Why Bangladesh Won’t Face a Crisis: Robust Exports, High Remittances and Low Inflation – The Himalayan Times – Nepal’s No.1 English Daily Newspaper
The South Asian island nation of Sri Lanka is facing the worst economic downturn in its history. It is going through a difficult period in the midst of political and administrative crises.
The collapse of the tourism industry, the country’s main source of income, over the past two years is largely responsible for Sri Lanka’s debacle.
The huge tranches of foreign loans previously acquired for various projects aimed at attracting tourists, on the other hand, must be returned.
In addition, industrial production fell, as did export profits and remittances.
The country is in an unprecedented economic crisis, including a production deficit, despite the reduction of taxes and VAT and the reduction to zero of the use of pesticides in agriculture.
Pakistan’s fragile economy – high inflation and low growth – is another flashpoint in South Asia, which has created political problems in that country.
The Asian Development Bank (ADB), however, said Bangladesh would not face the same economic crisis as Sri Lanka. Edmin Ginting, the agency’s resident representative in Bangladesh, said Bangladesh’s macroeconomic management was very good.
Moreover, the debt-to-GDP ratio is tolerable.
He made the remarks in response to questions from reporters at the launch of the AfDB’s “Asian Development Outlook” report last week. Ginting said Bangladesh’s debt management was very good. However, Ginting advised Bangladesh to be cautious on two counts.
These include strengthening debt management policies and increasing domestic revenue collection.
Bangladeshi Prime Minister Sheikh Hasina said Bangladesh is paying close attention to the economic crisis in Sri Lanka. She said that since the formation of the government, the country is repaying on time all the loans it has taken out for development. Bangladesh is a country that has never defaulted on its loans.
The economies of Bangladesh and Sri Lanka are not comparable. Remittances from Bangladesh (expatriate income) are increasing and the country’s reserves are at an all-time high.
Moreover, the money created by exporting well-known Made in Bangladesh products to countries around the world is constantly increasing.
Bangladesh has foreign exchange reserves worth $44.40 billion. Sri Lanka, on the other hand, has reserves of less than $2 billion.
Currently, Bangladesh’s external debt is $49.45 billion. According to the Bureau of Statistics, the total population of the country is 169.3 million. As a result, the external debt per capita is US$292.11. Sri Lanka, a country of 20 million people, has a total external debt of $33 billion. Thus, the per capita debt is $1,650.
The per capita debt of the people of Sri Lanka is 5.5 times that of Bangladesh. Since 2014, the debt burden had started to increase while its GDP was gradually decreasing. In 2019, external debt reached 42.6% of GDP, while in Bangladesh it is less than 13%.
Last January, remittances from Sri Lanka were worth just $271 million. In January, remittances from Bangladesh reached nearly $17 billion, and in March, remittances reached $18.6 billion. In the last fiscal year 2020-2021, Bangladesh recorded a record remittance of $24.7 billion even during the pandemic period. In 2021, Sri Lankan remittances were worth around $8 billion, largely impacted by the pandemic.
Although Sri Lanka’s export earnings have fallen, the opposite has happened in Bangladesh.
In March, Bangladesh earned $4.76 billion from exports. In January, Sri Lanka earned $1.1 billion from exports.
Bangladesh’s economy has improved even amid the coronavirus pandemic. Overall, all of Bangladesh’s economic indicators are improving, so it is unlikely to suffer the same economic disaster as Sri Lanka, whose indicators are negative.
Inflation in Sri Lanka was 16% a few days ago and continues to rise.
Inflation in Bangladesh, on the other hand, is 6%.
This means that the economic management of Bangladesh is much more integrated.
Sri Lanka’s GDP fell by 3.6% while Bangladesh’s GDP increased by 3.51%.
Bangladesh is therefore on the right track. Infrastructure projects like the Padma Bridge will be launched in June. A metrorail, Bangabandhu tunnel and some special economic zones are also to be launched this year. The initiation of these projects will add a new dimension to the development of Bangladesh. Once these projects are implemented, the returns will come immediately.
Investments in the country will increase, as will employment and GDP growth.
Bangladesh does not face a shortage of food production.
The country’s major food imports are not entirely dependent on imported goods. Bangladesh has plenty of food stocks in government warehouses, more than at any time in the past, about 2 million tons. Due to bumper yields in recent years, people also have sufficient stocks of paddy and rice. Thus, Bangladesh does not have to worry about food for one or two years. Inflation is unlikely to reach 20% like in Sri Lanka.
A GDP of $411 billion – compared to Pakistan’s GDP of $347 billion – makes Bangladesh the 33rd largest economy in the world. Experts predict that the size of the economy could double by 2030. The garment industry today employs nearly 2.5 million of the country’s 4.22 million working women.
Bangladesh also outperforms Pakistan on all standard economic indicators, including nominal gross domestic product, GDP per capita, GDP growth rate and foreign exchange reserves. It has now become one of the fastest growing economies in the world.
Bangladesh has very strong leadership, a pragmatic fiscal policy and plenty of foreign exchange reserves. So Bangladesh need not worry about the kind of economic collapse seen in Sri Lanka, although caution is warranted.
A version of this article appears in the April 14, 2022 printing of The Himalayan Times.