A ray of hope for the deeply affected Sri Lanka?

A street in the capital of Sri Lanka, Colombo. Fuel remains very costly here as the country moves towards recovering its economy. Photo courtesy of Weekly Echo reader in Colombo.
By Tham Soon Seong

PENANG, Sept 12: Two very prominent news reports surfaced on Aug 8, this year with the Sunday Star’s “Kids going to bed hungry”, signifying the continued dire economic situation in the 22 million nation and another report in the same paper on Sept 2, with a more hopeful headline: “Sri Lanka and IMF strike loan pact”.

The pact indicated that the IMF has provisionally agreed to provide US$2.90 billion over the next four years to salvage the country’s worst economic crisis. The proposed loan carried a number of conditions, including that all other creditor nations must also assist to ensure sustainability of the economy of Sri Lanka.  The creditor nations are India, China and Japan. So far, all these creditor countries/lenders have yet to respond to this requirement by IMF. If the assurances from these creditor nations do not come, it would simply mean that the loan from IMF will remain tentative.

The loan is also subject to the approval of the IMF Board. Thus the ray of hope is only in the pipe line, and it’s up to Sri Lanka to work out urgently to rescue her economy, the immediate need to meet the current deficit of pending payment of US$7 billion in 2022; the burden of resolving the total foreign debt of US$51 billion over the next 5 years. Thus, Sri Lanka as a nation would require the discipline over the minimum of 5 to 10 years to see the solution in her economy.

In the midst of the current crisis in Sri Lanka, reports have come in of another five South Asia countries facing worsening economic problems as well.  The five are: Pakistan, Afghanistan, Nepal, Bangladesh and Burma.

Pakistan has suffered the worst flood over the last century, with one third of the country currently under water.  It has been reported that the country now requires at least US$10 billion to sustain and repair its economy. 

Next in line is the war torn Afghanistan. The nation with a population of 35 million is reported to face current shortage of at least US$770 million to sustain her economy. The situation has been prevailing since the USA withdrew from the country after some 20 years of military occupation.

Nepal with a population of some 30 million is also facing a severe economic situation. This land locked country is receiving little attention from the outside world, as the location of this country has little strategic interest to outside nations. The only country that could possible come to help is India, currently preoccupied with its own state matters.

Then there is Bangladesh with its 170 million population. The world’s economic situation has serious  consequential effects on the economy of this over sized nation. Since the inception of Bangladesh in 1971, her economic development which has been based on very narrow income/ revenue sources. Encumbered by the current one million Rohingya refugees, the country is now also looking for external aid. So far, not many countries has come forward to assist.

Another South Asian country in a difficult economic situation is Myanmar. The country with some 54 million population is facing internal ethnic and refugee problems. The civil disturbances with the military based government and the ethnic refugee problems of Rohingya remain unresolved.

Looking at the current situations the five countries are in, a couple of things are quite clear. A sovereign nation must have self-resilience and well planned economic development pogrammes, both short-term as well as long-term plans, otherwise its economic sustainability will always be a problem. The other lesson is that a country can never depend on foreign aid all the time to sustain one’s economy. To alleviate these problems, international organisations and aid nations must also come into picture to help all these countries to plan their future development agenda and pattern. External economic aid can only offer short-term relief but it may not prepare the country for long term survival.

Thus, in the next few years, amid the ongoing global economic turbulence brought on by the Covid-19 pandemic and made worse by the ongoing war between Russia and Ukraine, there is a need for a review on how the countries can cope.

Perhaps the rich and well-to-do nations can come around to help the lesser countries? Plan a more sustainable global economic system? Relief assistance from the IMF and other bodies like the World Bank, Asian Development Bank can only be that – to alleviate immediate and emergency problems – but what is really required is long term assistance.

Thus a new world order is imminent.

Tham Soon Seong from Penang is an active economic and political observer. The views expressed here are that of the author’s and not necessarily that of the Weekly Echo’s.