From Sri Lanka to Bangladesh

I began this year in Sri Lanka. I had been invited to present a keynote paper at the Eastern University there. I had long cherished the wish to see this country up close and this gave me the opportunity to finally do so. Before I went there, the country had already become big news in the media worldwide. Financial crisis had driven it to bankruptcy. It didn't have the funds to buy oil and prices of commodities were shooting up. The angered people had pulled down the dynastic rulers. And so the question everyone asked was, how can they be hosting a conference in this country?

It takes around seven hours to get to Eastern University, located in Batticaloa, the other end of Colombo. There are a lot of trees, forests and deep jungles on the way to the university. One gets frequent glimpses of wild elephants and herds of deer. The elephants have attitude, as if they've roamed from the jungle to the side of the road to watch the zoo of humans go by!

Later too, I felt a sense of calm and tranquility as I noticed certain elements in a number of towns, villages and campuses, things that we sorely lack in our country. One of these was vibrant greenery of nature, a profusion of coconut trees, palm trees, banyan and other large trees all around. The water is clear, the breeze is cool and it feels good to breathe the fresh air. The campuses are pristine, other than the banyan trees, there are many local trees all around, filled with chirping birds.

Secondly, whether it is in the cities or the villages, girls can move around freely at any time of night or day -- walking, on cycles or motorbikes.

Thirdly, the roads, buildings and all places are free of garbage and waste. Perhaps due to Buddhist influence, every full moon is a national holiday in Sri Lanka. I had no idea about this delightful matter before.

The university students are mainly from four religions -- Singhalese Buddhists, Tamil Hindus, Tamil Muslims and Tamil Christians. The Singhalese are the majority, all over Sri Lanka. Buddhists constitute 70 per cent of the population, Hindus 13 per cent, Muslims 10 per cent and Christians 6 per cent. There is a relatively higher population of Muslims in Batticaloa. There is a higher number of female students than male in the university and I even spoke to a few in hijab. Everyone's religion was given equal importance on campus.

The global media, and even that of Bangladesh, has not given a fraction of coverage to Sri Lanka's achievements as to its bankruptcy. For example, we talk about free education being a right for all citizens, and that it is the responsibility of the state to ensure this. However, to the people, the government, the academics, and even those who need this the most, this hardly seems feasible. They come up with logical arguments or "How can this be possible?" "Where will such huge funds come from?"

But Sri Lanka is a country with a much smaller economy than Bangladesh, yet from a few decades ago it ensured free education for its citizens from the primary level right up till university, as well as health for all.

Actually, Sri Lanka had been well ahead among South Asian countries in many aspects. Despite being ridden with long-standing ethnic and religious war and conflict, Sri Lanka remained well above others for long in the Human Development Index (0.782 points). Sri Lanka has fared much better than Bangladesh, Pakistan and India in poverty rates, maternal mortality, infant mortality, education, clean water and health services. Its disparity was also much lower.

Sri Lanka was very organised in its Covid management. As a result, it had a relatively lower number of cases and deaths. Sri Lanka's per capita GDP ranks higher than those countries. Even after such an acute crisis, this remains at USD 4,600.

Yes the accumulated economic crisis has devastated the lives of 90 per cent of the country's people. The price of commodities has gone up double, even four-fold. The real income of the majority of the people has fallen below half. Malnutrition and hunger has increased. Yet the small group responsible for this predicament has become even wealthier in this span of time. Other than the wealthy sections and those who receive remittance from overseas, everyone is under extreme pressure. Unemployment has gone up and a lot of regular work has been outsourced.

At the conference, while discussing development and environment, many sessions over the two days also touched upon these issues. After the conference, the vice chancellor of the university called all the teachers of the economics department to meet me. They were to listen to my take on the Sri Lankan crisis and IMF. They should be the ones knowing more about their country's crisis than me!

However, due to very similar experiences of our two countries, I said that short-sighted policies, increase in debt dependence, illogical mega projects, capital-oriented reforms, extensive corruption under one-family authority as well as adverse international conditions, had driven Sri Lanka to this economic crisis. The fact that the mega projects had been taken up with foreign loans without any proper selection, at exorbitant rates and irregularities at every step, had even been highlighted in the country's auditor general's report.

Foreign loans had gradually accumulated in Sri Lanka since 2005. That year it has been USD 11.3 billion, by 2020 it crossed USD 60 billion, higher than their national annual income. In 2007 Sri Lanka first floated high interest sovereign bonds in order to meet the expenses of the high-cost mega projects. Loans from the international capital market were the highest at 47 per cent. Then the multilateral lending agencies were at 22 per cent, and 10 per cent from Japan and China.

In 2022, pressure to repay long term and short term loans took on alarming proportions. With the drop in the rupee value, remittance through official channels fell drastically.  Amid all this even, the World Bank in 2021 had said that despite some problems, Sri Lanka's economy is on track! IMF had made the same prediction. In 2020, food inflation went over 60 per cent.

The question repeatedly arose as to whether IMF loans were essential to resolve the crisis. Sri Lanka has taken IMF loans 16 more times in the past and so they were fulfilling those policies from beforehand, yet the crisis merely worsened. In South Asia, Pakistan has taken the highest amount of IMF loans, 22 times. Their crisis is the most acute. According to a study of the Johns Hopkins Institute of Applied Economics, unemployment had increased in the economies with IMF loans.

In fact, it is those who have not taken these loans that have managed to reduce unemployment and bring stability to the economy. I pointed to examples of various countries and said that though IMF was touted as the rescuer, it came to the rescue of those for whom the country and lives of the people were devastated. They pile up the burdens on the people with pressure to increase gas, electricity and water rates, and more commercialisation.

The price of power has been hiked in keeping with IMF conditionalities, tax rates have gone up, export-oriented policies have been expanded, while the budget for public-interest areas has been shrunk. In all countries, IMF loans bring relief to the governments and the powerful, and increased pressure on the people.

In Bangladesh, the cause of the crisis is the same. Here too, IMF and the World Bank do not address the root cause because they too are beneficiaries. Due to high export revenue and overseas remittance, Bangladesh's macroeconomic risks are lower than Sri Lanka. On the other hand, life is relatively more difficult for the people of Bangladesh due to high commercialisation of education and medical services, weak social safety nets and a frenzied destruction of nature and the environment in the name of destruction. Adding to the insecurity and downslide of lives and livelihood in Bangladesh, is the collapse of the election system and accountability, something that is still functioning in Sri Lanka.

* Anu Muhammad is an economist and professor of the economics department at Jahangirnagar University, and the editor of the 'Sarbajankatha' journal. He can be contacted at [email protected]    

* This column appeared in the print an online edition of Prothom Alo and has been rewritten for the English edition by Ayesha Kabir