Wednesday, 6 July, 2022

No Reason for Bangladesh to Be Sri Lanka

Parvej Siddique Bhuiyan

No Reason for Bangladesh to Be Sri Lanka

Sri Lanka has been mired in economic instability for the past few months, with major shortages of critical products, as well as a severe lack of petrol, medications, and foreign reserves.

The public outrage directed at the government sparked enormous street protests and political turmoil, compelling Prime Minister Mahinda Rajapaksa and his Cabinet to quit and a new prime minister to be appointed. Given the expanding trade deficit and foreign debt burden, many in Bangladesh fear that their country would face a similar position.

The political crisis in Sri Lanka has intensified as a result of the terrible economic crisis. Various explanations are being given as to why Sri Lanka fell into this situation. This is not unusual. The acute shortage of food, fuel and medicine has angered the people of the country. Violent movement is going on against the government. The situation has not improved much since the new prime minister has sworn in.

Sri Lanka embarked on major projects with a huge loan from China. Sri Lanka built the deep seaport of Hambantota in November 2010 with a Chinese loan. The port incurred a loss of USD 300 million in six years. In addition to this seaport, Sri Lanka built a huge conference centre on Chinese debt. It has remained unused since its launch.

An airport was opened at a cost of USD 200 million. At one stage, the Sri Lankan government could not even afford to pay the electricity bill from the airport. The projects are the sole decision of the Rajapaksa family to retain power. The family has dominated Sri Lankan politics for two decades.

With Sri Lanka in economic and political turmoil, there are fears (in the eye of some pessimistic economists) that Bangladesh would face a similar situation. But most of the economists in Bangladesh, on the other hand, believe that the country's economic characteristics are sound.

Bangladesh will not be in the same scenario as Sri Lanka. Bangladesh is improving across the board. The Padma Bridge may now be seen. The comparison of Sri Lanka's economy to Bangladesh's is motivated. Those who claim that the situation in Bangladesh will be similar to that of Sri Lanka are either lying or spreading false information. The Padma Bridge is being built entirely on its own dime. Once the bridge would be opened, people will get benefits. The GDP will increase.

Tourism and agriculture are the two mainstays of Sri Lanka's economy. While the country was ravaged by the coronavirus pandemic, the agriculture sector suffered as a result of poor government decisions. They (Sri Lanka) borrowed billions of dollars for development before crumbling under the weight of debt. They are now unable to repay.

Sri Lanka's economy is largely dependent on tourism. The Sri Lankan government's revenue has plummeted in two years. Due to the corona-induced travel ban, the country did not get much income from this sector. However, to attract tourists, a huge amount of foreign loans taken earlier in various projects have to be repaid. Industrial production has collapsed, and export earnings and remittances have also reached the bottom. As well as reducing taxes and VAT, reducing the use of chemicals in agriculture to zero production deficits, altogether some wrong plans and epidemics have hit the country.

On the other hand, the economy of Bangladesh is not dependent on any single sector. The financial sectors of the country were active even during the pandemic. There is no shortage of food production. Bangladesh's export earnings and remittances have not reached alarming levels. The country is not dependent on staple food imports. Its foreign exchange reserves are USD 44.40 billion while Sri Lanka's reserves are less than USD 2 billion. The per capita debt of Bangladesh is 292.11, which is 1650 dollars in Sri Lanka.

It has been informed that the Padma Bridge will be launched in June. Metrorail, Bangabandhu Tunnel and some special economic zones will also be inaugurated this year. The launch of these projects will add a new dimension to the development of Bangladesh. Total domestic production will increase.

In the last 15 years, seaports, airports, roads and many other projects have been taken up in Sri Lanka. Another city, Colombo Port City, is being built near the capital Colombo. It will take 25 years to complete the work and the budget is estimated at about one and a half billion dollars. The city is said to be ahead of Hong Kong, Dubai and Singapore. Sri Lanka has borrowed from various sources for the implementation of such projects, but despite spending huge sums of money, many projects have not been economically viable.

On the other hand, the mega projects taken by Bangladesh are Padma Bridge, Karnafuli Tunnel, Metro Rail, Dhaka Elevated Expressway, Rooppur Nuclear Power Plant, Rampal Coal Power Plant, Matarbari Coal Power Plant, and Payra Seaport. Everything is important and necessary. If these projects are implemented, the return will come immediately. Investment in the country will increase. There will be employment. GDP growth will increase.

The most important thing is that in all the projects of Bangladesh, big and small, the World Bank, ADB, IDB, JICA and other development agencies have added loans. The interest rates of these financial institutions are very low and the load can be repaid over many years. Some of the loans, however, are later given as grants to other projects. This is especially true of most JICA loans.

Although there is a downside to receiving remittances because of the corona epidemic and the Russia-Ukraine war, Bangladesh continues to show a surge in export earnings. In the last financial year, the growth was more than 16 per cent. In the 9 months of the current financial year (July-March) the growth has doubled to 33.41 per cent. During this time, Sri Lanka's export earnings have plummeted. The condition of remittances is also miserable.

The negative impact of organic farming has exacerbated the crisis in Sri Lanka. But there is no big negative news in the agriculture of Bangladesh.

There is no concern about the amount of food stock in Bangladesh. But that's exactly what we have to learn from Sri Lanka, we need to be careful. We need to stop siphoning off money from our country into other countries. Corruption, irregularities, and waste must be reduced. It would be better to avoid luxuries and walk the path of austerity in all cases.

The administration of Prime Minister Sheikh Hasina has taken many initiatives to cut spending and conserve foreign currency reserves. It has decided to halt official travel abroad and postpone a few smaller projects that require imports from other nations. Hasina also asked citizens to contribute by practicing austerity and exercising caution when making financial decisions. The prime minister had previously issued instructions to government personnel on how to practice austerity. She urged the private sector and the general public to save money today.

But the government needs to be extremely careful with economic management. While the experts don't see any imminent economic crisis, they believe that good governance and financial management are needed to ensure Bangladesh doesn't end up facing a situation that Sri Lanka now finds itself in. But Sheikh Hasina administration has instructed to maintain good governance and financial management which is very praiseworthy. Bangladesh's economy is "vibrant," and the administration has exercised "great prudence" to avoid a disaster similar to that in Sri Lanka. Thus, Bangladesh will suffer a situation like the economic crisis in Sri Lanka, such a comparison was “unacceptable”.


The writer is an analyst and can be

contacted at: [email protected]