So-called civil society members from the Prothom Alo and Policy Research Institute are predicting:
Bangladesh will follow the path of Sri Lanka. But do they really know the reason for the ongoing situation in Sri Lanka? Or is it their new trick to get funds in name of new projects and consultancy from their foreign masters?
Let’s look at some academic facts:
First of all, if we analyse the causes as mentioned by various media reports and economists for the catastrophe of the island nation in the Indian Ocean, it will be clear that these risks are not the same in the case of Bangladesh.
Causes for the economic collapse of Sri Lanka:
– The tourism-dependent government witnessed a fall in its tourism sector in the last two years due to the coronavirus pandemic. As the travelling of the tourists was affected by the pandemic, the country could not earn any revenue from this sector.
– But the country had to pay the instalments of the huge amount of foreign loans taken earlier for investing in various projects to attract more tourists.
– Both revenues from industrial production and exports, and remittances have shrunk. In addition, the country has reduced its taxes and VAT from people affecting government revenue. It also tried to bring the use of chemicals in agriculture to zero decreasing production. Such mistakes along with the pandemic hit hard the country to create this situation.
On the other hand:
The economies of Bangladesh and Sri Lanka are quite different.
– There is no shortage of food production in Bangladesh.
– The amount of exports and remittances in Bangladesh is increasing day by day. So far there is no downtrend in this sector observed.
– Our main food does not depend on import.
– Bangladesh has foreign reserves of USD 44.40 billion dollars while Sri Lanka has less than USD 2 billion.
– Per capita foreign debt of Bangladesh is not as high as that of Sri Lanka.
The per capita debt of Bangladesh is USD 292.11 which is USD 1650 in Sri Lanka.
Bangladesh has no reason to undergo a similar situation to Sri Lanka.
Expenditure and reality of megaprojects of the two countries:
The Padma Bridge will be open in June while Metro Rail, Bangabandhu Tunnel and some other special economic zones will also be launched later this year. The inauguration of these projects will add a new dimension to the development of Bangladesh, contributing to the total domestic production.
In the last 15 years, Sri Lanka undertook projects like seaports, airports, roads and others. Moreover, the construction of another city called Colombo Port City was underway by acquiring land from the sea near the capital Colombo. The work of this project, worth one and a half billion dollars, will take 25 years more to be completed. The city is expected to compete with Hong Kong, Dubai and Singapore in terms of modern amenities and facilities. Sri Lanka has borrowed a lot of money from various sources to implement such projects, but many of them were not economically viable despite spending huge sums of money.
Over the past decade, Sri Lanka has borrowed USD 5 billion dollars from China, which is 10 per cent of its total debt.
On the other hand, the megaprojects taken by Bangladesh are Padma Bridge, Karnaphuli Tunnel, Metro Rail, Dhaka Elevated Expressway, Rooppur Nuclear Power Plant, and Rampal Coal Power Plant, Matarbari Coal Power Plant, Payra Seaport, Deep Seaport, and LNG terminal etc. None of these projects is unnecessary but very important for the country’s development. The country will get returns from these projects immediately once implemented. The amount of investment in the country will increase, creating new jobs and raising the growth of GDP.
The most important thing is that Bangladesh is using both its own funds and loans from the World Bank, ADB, IDB, JICA and other development agencies in all the big and small projects. The interest rates of these companies are very low and can be repaid over a longer period of time. Some of the loans, particularly from JICA, however, are later given as grants to other projects.
Sri Lanka, on the other hand, has implemented large-scale projects on the condition of Chinese supplier credit (purchasing goods from the funding country). So, they have also undertaken many unnecessary projects with loans at a high-interest rate. Sri Lanka is now facing a crisis to repay those loans.
Differences in remittances between the two countries:
In January, Sri Lanka had remittances worth only USD 27 crore 10 lakh dollars while according to the March data of Bangladesh Bank, Bangladeshi expatriates sent remittances of USD 186 million dollars. In the last 2020-21 fiscal year, a quarter of a billion Bangladeshis from different countries of the world sent a record amount of remittances of USD 24.78 billion even during the coronavirus pandemic.
Comparison of export revenues:
Bangladesh continues to show a surge in export earnings amid the Covid-19 pandemic and the Russia-Ukraine war. In the last fiscal year, the growth was more than 17 per cent which is more than double (33.41 per cent) in the first nine months of the current fiscal year (July-March). On the contrary, Sri Lanka’s export earnings have dropped along with the sorry state of remittances.
Data from the Bangladesh Export Promotion Bureau (EPB) on export earnings for March shows the country has earned USD 4.76 billion dollars from exporting goods this month. But in January, Sri Lanka earned only USD 1.1 billion from exports.
In other words, even though the coronavirus pandemic caused the collapse of export earnings in Sri Lanka, Bangladesh experienced the opposite. And these earnings are now on increase even more after the Covid-19 situation came under control.
Reserve of Sri Lanka vs Reserve of Bangladesh:
On April 4, the amount of Bangladesh’s foreign exchange reserves was USD 44.40 billion dollars while Sri Lanka had less than USD 2 billion dollars. At the end of January, the amount was USD 2.36 billion dollars.
It means the coronavirus situation had a greater impact on the Sri Lankan foreign currency reserves, but the case is different for Bangladesh. Rather, the reserve once exceeded USD 48 billion dollars in the meantime.
On the other hand, Sri Lanka has been suffering from a reserve crisis since the beginning of the Covid-19 pandemic. In May last year, Bangladesh gave Sri Lanka USD 250 million loans through swap currency to increase its reserves. The country is yet to repay the loan but seeks another USD 250 million dollars.
Sri Lanka fails in agriculture but Bangladesh shines:
After assuming power in 2019, Sri Lankan President Gotabaya Rajapaksa introduced organic farming in the country. He also banned the use of chemical fertilizers and pesticides in agriculture.
But it has a negative impact on the country reducing rice production by up to 20 per cent. Sri Lanka, which was once self-sufficient in rice production, was then forced to import rice worth about half a billion dollars. As a result, the price of the daily product gets increased to a great extent. Organic agriculture had a negative impact and the country’s tea production and tea export were reduced alarmingly.
But Bangladesh’s case is completely different. The country is self-sufficient in rice production and its production is increasing year by year. Food stocks are at an all-time high after the government allowed rice imports on private initiatives.
Currently, the food storage in government warehouses is more than at any time in the past, about 2 million tons. Also, people have ample stocks of rice from bumper production in the last few years. So Bangladesh does not have to worry about food for the next one or two years. Also, there is no risk of 20 per cent inflation like that of Sri Lanka.
