Home ›› 07 May 2022 ›› Opinion
The economic situation in Sri Lanka has created panic in entire South Asia, if not the world. Many observers at home and abroad have signaled alerts to Bangladesh also. The Lanka fever is not over in Bangladesh despite the government here, especially the prime minister, has said Bangladesh would not fall into the same situation like Sri Lanka. The inland area size of Sri Lanka is 65,610 square kilometers, just little less than half of Bangladesh’s but its population is 22 million, which is one-eighth of Bangladesh’s population. In 2021, the size of Sri Lanka’s nominal GDP was worth US$85billion. Per capita GDP was calculated at $3,920, which is much bigger than Bangladesh’s.
I am still puzzled, thinking about the ill fate of the Lankans– the nation having the highest literacy rate in South Asia. The island nation has beautiful hills and beaches and attracted tens of thousands of tourists worldwide every year before the corona pandemic started. The county, like that in Singapore, has a deep seaport to serve transit shipment services for trades of goods between many eastern and western countries.
The island country has valuable agriculture and forest resources. The country’s agriculture sector is also enormous, but they have not utilized it. It has considerable plantations areas for tea, rubber, tobacco, and coconuts, and such products are processed and exported across the world. Cultivation of rice is also significant in that country. Sri Lanka’s export-oriented apparel and textile industry had taken ground even before that started in Bangladesh. Bank and financial industry, shipping service industry, and IT industry have also been strong in the country for decades. A country of twenty million population has nearly two million expatriates working and living in many parts of the world including the Far East, Middle-east, the EU, and the Americas.
So why the Lankan economy is in the doldrums now?
The year 2021 turned out to be the worst year of economic crisis in Sri Lanka, continuing into the current year. Last year inflation in Sri Lanka crossed 12 per cent, and the Lankan inflation has been making world headlines for the past few months. Also, during my recent conversation with the former governor of Bangladesh Bank Dr. Salehuddin Ahmed, I found his thoughts similar to mine. I asked the former BB Governor why the state of the economy of Sri Lanka has become so miserable. Do you also see the economy of Bangladesh can face fate of Sri Lanka? Dr. Salehuddin was straight-cut here but did not go along the same lines of pessimists or blind critiques. ‘Look, there are two extreme views; one group says that the same will happen in Bangladesh, and others say that it would not,” he said. “It cannot be compared in that way; Bangladesh is a country with huge population in a comparatively smaller land, but it is nearly self-sufficient in food production; compared to similar economies, our economic growth is comparatively in a much better condition in a corona-affected world. So, apparently, there is no reason that the collapse in Sri Lanka to replicate in Bangladesh.”
However, Dr. Salehuddin, who now teaches economics in universities, points out that Sri Lanka’s predicament has not taken shape as suddenly as many think. Many people believe that the Sri Lankan incident happened suddenly, but the reality is different. Dr. Salehuddin points out that after the civil war in Sri Lanka ended in 2009, the country was supposed to see peace and harmony. Mahinda Rajapakse, the architect of the Sri Lankan army’s victory over the 30-year Tamil insurgency, could not follow post-apartheid South Africa’ Nelson Mandela who took in everyone in South Africa to rebuild the country politically, socially, and economically. I also agree with the former boss of the Bangladesh Bank that Mahinda Rajapakse and his family have failed to follow Nelson Mandela. Although the civil war in Lanka ended 14 years ago, relation between the Sinhalese, who constitute about 75 percent of Lanka’s pupation, and the Tamils, who constitute about 15 percent of Lanka’s pupation, are still not good. I know many Muslim businesspeople in Sri Lanka, who are very talented and efficient, but I felt a palpable tension among them. Muslims constitute nearly 10 per cent of Sri Lanka’s population. Many international political analysts say that the bombing on Easter in 2019 was a major attack on minorities. Then attacks on churches also caused deterioration in social relations among ethnic groups in Sri Lanka.
Since 2014, men from the same family have been coming to the center of power in Sri Lanka. The country had good education and health indicators and strong political institutions, so it was expected to move ahead with good governance and democratic norms, but those possibilities have been strangulated by the Lankan politicians in power. Hence, the country now sees a shortage of food, medicines, and essentials. Mismanagement and its natural punishment in Sri Lanka are learning for others. They took a lot of foreign loans. Borrowing is not wrong if selecting projects, implementing and utilizing money is right. But Lankans poured more money into projects than the original targets, and corruption was allegedly endemic.
Many analysts now say that the last 9-10 years have been almost disastrous in Sri Lanka. Lack of communal harmony made a lousy impression on tourists, and later due to fearful restrictions during strong Covid-19 waves, Sri Lanka’s tourism sector collapsed.
We have regularly been seeing international news headlines now on the high cost of living in Lanka as the devaluation of the Sri Lankan rupee against the dollar has made the commodity prices skyrocket there. A thousand rupees now is the price for a kilogram of apples there, nearly three hundred rupees for a kilogram of rice. Here, Dr. Salehuddin, the ex-BB boss, having experience in forex trades and managing the country’s forex reserve, cited the theory of economics, “When the supply of goods and services get reduced, there remains minimum demand in the market. Foreign reserve works as a backup strength of a country’s currency system, so due to shortage of dollars, Sri Lanka is now unable to import many things, and that is why prices are high in Sri Lanka,’ he analyzed. Sri Lanka is now helplessly requesting India for medicine and food. Meantime, Bangladesh, on 5th of May provided Sri Lanka with one lot of essential medicines as a gift to the brotherly nation. It is worth mentioning here here that Sri Lanka has been a good market for made in Bangladesh medicines for years. Bangladesh may not become as helpless as Sri Lanka, but we must keep the amount of debt below the risk level. Sri Lanka and Pakistan could not do it, and earlier such situations took place in Greece and Portugal, and all suffered. Bangladesh had never been a defaulter in international loan repayments. However, we have to be cautious as our foreign debt increases day by day. We have to keep in mind that failure in repayments pushes down the country’s credit rating, which is why Sri Lanka is now a financially sinking and self-declared bankrupt nation.
The writer is a Dhaka-based broadcast journalist. She can be contacted at [email protected]
