The crisis should be a lesson for the South Asian countries where administrations are politiicsed and good governance is absent.
Besides high inflation and power cuts, Sri Lanka currently has a shortage of food, medicine and fuel.
The event titled “Current Sri Lankan Economic Crisis: Lessons for other South Asian Countries” was organised by the South Asian Institute of Peace and Governance of North South University.
With debt-to-GDP ratio 110 percent, Sri Lanka suspended payments on portions of its $51 billion in external debt.
The country took large amounts of foreign loans at high interest rates several times for mega projects like sea and air ports.
The government fully adopted organic agriculture in early March 2020, banning import of chemical fertilisers. But it led to a decline in agricultural output. The country also slashed VAT from 15 percent to 8 percent and raised income tax bracket from 800,000 Sri Lankan rupees to 3 million rupees, they said.
President Gotabaya Rajapaksa, 72, who won the presidency in 2019 by a big margin, appointed his brother Mahinda Rajapaksa as the prime minister and three other family members as finance, agriculture and sports ministers.
Channa De Silva, chairman of Sri Lankan think tank Sarvodaya Development Finance, said mismanagement and corruption were rampant in the government as about $3 billion was spent on building infrastructures like a deep water port, an airport and a cricket stadium with borrowed money.
“We thought there would be commendable returns from the investments and high investments, especially from China and Russia. But we were wrong,” he said.
De Silva said Sri Lanka’s relations with China deteriorated over negotiations and in many cases, the bureaucrats, many of whom were politicised, did not act right.
Nazneen Ahmed, country economist at UNDP Bangladesh, said relying too heavily on two to three sectors is very risky, hinting at Bangladesh dependence on garment exports and remittance for its foreign exchange.
Bangladesh too has undertaken a number of mega projects, but the problems are long delays in implementation and the escalation of costs.
The government needs to be very careful about taking up mega projects in future, she suggested.
Former foreign secretary Shahidul Haque said Sri Lanka appeared to lean towards one side in global and regional diplomacy in recent years.
“One needs to be very clever in terms of rebalancing relationship with the global powers,” said Haque, also Bangabandhu chair at Delhi University.
Sulochana R Mohan, deputy editor at Sri Lankan newspaper Ceylon Today, said the good thing is that the people in Sri Lanka are now united in their demands for change.
The discussion was moderated by Prof Gour Gobinda Goswami of North South University.
