Parvej Siddique Bhuiyan
There 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, as well as an extreme balance of payments problem.
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 resigned and was sworn in.
Sri Lanka embarked on a major project 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 300 million USD in six years. In addition to this seaport, Sri Lanka built a huge conference center on Chinese debt. It has remained unused since its launch.
An airport was opened at a cost of 200 million USD from China. 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 (on the eye of some pessimistic economists) that Bangladesh would face a similar situation. But most of economists in Bangladesh, on the other hand, believe that the country's economic characteristics are sound.
Bangladesh will never 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 economy is motivated. Those who claim that the situation in Bangladesh will be similar to that in Sri Lanka are either lying or spreading false information. The Padma bridge is being built entirely on its own dime. Once the bride would be implemented, people will get benefit. The GDP will be folded.
Tourism and agriculture are the two mainstays of Sri Lanka's economy. While the country was ravaged by the coronavirus pandemic, agriculture suffered as a result of poor government decisions. But Bangladesh's economy is based on strong foundation. There are many informal businesses in Bangladesh which are contributing to the strength of the economy. 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 closure of tourist travel, the country did not get much income from this sector. However, in order to attract tourists, huge amount of foreign loans taken earlier in various projects have to be repaid. Industrial production has collapsed, 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 deficit, all together 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 Coronation period. There is no shortage of food production. Bangladesh's export earnings and remittances have not reached alarming levels. Bangladesh is not dependent on staple food imports. Bangladesh's foreign exchange reserves are 44.40 billion USD. And Sri Lanka's reserves are less than 2 billion USD. Bangladesh's foreign debt is not as high as Sri Lanka's per capita. The per capita debt of Bangladesh is 292.11 which is 1650 dollars per capita of Sri Lanka.
It has been informed that the Padma bridge will be launched in June. Metrorail, Bangabandhu Tunnel and some other special economic zones will also be launched this year. The launch of these projects will add a new dimension to the development of Bangladesh. Total domestic production will increase. But 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 by rescuing land from the sea 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, Pigeon Seaport, Nairoj, a deep-sea port, L. 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, but the World Bank, ADB, IDB, JICA and other development agencies have added loans and their own money. The interest rates of these financial institutions are very low. 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.
Despite the Corona epidemic and the Russia-Ukraine war, although there is a downside of receiving remittances, Bangladesh continues to show a surge in export earnings. In the last financial year, the growth was more than 16 percent. In the 9 months of the current financial year (July-March) the growth has doubled to 33.41 percent. 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 agriculture of Bangladesh.There is no concern about the amount of food stocks in Bangladesh. But that's exactly what we have to learn from Sri Lanka, we need to be careful. We need to stop money laundering from our country to other countries. Corruption, irregularities, waste must be stopped. It would be better to avoid luxuries and walk the path of austerity in all cases.
Sri Lanka, on the other hand, has implemented large-scale projects with China in the form of supplier credit (purchasing goods from the country that pays). They have also done many projects that are not necessary. The interest rate of these projects is much higher. Sri Lanka is now in danger of repaying those loans at interest. But in the case of Rooppur power project, Bangladesh can extend the dateline by negotiating with Russia if it is required. Bangladesh will be able to pay the loan.
In January, only 271 million in remittances came to Sri Lanka. According to the March data of Bangladesh Bank, the expatriates have sent remittances of 1860 million dollars. In the last 2020-21 financial year, a record number of remittances of 24.8 billion was sent by a quarter of a billion Bangladeshis in different countries of the world even during the Corona epidemic. Bangladesh has ample food supplies. About 2 million tonnes of storage in government warehouses is higher than at any time in the past. People also have enough of paddy and rice due to strong yields in recent years. Bangladesh will not have to worry about food for the next year or two. There's no cause for inflation to reach 20%, as it did in Sri Lanka.
All of Bangladesh's economic indices are good. In Sri Lanka, on the other hand, all indicators were unfavorable. Bangladesh is the world's 33rd largest economy, with a GDP of $411 billion.Nearly 25 lakh of the 42.2 lakh female workers work in the apparel sector. In other words, Sri Lankan expat income in Corona plummeted.
Bangladesh earned $4.76 billion in exports in March. Sri Lanka made $1.1 billion in exports in January. In April last year, Sri Lanka's reserves stood at $4.47 billion. At that time Bangladesh's reserves were over $46 billion. Besides, Sri Lanka's GDP is only $83 billion as against Bangladesh's $416 billion.Bangladesh now has $42 billion in reserves (with these reserves it is possible to cover five months of import costs). Covering 3 months for import cost is almost standard for a country.But this not end. Sri Lanka has less than $2 billion in reserves. Sri Lanka's reserves were $2.36 billion at the end of January. It was $3.1 billion at the end of last December.
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 "During a news conference in Dhaka on Tuesday.
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, saying such comparison was "unacceptable".
Parvej Siddique Bhuiyan is economics, security and strategic affairs analyst.