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In My View

Bangladesh will not face crisis like in Sri Lanka

Published : Friday, 29 July, 2022 at 12:00 AM  Count : 1087
Syed Badiuzzaman
Today, let's talk about the recent and still ongoing crisis in Sri Lanka. Many people have already discussed this significant and perhaps the greatest post-pandemic global topic which has captured the attention of many social scientists, especially the economists around the world. And certainly more discussions on this issue will follow on various media platforms in the days ahead.

I must not claim that I already know everything about the crisis in this beautiful island nation in the Indian Ocean formerly known as Ceylon. The official name of this multinational state of 22 million is the Democratic Socialist Republic of Sri Lanka. Separated by the Gulf of Mannar and Palk Strait from the Indian subcontinent, Sri Lanka shares a maritime border with India and the Maldives.

Like in many countries around the world, the economic and political crises of Sri Lanka have been a talking point of people, especially the opposition politicians in Bangladesh. Many have already remarked that "this country too will be heading toward the Sri Lanka-like situation." Even the prominent leaders of the country's main opposition Bangladesh National Party or BNP have repeatedly said that the "fate of Bangladesh will be similar to Sri Lanka's."

These comments are exaggerated, not based on facts and utterly irresponsible. Those who have and are still making such baseless remarks about Bangladesh do not have any clear knowledge about the crisis in Sri Lanka nor do they have a good understanding about the strength of Bangladesh's economy. They are making such unreasonable and preposterous comments just for the political purposes and misleading the people of the country.  

The state of the economy of Bangladesh is strong. With this kind of strength of its economy, a nation will not face a Sri Lanka-like crisis. And neither will Bangladesh! I will explain why toward the end of this article. Now let us take a look at what exactly brought Sri Lanka to the current crisis. A single cause hasn't brought this beautiful island nation to where it is finding it today. A combination of national, international factors and of course the pandemic of COVID-19 is responsible for the current crisis in Sri Lanka.  

Presently, the country's foreign debt has reached $51 billion while foreign currency reserves plummeted to just $50 million with consumer inflation skyrocketing to 39 percent. Imagine what a precarious situation Sri Lanka is currently finding itself in with regard to its foreign currency reserves -- a paltry $50 million. Millions of people in the world have $50 million or way above this amount in their financial portfolios including stocks, bonds, commodities, cash and cash equivalents.

The crisis in Sri Lanka actually began back in 2009 right after the ending of the prolonged civil war that badly bruised this nation. As the civil war ended, the government started concentrating on local production and sales of goods. And the result was obvious. A discouragement of exports started hurting the country's much-needed foreign currency reserves. And as the emphasis was laid on sales of local products, the demand for foreign goods increased considerably in the country.

Then in 2019, Gotabaya Rajapaksa's sweeping tax cuts was another major blunder for Sri Lanka's economy. Soon after winning his presidential election and prior to the parliamentary polls, he announced a reduction of value added tax in Sri Lanka from 15 percent to 8 percent and eliminated at least another half a dozen taxes for popularity. As a result of these tax cuts, Sri Lanka lost at least one million tax payers since 2019. Tax cuts brought a disastrous effect on the nation's economy as the government lost a significant amount of revenue.

And then came the assault of the prolonged pandemic of COVID-19 on Sri Lanka. The economy of every country was affected by the border closures for pandemic and Sri Lanka was no exception. However, Sri Lanka's economy was hit hardest as its tourism industry, a major contributor to the nation's GDP, experienced a massive revenue loss as well as job cuts. In 2020, tourism contributed just 0.8 percent to Sri Lanka's GDP while in 2018 prior to the pandemic the country's tourism industry's share of the GDP was as high as 5 percent.

As a result of a ban on foreign-made fertilizer last year, as mentioned in an article published on the website of the World Economic Forum, Sri Lankan famers used only local and organic fertilizers which caused a massive crop failure. The ban was enforced to prevent further reduction of the country's foreign currency reserves but it backfired and led to more economic crisis. The situation forced Sri Lankans to rely again heavily on imports causing more depletion of the nation's reserves. Rising grain and fuel prices due to the Ukraine war have made the dire situation in Sri Lanka even worse.

In last April, the Sri Lankan government announced that it was defaulting on its debt payments making it the first sovereign default in Sri Lankan history since independence in 1948 and the first state in the Asia-Pacific region to enter sovereign default in the 21st century. Representatives of the International Monetary Fund recently arrived in the country to discuss a bailout. Sri Lankan ministers visited Russia for negotiating a deal to import oil at a reduced price. China and India have also promised to help Sri Lanka out of this economic crisis.

Bangladesh will not face Sri Lanka-like situation for a variety of reasons. First of all, this country has two strong, reliable and permanent foreign currency earners -- more than 10 million expatriate Bangladeshis and the ever-growing garment industry of Bangladesh. Even though there has been a fall in foreign reserves by about $5 billion compared to last year, the country still maintains a slightly below $40 billion foreign reserve -- enough to pay for at least six months' imports. The fall has been due to the job losses of some expatriate Bangladeshis as a result of the pandemic which has affected people of virtually all countries of the world.

Secondly, Bangladesh is self-sufficient in food grain production. In fact, the food grain production is more than enough to satisfy the domestic requirement with a surplus production of 2.6 million metric tons. Since independence back in 1971, Bangladesh has made considerable progress in rice and wheat production. The agriculture sector is strong and with further mechanization of farming the grain production of the country will significantly increase. High temperatures during summertime sometimes damage some food grain in some parts of Bangladesh. However, the country has not experienced a major crop failure in recent history.

The country has also adequate stock of petroleum fuel and the import for six months is in the pipeline. Unlike Sri Lanka, Bangladesh has experienced only mild impact of the COVID-19 pandemic on its economy. Prime Minister Sheikh Hasina's government is credited for the economic prosperity of Bangladesh. Officials know very well what is good and bad for the nation's economy. Therefore, Bangladesh will not experience a Sri Lanka type crisis.
The writer is a Toronto-based journalist who also writes for the Toronto
Sun as a guest columnist.







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