‘Denial of economic crisis leading to South Asian economies debacle’

Islamabad : Experts said the South Asian economies despite convincing growth trajectory were vulnerable to economic debacle due to their denial of economic crises emerging amid inaction towards inter-sectoral gaps.

They were speaking at a plenary session during the 27th Sustainable Development Conference organised by Sustainable Development Policy Institute (SDPI) at Pak-China Centre here. Dr Shantayanan Devarajan, Georgetown University, Washington DC, participating virtually, juxtaposed economic and political turmoil in Sri Lanka and Bangladesh as a case study for South Asian countries that had a perplexing situation amid spiking up growth rate since their progress in 1990s.

Dr Shantayanan underlined that despite per capita income doubled along with rapidly increasing secondary education enrolment and child mortality rate plummeting, countries like Bangladesh and Sri Lanka faced widespread public protests against the democratically-elected governments and ousted the "popular" leaders. He added that the Sri Lankan crisis was primarily due to denial of economic crises brewing out of sitting government's short-run growth-focused decision and reluctance to restructure its debts with the IMF increased pressure on all sectors feeding into the economic outlook.

The protests, Dr Shantayanan said only focused on the administration and governance in those countries whereas Bangladesh was consistently a strong performer in terms of growth and manufacturing, poverty reduction, education and health. However, persistent high levels of corruption, bad governance and cost of denial in Bangladesh downgraded its growth rate, he added. Dr Dushni Weerakoon, Executive Director, Institute of Policy Studies, Sri Lanka, said the political capital in Sri Lanka could not be ignored while dealing with its economic crises. She said the then Prime Minister of Sri Lanka despite the fact that the country was coming from an IMF programme that led to the increase in taxes, decided to lower the taxes to show increased economic outlook.

She said the political leadership of Sri Lanka lost its political capital in the 2022 polls after implementing the IMF recommendations in the programme. However, the economic revival in Sri Lanka was beyond expectations as the government embraced above business as usual approach to address the crises.

Dr Najy Benhassine from the World Bank said that Pakistan was not a country in denial. This is a country that keeps going through 'boom and bust' cycles. We already know the causes behind those cycles for Pakistan but we cannot seem to get out of them, he said adding that the problem for me is that Pakistan keeps going back to the same thing. Esther Perez Ruiz, International Monetary Fund (IMF) Resident Representative in Pakistan, said over the last year, we saw a remarkable return to macroeconomic stability. She said the latest reforms are likely to push Pakistan away from 'boom and bust' cycles and put in place a macroeconomic model of sustainable growth. Dr Samuel Rizk, resident representative of the UNDP, said a country that had multidimensional challenges needed multidimensional solutions.