By Ashis Biswas
Among India’s regional neighbours, the Sri Lankan economy has shown signs of recovery in recent months, with Colombo repaying the $51 million Bangladeshi emergency loan it had received when its financial crisis was at peak. This remarkable turnaround which needs to be sustained over the long haul, has been achieved, thanks to a slew of significant measures, some of them unpopular, taken by Sri Lankan policymakers.
Policymakers still have a long way to go in Sri Lanka, with very high inflation and a major burden of further loan repayments looming ahead, not to mention a patient but sullen population currently paying higher taxes than before.
The financial outlook remains grim for Bangladesh and Nepal. The US dollar continues its strong run, which means both the Taka and the Nepalese Rupee cannot arrest their slide in exchange value vis-a-vis the greenback.
To deal with major features of the present situation in Bangladesh, one US dollar is currently worth Taka 109 or thereabouts , but well over Tk 116 in illegal’ Hundi’ transactions. Some expat Bangladeshis have switched over to using illegal means to send home hard earned remittances.
This has led to a noticeable decline in officially reported remittances. Export earnings too have dropped in recent months, further weakening the traditionally strong pillars of the country’s economy. According to one estimate, there has occurred a 30% decline in the value of Taka in less than two years!
Dhaka -based experts warn that there are no signs of any immediate relief, going by present world trends. Apparently millions of people will pay through their noses to meet their regular food, fertiliser and fuel bills, with inflation still hovering around 7/8%, without choice.
As with most developing countries, Bangladesh opted to restrict imports which have become much costlier, to the extent possible. The Finance Ministry and the banks have worked out a policy to reduce the daily outflow of US dollars as far as possible. Arrangements have been made to avoid using the US dollar in trade/business with India, for instance. These measures have helped stabilize the situation somewhat. Bangladesh expects to save around $200 million annually, a sizable gain in the present situation.
But unusually tight import controls have also resulted in a slowdown of industrial production in some sectors that allow no import substitution for much needed raw materials ! This would not help Bangladesh to add to its export earnings.
The country is yet to recover from the shock of a massive bank corruption. World Bank as well as IMF authorities have often expressed their misgivings about Bangladesh’s economic functioning and corruption in the past. To add to the basket of existing problems, for the first time in many months, Bangladeshi forex reserves are down to around $21/22 billion , falling steadily from its 2021 peak of $42 billion-plus !
What has further complicated the already daunting scenario for the ruling Awami League is that urgent pro-people solutions must be found during the present pre-election campaign months , to show the world that the government has done its best to help a much harassed population facing its worst ever economic crisis !
In contrast, Nepalese officials and analysts dealing with the present economic situation sound more benign than their Bangladeshi counterparts. A cheaper Nepalese rupee vis-à-vis the US dollar, they reason, should help the country’s tourism, a major revenue earning sector, substantially as visitors would spend pay less than before ! Hopefully remittances should increase, thanks to the strengthening of the US economy. Incidentally one US dollar has been worth between Rs 134(Nepalese) and Rs 150 in recent months.
However, there are major worries as well. Nepal may well end up being highly indebted in the long term. It is yet to overcome the major financial setback it had suffered during the massive 2015 earthquake, not to mention the prolonged economic blockade on account of the domestic political crisis involving the Indian-origin Madhesia population,
As a landlocked agricultural country without much industrial production and items to export, Nepal depends on importing of essential goods. With its national currency weakening relative to the dollar, transactions have become costlier. Inflation at around 7/8% has already hit the population very hard. As the festive season approaches, there is little to cheer among the suffering citizens as well as the Government.
In both countries, authorities in a desperate bid to check the rising costs of food, recently approached India to send urgent supplies of rice, wheat and sugar, to meet local demands in the medium term. Officials from Dhaka and Kathmandu requested GOI to allow a relaxation of existing regulations governing food item exports and allow the movement of items like onions, eggs and sugar to help maintain the price line and economic stability in India’s own neighbourhood.
The initial talks have not gone too well for either Bangladesh or Nepal. India, seeing the growing uncertainties in the international situation, with food production fluctuating in different regions on account of natural mishaps and global warming, has stopped food exports for the time being.
India too goes to the polls in a few months’ time and can hardly take chances in a difficult year for its own economy. GOI has responded cautiously to its neighbours, indicating that it may not be possible to export foodgrains in large quantities .Moreover because of economic uncertainties and transport difficulties, prices in the international markets have gone up.
Both Nepal and Bangladesh have pressed GOI not to raise existing prices of food items, as costs rising further will only worsen inflation, apart from creating law and order problems in the region in extreme cases. (IPA Service)