Amidst all negative news emanating from South Asia ever since the Covid-19 pandemic started abating, some glimmer of hope to bring back resilience in the region is coming from India. In total, an amount of Rs 5,848.58 crore has been allocated in India’s annual budget for aid and assistance to friends and neighbours. Bangladesh, which is in a fast-developing mode, continues to get the highest allocation in terms of ‘line of credit’ given by India internationally. Rs 200 crore was allocated as aid to Bangladesh in the annual budget this year, writes DR DEBJYOTI CHANDA
As known already, the International Monetary Fund (IMF) has recently approved US$ 4.7 billion credit facility to Bangladesh to be disbursed under a 12-month programme, which has come as a high degree of relief when the South Asian country was facing rising inflation and foreign exchange crunch. The government of Bangladesh is also closely working to reduce budget deficit and increase tax-to-GDP ratio to cope with forthcoming challenges in the fiscal and macroeconomic front. In fact, the Russia-Ukraine conflict with its resultant aftereffects forced Bangladesh, like other South Asian neighbours, to seek IMF assistance as ‘costlier oil ate into the region’s foreign exchange stockpile.’ Ensuring economic and social stability has become all the more crucial for the Sheikh Hasina government, which is in office for three terms consecutively as parliamentary elections are slated in Bangladesh as early as January 2024.
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Back in India, when Finance Minister Nirmala Sitharaman was placing the annual budget for the year 2023-24 in the lower house of Indian Parliament last month, some pronouncements made by her therein, surprisingly started making international headlines for obvious reasons.
In the quantum of aid and assistance from India to its neighbours, friends and allies, an amount of Rupees 200 crores was set aside for Taliban-controlled Afghanistan, the country with which India is yet to re-establish diplomatic relations.
Moreover, during the entire COVID 19 pandemic period, India dispatched hundreds of tons of wheat and essential medicines for Afghanistan, signalling the warmth of India’s relations with the Afghan people. In its first formal contact with the Taliban, J.P. Singh, Joint Secretary in India’s Ministry of External Affairs, met Afghan Foreign Minister Amir Khan Muttaqi, where the Afghans requested India to reopen its diplomatic mission in Kabul and elsewhere in Afghanistan, restart the unfinished projects India was executing and guaranteed full-proof security for all Indian officials upon return.
This budget has a total allocation of Rupees 45 lakh crore (US $ 550 billion), 3rd largest in the world after the USA and China, Rupees 990 crore was set aside towards India’s G 20 Presidency programmes. In line with India’s ‘neighbourhood first’ policy the largest share of the eight portfolios as year marked in the annual budget was granted towards Bhutan with the allocation of Rupees 2400 crore which constituted 41.04% of MEA’s development assistance. Rupees 400 crore were provided to Maldives to meet the requirement of funds towards ongoing projects such as Greater Male Connectivity Project and High Impact Community Development projects.
The budget document states that Nepal will get development aid worth rupees 550 crore, Mauritius is set to receive Rupees 460 crore, while Rupees 400 crore has been pegged for Myanmar. Sri Lanka, currently reeling under an economic crisis, shall receive rupees 150 crore while Rupees 250 crore has been set aside for the African countries.
In total, an amount of Rupees 5,848.58 crore has been allocated in India’s annual 2024-23 for aid and assistance to friends and neighbours. Bangladesh, which is in a fast-developing mode, however, continues to get the highest allocation in terms of ‘line of credit’ given by India internationally. Rupees 200 crore was allocated as aid to Bangladesh in the annual budget this year.
IMF Chief Economist Pierre-Olivier Gourinchas has said India and China will account for half of global growth this year, while the US and Euro area combined will account for just 10 percent. While India is movSOUTH ASIAN COUNTRIES’ GDP COMPARISON India $3.469 trillion (2022) Bangladesh $460.751 billion (2022) Pakistan $376 billion (2022) Sri Lanka $73.74 billion (2022) 34 PRESS XPRESS FEBRUARY 2023 FEBRUARY 2023 PRESS XPRESS 35 DELHI DIARY DELHI DIARY ing rapidly towards the goal of prosperity and holistic development, Pakistan, which was formed by partitioning India 75 years ago, in sharp contrast is currently reeling under a massive economic crisis. With the rupee recording a historic low of 275 to the US Dollar and foreign exchange reserves dropping to the lowest level since 1998 at about US dollar 3 billion, which is not enough to cover a month’s exports, the situation has grown more complex with a series of terror attacks, including a major suicide bombing in the northwestern city of Peshawar on January 30 that saw the death of over 150 people. Terrorists only exacerbated Pakistan’s unprecedented economic and diplomatic crisis. Even its close strategic ally China is recognising the pressing need for Pakistan to set its house in order and not support radical terror groups. Experts opine the year 2022 was especially bad for Pakistan, which saw political turmoil and catastrophic flooding – a situation catapulted by backbreaking inflation, depreciating currency and precariously low foreign reserves.
However, Pakistan’s ruling elite including the army establishment seems clueless as how to address the root causes which have shaped these issues leading to political instability and economic upheaval in the country. Caught up in the vicious cycle of debt Pakistan has knocked the door of IMF for the record 23rd time, which however, has demanded significant belt tightening measures bound to be unpopular. Experts feel, “IMF funds will help Pakistan avoid default on its international obligations, which will have seizure consequences for its economy and its people ”. The country is in urgent need of US $ 20 billion over the next twelve months to make payments arising out of debt obligations as per the state bank of Pakistan. According to the World Bank, Pakistan’s external debt currently is US $ 126.9 billion and debtto-GDP ratio is in the danger zone of 70% and 40%-50% of government revenue is earmarked for interest payment.
With inflation at 27.55%, which is at a 48-year high, hundreds of containers are stuck in ports as the cash-starved government has decided to curtail imports. State Bank of Pakistan has informed that liquid foreign reserves held by the country is just US $ 9.45 billion as on January 2023.
The Shehbaz Sharif government term ends in August 2023, after which a caretaker government may take over to oversee the election process. However, this caretaker government shall have no mandate to sign a deal with the IMF for loans. This will definitely undermine a coherent and timely policy response leading to further turmoil in the already crisis ridden state of affairs.
Island nation Sri Lanka became embroiled in a major crisis in May 2022 when Prime Minister Mahinda Rajapaksa resigned after his supporters attacked anti-government protesters outside embattled President Gotabaya Rajapaksa’s office, leaving hundreds injured, prompting authorities to impose nationwide curfew and deployment of the army. President Rajapaksha’s ouster in July failed to allay public disaffection with prolonged power outages, queues and shortages of essential commodities.
With the outbreak of violence and occupation of key government buildings by protesters, the country was descending into a state of anarchy. However, chaos was averted as the Parliament by majority of votes elected Ranil Wickremesinghe as interim President after President Gotabaya Rajapaksa fled the country, indicating to the nation’s long tradition of democracy and fervent desire of the political class not to commit past mistakes.
In April 2022, Sri Lanka committed foreign debt default. Complex negotiations with creditors on debt restructuring and negotiations with the IMF for a bailout program started.
The country has in the meanwhile plunged into prolonged recession as tourism its primary source of income saw a serious downturn during the COVID pandemic.
In 2022, Sri Lanka was among the top ten countries with highest food prices and also other essential commodities, pushing many vulnerable Sri Lankans into extreme poverty. Experts opined that “having China, India and Japan as its largest bilateral creditors alongside primarily US based private bondholders adds a layer of complexity in working out treatment that is comparableand accepting to all ”. Decrease in real wages coupled with skyrocketing inflation and higher taxes and squeezing disposable income of the common citizen leading to social unrest.
However, the ouster of the megalomaniac Rajapaksa family, and entry of Ranil Wickremesinghe, a seasoned politician with a sound grasp of global economic forces and geopolitical relations augurs well for the future of Sri Lanka. The political leadership will have to maintain a delicate balance to assuage public disaffection, as well as ensure that political uncertainty does not delay economic decision making in any manner.
India is actively assisting Sri Lanka in the current economic recovery phase. Apart from granting US $ 1 billion Indian line of credit to import pharmaceuticals and other essentials, it has given financial assurances to the IMF concerning the International Monetary Fund regarding the country’s debt restructuring program and getting Extended Fund Facility.
India has also agreed to put in place necessary regulations and approvals to facilitate rupee trade between the two countries. It is also about two years that the civilian government of Aung San Suu Kyi was ousted from power by military dictators in Myanmar. Since then scant information is seeping out of the iron curtain that has been imposed on the country by the martial law administrators. Initially, reports of massive civic unrest was reported, which was dealt with strong repression, prompting the United Nations and other western powers to impose sanctions on the country. It is today an international pariah, although credible reports that many countries at a bilateral level are cooperating with the junta government are also being received.
Of late, the military government is increasingly launching airstrikes across swaths of the country in an attempt to suppress a determined opposition. Myanmar Witness, a civil rights watchbody, has identified 135 “airwar” incidents over the last six months of 2022. The Special Advisory Council on Myanmar estimated that “the junta government had stable control over just 17% of the country– while opposing groups have effective control over more than 52%. The junta, “on account of its ability to launch airstrikes, has an asymmetrical advantage over the dogged protesters and armed resistance groups”. While lakhs of Rohingya refugees from Myanmar have taken shelter in neighbouring Bangladesh, the UN has estimated that 1.5 million people are internally displaced within Myanmar. 17.6 million people according to the UN, are currently in need of humanitarian assistance in that country.
Myanmar has said that “by nearly every feasible measurement, and in ev- ery area of human rights economic, social and cul- tural, as such as civil and political– Myanmar has profoundly regressed”
Real GDP growth rate forecast for South Asian economies
UN Human Rights chief Volke Turk, commenting on the situation in Myanmar has said that “by nearly every feasible measurement, and in every area of human rights economic, social and cultural, as such as civil and political– Myanmar has profoundly regressed” since the military takeover in February 2021. However, as per reports, Russia and China and of late India along with many multilateral agencies, are working closely with the junta government. India and China, both abstained during the UNSC resolution on the Myanmar military junta last January. Ruchira Kamboj, India’s permanent representative at the UN justifying the move, said, “in view of our commitment to the democratic process and the wellbeing of the Burmese people, India has decided to abstain from this resolution”. In reality, India’s decision is a strategic act to counter China, whose active presence in Myanmar is detrimental to India’s interests. Meanwhile, the common people of Myanmar continue to suffer.
The political and economic situation in Nepal, sandwiched between India and China is no better. Coalition governments and lack of majority in parliament has resulted in change of prime ministers successively, resulting in lack of continuation in policy, leading to a fragile economy. The COVID-19 Pandemic dealt a severe blow on tourism in Nepal, which is its primary source of revenue. The flow of remittances have also reduced considerably, thus resulting in plummeting foreign exchange reserves coupled with high inflation and low real wages, making life of the common man miserable. After Prime Minister Prachanda’s return to power the IMF has sent its “IMF Article IV Consultation and ECF First review Mission to Nepal” which has had a round of discussions with the apex Nepal Rastra Bank. The IMF has delayed the second instalment of a 400 million dollar loan to Nepal till February 2023, questioning the wisdom behind imposition of import ban on certain products as it was hurting the trade and the economy.
Amidst all this negative news emanating from South Asia since the global covid pandemic started abating some glimmer of hope to bring back resilience in the region is coming from India.
That India is slowly but surely assuming the role of being the central pivot and fulcrum of the economic upswing in the region became clear when Air India, a subsidiary of Tata Sons, a major Indian corporate giant on 15th February 2023 announced a 470- aircraft order with Airbus (France) and Boeing (USA) worth US$ 82 billion prompting President Biden issue a statement that this would create ‘ one million American jobs over 44 states’. French President Macron remarked that this deal ‘marks a new stage in India and France’s strategic partnership’. Prime Minister Rishi Sunak of the United Kingdom commenting on the deal said ‘ India is projected to be the world’s third largest economy by 2050, so export wins like this are a big boost to UK trade – a key way we can grow our economy ‘.
The international community shall be converging to deliberate and discuss on multifarious issues in 200 different meetings to be held across India on the occasion of India’s G20 presidency which will culminate with the Summit Meeting of leaders of 20 top economies of the world plus eight leaders of countries including Bangladesh especially invited by India on the first week of September 2023. G20 accounts for 75 percent of international trade, 85% of global GDP and two-thirds of the world’s population making it the premier forum for international economic cooperation. It may be presumed that such a major event, in the backdrop of political and economic upheaval all around, will have a beneficial positive effect on the rejuvenation of the entire South Asian region.