Bangladesh is a miracle story, while Sri Lanka and Pakistan are disaster tales, writes John Rozario for South Asia Monitor
According to the World Bank’s latest report, Bangladesh has a strong track record of development and prosperity. Over the last decade, it has been one of the world's fastest-growing economies, owing to a demographic dividend, robust ready-made garment exports, remittances and stable macroeconomic conditions. Following the Covid-19 pandemic, the country experienced a rapid economic recovery.
From being one of the poorest nations at birth in 1971, Bangladesh reached lower-middle-income status in 2015. It is on track to graduate from the UN’s Least Developed Countries list in 2026. Poverty declined from 43.5 percent in 1991 to 14.3 percent in 2016, based on the international poverty line of $1.90 a day. Moreover, human development outcomes have improved along many dimensions.
On the other hand, Sri Lanka is going through an extreme economic crisis. Foreign exchange reserves have fallen so low that school examinations have been axed due to a lack of imported paper. In addition to cooking gas, there is a shortage of fuel. Blackout has followed lack of electricity.
Sri Lanka saga
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. The country has never been in such a bad situation since independence in 1948. To cope, Sri Lanka has asked for a new loan of $1.5 billion from India. Bangladesh provided 250 million in currency assistance.
Why this situation? Economic analysts have cited various factors, from which different countries can learn lessons in their current and future plans.
Sri Lanka has undertaken several mega projects. These include seaports, airports, roads and other projects that 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.
Colombo 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. At present, Sri Lanka has a debt of $12.5 billion for the bonds alone. Besides, the government has also borrowed from domestic sources.
The once-self-sufficient country is also in dire straits due to tax cuts, reduced income from tourism and 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.
State of Pakistan
Pakistan is in political and economic turmoil. It is in debt amounting to $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 economy is already fragile due to the depreciation of the 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.
Dhaka’s relative successes
On the other hand, Bangladesh is a story of development. The implementation of megaprojects is now just a matter of time. Urban facilities have been ensured in villages. Flyovers can be seen on most roads in the capital. Metro rail will be launched soon. The Padma bridge is no more a dream.
The government in Bangladesh has shown great prudence and foresight in the country’s progress. For this reason, there is nothing to be afraid of. One hundred economic zones are being formed. Investment is coming from different countries. 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. Sri Lanka has less than $2 billion. 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 percent compared to Pakistan's 5.8 percent. 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.”
Bangladesh is a miracle story, while Sri Lanka and Pakistan are disaster tales.
(The writer is a strategic and international affairs analyst and researcher. Views are personal. He can be reached at email@example.com)