Though Sri Lanka and Bangladesh received the International Monetary Fund’s loan payouts strengthening their buffers against risks to foreign exchange reserves, Sri Lanka has made good progress rising from an economic collapse, said a former lead economist of the World Bank’s Bangladesh Dhaka office, Zahid Hussain.
“Sri Lanka’s inflation has been tamed and foreign exchange reserve is also rising as it raised the benchmark interest rate and made it flexible,” he said.
The country ended 2022 with an inflation rate of 54 percent. It is estimated at 4.8% for 2023. The reserve improved from $1.8 billion last year to an estimated $3.8 billion in 2023.
Hussain said Sri Lanka has taken strong steps through monetary policy to tackle inflation whereas Bangladesh is already late and still has not done enough.
“At one time, Sri Lanka used to manage the exchange rate. Later, it left it on the market. Subsequently, the exchange rate has returned to normalcy.”
Sri Lanka has also addressed the weaknesses in the financial sector.
“On the other hand, Bangladesh has framed rules for the sector but the implementation will start from March 2025 although the banking and the non-banking sectors are already in bad shape owing to scams, spooking depositors’ confidence. Why is this waiting (in Bangladesh) to implement it?” asked Hussain.
Bangladesh’s reserve stood at $33.4 billion in 2021-22 and it is estimated to sip to $24.3 billion in 2023-24. The inflation rate was 9 percent in FY22 and the IMF expects it to fall to 7.9 percent in FY24.
Dhaka lent $200 million to Colombo when the economic crisis unfolded.
The nation paid off the entire amount as reserves improved.
Executive Director of the South Asian Network on Economic Modeling, Prof Selim Raihan, said the Sri Lankan economy bounced back mainly because of its reform initiatives.
“The Central Bank Governor was not politically motivated and he took policy measures professionally and effectively. As a result, the economy rebounded dramatically though it is not out of the woods yet.”
On the other hand, Prof Raihan says, there is no visible sign of a revival in Bangladesh since the government is dilly-dallying in bringing about reforms. – thedailystar.net
