.
The recent political instability has created a crisis in Pakistan. The recent political unrest has shaken the business and industrial sectors. The country’s economy is already fragile due to the depreciation of the rupee, declining reserves, rising commodity prices, and revenue shortfalls.
The Pakistani rupee is depreciating. The rupee depreciated against the Dollar on Thursday, hitting a new record and 188 Pakistani rupees are available for one dollar. Never in the history of Pakistan has the rupee depreciated so much.
The biggest challenge for Imran Khan’s government was the economic crisis and he claimed that he would change the country’s economy. He did not go to the IMF, reduce debt, and bring down inflation.
During his tenure, there has been an increase in the amount of debt, ranging from inflation, to a record fall in the value of the Pakistani currency.
On the other hand, Bangladesh is currently a wonder of development. The implementation of big projects is now just a matter of time. City facilities have also been ensured in the villages. A Metrorail will be launched in a few days. The long Padma bridge is not a dream now, it is real. The implementation of such a project with the government’s own funding was at one time unimaginable. The country is moving forward with a sound plan.
Economic Zones
The present government in Bangladesh has shown great prudence and foresight in the progress of Bangladesh. For this reason, there is nothing to be afraid of seeing the situation of any country as a nightmare. Around 100 economic zones are being formed. Investment is coming from different countries. Foreign exchange reserves are adequate (US$ 45 billion, January 2022), and remittances are satisfactory. It can be said that every economic foundation of Bangladesh is still in a strong position. The economy of Bangladesh was also active during COVID and emphasis has been laid on revenue collection and the agricultural sector of Bangladesh is very strong. Bangladesh is in a positive position in terms of foreign exchange reserves, remittances, and export earnings.
Bangladesh’s foreign exchange reserves now stand at more than US$ 45 billion, despite rising import costs. With which we will be able to meet the import cost of six months. Bangladesh’s growth rate was way above Pakistan, even before the pandemic; in 2018-19 it was 7.8% compared to Pakistan’s 5.8%. Various international organisations, including the World Bank, the World Economic Forum, and the Economic Intelligence Unit, have identified Bangladesh’s economic development as a “wonderful puzzle”. While the current economy of Bangladesh is US$ 410 billion, the size of Pakistan’s economy is about US$ 260 billion.
Bangladesh has improved its quality of life, economic strength, prosperity, education, and research in every field. Due to the global coronavirus pandemic, Bangladesh’s growth has slowed down. But where the growth of all the developed countries of the world was negative in these years, the achievement of Bangladesh was also noticeable.
Premier Sheikh Hasina has achieved full potential to move from a least developed country to a developing country. It has been possible because of people’s hard-working, strong leadership. Political stability, the flow of FDI, empowerment of women, unique poverty alleviation model, inclusivity of economy, etc. That is the story of South Asian countries: ‘Bangladesh’ is a ‘miracle story’.
(The writer is based in Karnataka, India, and has completed a master’s degree from the Jawaharlal Nehru University in International Relations. He is a researcher in strategic and international affairs analysis)
– Eurasia Review
– Daily News Sri Lanka
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