Sri Lanka is currently grappling with a severe economic and fiscal crises and looking at options for getting out of the abyss. While the country has taken guidelines from the International Monetary Fund (IMF), it is also worthwhile to look at solutions from the region as they are more adaptable and pragmatic for a third world resurgent Nation.
In South Asia, Sri Lanka is not alone in this predicament as Pakistan and Nepal too are faced with major economic and fiscal problems. Although India too resorts to power cuts because of power shortages, the Indian economy is in a strong position with regard to currency reserves. India faced a similar economic downturn in 1991 and then Indian Finance Minister, Dr Manmohan Singh, tackled it well , which paved the way for him to be Prime Minister when the Congress Party returned to power. It may not be fair to compare a small country like Sri Lanka with India as it’s a regional power with economic resilience due its geographical size and strength of population.
However, Sri Lanka can learn lessons from Bangladesh’s success story. According to the World Bank’s latest report, Bangladesh has a strong track record of development and prosperity. During the 10 years from 2010 to 2020, Bangladesh was one of the world’s fastest-growing economies, owing to a demographic dividend, robust ready-made garment exports, remittances and stable macroeconomic conditions.
Similar to Sri Lanka, Bangladesh too faced an economic slump following the Covid-19 pandemic, but experienced a rapid economic recovery. The success story of Bangladesh is all the more laudable because it was one of the poorest nations at birth in 1971. It suffered massive destruction of economic infrastructure and industries during the freedom struggle from 1970-71.
Beginning as a poor country, Bangladesh reached lower-middle-income status in just 4 years. With the rapid progress made during the last decade, Bangladesh is now on track to graduate from the United Nation’s Least Developed Countries list in 2026. Poverty declined from 43.5 per cent in 1991 to 14.3 per cent in 2016, based on the international poverty line of US$1.90 a day. Moreover, human development outcomes have improved along many dimensions.
Bangladesh today provides other developing country an example of a story of success to emulate, unlike, Nepal, Pakistan and Sri Lanka. Bangladesh can be proud of early implementation of megaprojects. Urban facilities have been ensured in villages. Flyovers can be seen on most roads in the capital. Metro rail will be launched soon. The gigantic Padma Bridge over the biggest river is no more a dream.
Strategic and international affairs analyst and researcher John Rozairo said the Government in Bangladesh has shown great prudence and foresight in the country’s progress. For this reason, the country could took over massive development projects without any fear. One hundred economic zones have being established all over the country. Investment to Bangladesh is coming from different countries as the country has a positive track record. It can be said that the country’s economic foundation is still strong.
Bangladesh’s foreign exchange reserves now stand at more than $45 billion, despite rising import costs. Comparatively, Sri Lanka has less than $2 billion and of which only an amount of US$ 50 million is available now, according to Finance Minister Ali Sabry. So, Bangladesh cannot be compared with Sri Lanka.
Bangladesh’s growth rate was also way above Pakistan, even before the pandemic; in 2018-19 it was 7.8 per cent compared to Pakistan’s 5.8 per cent. Various international organizations, including the World Bank, the World Economic Forum and the Economic Intelligence Unit, have identified Bangladesh’s economic development as a “wonderful puzzle.”
Rozario described Bangladesh as a miracle story, while Sri Lanka and Pakistan are disaster tales. Pakistan is in worse political and economic turmoil than Sri Lanka. It is in debt amounting to $130 billion. At the same time, inflation seems to be galloping without any control. Over the past three years, Pakistan’s progress has stalled. The economy is already fragile due to the depreciation of the Pakistani rupee, declining reserves, rising commodity prices and revenue shortfalls.
Not only has the Pakistani currency depreciated but the wheels of its economy slowed down over the past three years. The recent political unrest has shaken the business and industrial sectors.
Referring to Sri Lankan economic challenges, economic analyst John Rozario cited various factors, from which different countries can learn lessons in Sri Lanka’s current and future plans. “Sri Lanka has undertaken several mega projects. These include seaports, airports, roads and other projects, some of them are now considered unnecessary and redundant. Different governments have taken loans from different sources at home and abroad. As a result, their foreign exchange reserves gradually ran out. According to economists, there has been little foreign direct investment in Sri Lanka in the last 15 years. Instead of foreign investment, various Governments have focused on borrowing,” he said.
Despite the recent economic downslide, Sri Lanka is slightly in a better position than Nepal and Pakistan. Now with the debt-restructuring facilities from India, China and several other countries and with the immediate assistance from the IMF, Sri Lanka would get a little space to breath and consider long term measures to get the economy back on rail. In this, Sri Lanka could take many lessons from Bangladesh, on how that country succeeded in increasing exports of garments and many products, both industrial and agricultural with attracting foreign and domestic investments.
By Sugeeswara Senadhira