As Bangladesh’s new government takes office, it faces the daunting prospect of an economic crisis that could potentially trigger social unrest. In the South Asian context, no recent situation is more instructive than Sri Lanka’s struggle with a devastating economic crisis, widespread public discontent, and a shift in leadership. President Ranil Wickremesinghe, who assumed office during an unprecedented crisis in Sri Lanka, provides crucial lessons in managing such a crisis and navigating widespread dissent. Despite facing both criticism and cautious optimism, his leadership actions and policies have contributed to economic recovery and stability. These lessons offer key insights for Bangladesh’s new administration
1. Immediate Fiscal Reforms and Negotiations with International Financial Institutions
One of the most crucial steps taken by Wickremesinghe was to immediately engage with the International Monetary Fund (IMF) to negotiate a bailout package. At the time, Sri Lanka was drowning in foreign debt, with depleted foreign reserves, and the country had declared bankruptcy. Bangladesh is also experiencing rising inflation and a balance of payments issue, though its situation is not yet as dire as Sri Lanka’s.
Wickremesinghe’s firm commitment to reforms, though deeply unpopular, laid the groundwork for long-term recovery. His willingness to cut fuel subsidies, hike taxes, and reduce government spending helped convince the IMF to offer crucial assistance. These measures allowed Sri Lanka to begin replenishing its reserves, stabilize the rupee, and bring some order back to its fiscal system. For Bangladesh, similar fiscal prudence and the quick action of negotiating with international partners, especially given its foreign debt levels, can stave off more severe economic decline.
2. Handling Public Unrest with Strategic Diplomacy, Not Aggression
Wickremesinghe inherited a situation where public trust in the government was at an all-time low, with protests that had ousted his predecessor and protests against his own rule. Despite initial hostility, one key element of his success was his refusal to resort to a heavy-handed crackdown on protests. Instead, he used a diplomatic approach, opening communication channels with key civil society groups, unions, and international organizations to contain the unrest without escalating violence.
While there were arrests and some clashes, the overall handling of protests under Wickremesinghe showed a greater level of tolerance and communication than might have been expected in such a volatile situation. Bangladesh, in recent years, has seen protests over issues ranging from rising food prices to wage disputes. By following a similar path, the Bangladeshi government can engage with protestors constructively, avoiding further alienation of its people and diffusing tension through dialogue rather than force.
3. Prioritizing Long-Term Economic Stability Over Short-Term Political Gains
Wickremesinghe made it clear early on that his administration would focus on long-term economic recovery rather than short-term political populism. He rejected calls for immediate elections, recognizing that they could further destabilize an already precarious situation. Instead, he concentrated on restoring international confidence in Sri Lanka’s economy by making painful but necessary adjustments in taxation, foreign debt restructuring, and public expenditure.
While this approach was not politically popular, it gained him credibility with international financial institutions and foreign investors. Bangladesh, facing growing pressure to address its economic imbalances, can take a similar path by choosing policies that promote long-term stability, even at the expense of short-term popularity. Prioritizing sectors like agriculture, renewable energy, and technology, while making difficult decisions on subsidy cuts and taxation, will ultimately help Bangladesh avoid Sri Lanka’s near-collapse scenario.
4. Strengthening Regional and International Partnerships
Another key element of Wickremesinghe’s strategy was to strengthen Sri Lanka’s relationships with key regional players like India and China, as well as build bridges with Western countries and multilateral organizations. Bangladesh is in a unique position as it is a rising economy in the region, and it too can leverage its geopolitical location to strengthen economic ties with major powers.
By aligning itself with regional trade and investment initiatives, Bangladesh’s new government can secure critical support for its own economic recovery. Ensuring that these partnerships are well-balanced, as Sri Lanka is learning to do after becoming overly reliant on Chinese loans, will be vital in managing external debt and ensuring sovereignty in decision-making.
Conclusion
Sri Lanka’s journey through its recent crisis has been turbulent, but President Wickremesinghe’s leadership offers valuable lessons for Bangladesh. By focusing on long-term stability, handling public discontent with diplomacy, engaging with international financial institutions, and building strong partnerships, Bangladesh’s new government can avoid the pitfalls that nearly destroyed Sri Lanka. The path will not be easy, and unpopular decisions will need to be made, but with strategic leadership, Bangladesh can weather its economic challenges and emerge more resilient.
