Thursday April 25, 2024

‘Debt crisis, alienation of key partners major reasons behind Sri Lanka crisis’

By Rasheed Khalid
May 19, 2022

Islamabad: Dr. Akhil Bery, Director, South Asia Initiatives, Asia Society Policy Institute, Washington DC, has said that the debt crisis, alienation of key partners, and over-reliance on China are three major reasons for the current crisis in Sri Lanka.

Dr. Bery was addressing a Panel Discussion on ‘Sri Lanka’s economic crisis and what Pakistan needs to learn’ organised here by the Institute of Strategic Studies (ISS). Dr. Bery said that India is currently leading the way to help Sri Lanka to get out of the existing situation. Rehana Thowfeeq from Advocata Institute, Sri Lanka, said that both issues, the impending structural issues, and decisions that were taken during the COVID-19 pandemic, have impacted the Sri Lankan economy. She added that the series of the bad economic decisions based on populist moves led to the path of abandoning fiscal consolidation in the country. This ultimately led to the current crisis the economy is crippling with, she concluded.

Sharukh Wani from International Growth Centre, Blavatnik School of Government, University of Oxford observed that bad policy decisions are leading the Pakistani economy on a downward spiral. This is partly due to a lack of political ownership arising out of political instability in the country. On the policy option available, he emphasized that the government needs to own up to the problem and take tough decisions in order to stabilise the economy. Also, the upcoming macroeconomic structural issues need to be addressed to avert the emerging crisis beforehand.

Imran Sardar, Research Analyst, Institute of Regional Studies, Islamabad, stressed that the global geopolitical dynamics and Pakistan’s dependence on major powers have hugely impacted its economy. Pakistan’s current geo-economic policy needs a careful balancing approach and a deep understanding of the Chinese role in its economy also needs to be focused on.

Khalid Mahmood, Chairperson, BoG, ISS, said that one should live within one’s means as going beyond the limits and investing in unproductive solutions could lead to a debt trap-like situation. Therefore, the right decisions at the right time are the need of the hour if Pakistan is to avoid Sri Lanka-like situation, he warned. Earlier, in his welcome remarks, Aizaz Ahmad Chaudhry, Director-General, ISS, said that what is happening in Sri Lanka is a sad situation but the good thing coming out is that the Sri Lankan government is taking up the challenge and not shying away from the problem which is a step in the right direction.