South Asia in week

In this piece, find out on South Asian economies, including Sri Lanka’s national budget and IMF warning Maldives. First, Bangladesh.

Bangladesh forms National Consensus Commission to carry out reforms 

(via Xinhua on Feb 13)

The Bangladeshi interim government has announced the formation of its National Consensus Commission to bring major reforms to the state system. 

According to a circular issued by the Cabinet Division on Wednesday, the national commission was formed under the leadership of the Chief Adviser of the interim government Muhammad Yunus. 

With a fixed tenure of six months, the national commission includes the heads of six different reform commissions formed earlier and will start functioning from February 15. 

Officials said the newly formed commission will hold discussions with political parties and stakeholders to help create national consensus on reforms in line with the expectations of the people.

Yunus took oath as the head of the country’s interim government on August 8, 2024, following the resignation of the then Prime Minister Sheikh Hasina.

In his address to the nation on September 11, Yunus announced the formation of six commissions for reforms in the electoral system, police, judiciary, public administration, constitution and Anti-Corruption Commission. Yunus has already expressed his determination to quickly advance reforms and hold an election thereafter.

Bangladesh says in talks with Musk for Starlink rollout 

(via AFP on Feb 14)

Bangladesh said on Friday it had asked tech billionaire Elon Musk to bring satellite internet service Starlink to the South Asian country, as its fragile interim government seeks US diplomatic support.

Musk has a highly visible White House role as President Donald Trump’s right-hand man, where his meetings with foreign leaders have raised questions over the blurring of his official roles and business interests.

The world’s richest man spoke on Thursday with Nobel peace laureate Muhammad Yunus, who is leading a caretaker administration in Bangladesh following a student-led revolution last year.

They discussed during a lengthy video call bringing Starlink, which provides internet access to remote locations by low Earth orbit satellites, to Bangladesh.

The pair emphasised that the service would create new opportunities for “Bangladesh’s enterprising youth, rural and vulnerable women, and remote communities”, a statement from Yunus’ media office said.

The statement added that Musk had said he was “looking forward” to visiting Bangladesh after Yunus extended him an invitation.

Musk has yet to discuss the meeting publicly, including on X, the social media platform he owns and on which he chronicles his day-to-day thoughts.

The call took place the same day Musk met with Indian Prime Minister Narendra Modi, who was in Washington at Trump’s invitation.

Modi’s government has seen deteriorating relations with Bangladesh since Yunus took office after last year’s uprising ousted autocratic ex-premier Sheikh Hasina.

India was Hasina’s most important benefactor and she remains in exile in New Delhi, despite Bangladesh’s demands she be extradited to face trial for the killing of hundreds of protesters during the revolt that toppled her.

Sri Lanka budget banks on car taxes to boost coffers 

(via AFP on Feb 17)

Sri Lanka is banking on vehicle import taxes to boost revenue and revive the island nation’s battered economy, leftist President Anura Kumara Dissanayake’s maiden budget showed on Monday.

Vehicle imports were banned in 2020 to save foreign exchange but the move deprived authorities of a lucrative revenue stream, as cars were taxed at about 300%.

Dissanayake said the ban’s end would bolster state revenue to meet the tax target of 15% of GDP, which the country must achieve under the terms of an International Monetary Fund bailout agreement.

“For the year 2025, the bulk of revenue gains is expected to be delivered by the liberalisation of motor vehicle imports,” the president told parliament.

“This process is being carefully monitored to ensure that the import of vehicles does not result in undue negative impacts on external sector stability.”

The budget also doubled the entrance fee of the island’s two casinos to $100 and raised the turnover tax on gaming establishments to 18%, up from 15%.

The IMF wants Sri Lanka to double its income from taxation compared to the 7.3% of GDP it took in 2022, when the country defaulted on its $46 billion foreign debt.

That year saw the island run out of foreign exchange to finance the import of food, fuel and other essentials, prompting months of street protests led to the toppling of then-president Gotabaya Rajapaksa.

Sri Lanka secured a $2.9 billion four-year loan from the IMF the following year.

Dissanayake, who was elected last year promising to end corruption and bring back stolen assets stashed abroad, said the economy was on the mend.

“We should be in a comfortable position to service our foreign debts from 2028,” he said.

He also announced a hefty 65% increase in the minimum wage to LKR 40,000 ($133) and raised subsidies for low-income earners.

Sri Lanka eyes 5% growth, FTAs, digital economy in 2025 budget 

(via Xinhua on Feb 17)

Sri Lanka is set to expand its free trade agreement network and simplify its import duty structure to help small- and medium-sized enterprises access raw materials more easily, President Anura Kumara Dissanayake announced on Monday while presenting the 2025 budget.

This is the first budget of the National People’s Power (NPP) government which was elected to power in 2024.

The president said they expect economic growth of over 5% real GDP growth over the medium term.

The government expects exports of goods and services to reach an all-time high of about $19 billion in 2025 and the growth in non-debt creating inflows along with robust economic growth and a primary budget surplus of 2.3% of GDP will ensure that Sri Lanka is well-placed to meet the gradual increase in debt service payments from 2028 onwards, he said.

The government will formulate the national export development plan (2025-2029) to increase Sri Lanka’s export of goods and services, and micro, small, and medium enterprises will be facilitated to tap new export markets, expand existing markets, or connect in the value chains of large-scale exporters and global value chains, he said.

With the view of removing limitations in access to high-quality, affordable raw materials, new tariff rates will be based on a national tariff policy to create a simple, transparent and predictable tariff framework, the president said.

Sri Lanka’s network of free trade agreements (FTAs) with strategic partners, particularly with a view to greater economic ties with the Association of Southeast Asian Nations will be expanded through the Regional Comprehensive Economic Partnership (RCEP) and other agreements, the president said.

The government aims to grow Sri Lanka’s digital economy to a level in excess of $15 billion or 12% of the national economy over the next five years and the government proposes to allocate LKR 3 billion (about $10 million) to bolster the acceleration of digital economy development, he said.

The president said the 2025 budget targets a deficit of 6.7% of GDP, slightly lower than the 6.8% deficit recorded in 2024, adding that the health sector will receive a substantial boost, with a budget allocation of LKR 604 billion (around $2.04 billion) for 2025.

IMF urges tighter fiscal controls to save Maldives 

(via AFP on Feb 19)

The Maldives needs “urgent and stronger” fiscal consolidation to salvage its troubled economy despite a thriving tourism industry, the International Monetary Fund has warned.

The upmarket Indian Ocean holiday destination expects its economy to grow by 5% in 2025, but the IMF warned the sunny forecast masked potential headwinds.

“There is large uncertainty around the forecasts and risks are tilted to the downside,” the Washington-based lender of last resort said in a Tuesday statement.

“There is the need for more urgent and stronger fiscal consolidation. Holistic expenditure rationalisation is necessary to restrain excessive spending.”

The tiny nation refused an IMF bailout loan late last year and the government announced severe spending cuts, with President Mohamed Muizzu taking a 50% pay cut.

Muizzu has also introduced a mandatory 10% pay cut to most public sector jobs.

The Maldives said in September that its financial troubles were “temporary” and that it had no plans to seek a bailout, despite warnings of a possible sovereign default.

The IMF said overall fiscal deficits and public debt are projected to stay elevated and called for urgent policy adjustment.

“The Maldives is navigating a pivotal moment to urgently restoring macroeconomic stability and debt sustainability,” the IMF said.

Known as a luxury holiday destination with pristine white sand beaches and secluded resorts, the Maldives has also become a geopolitical hotspot.

China and India are the two largest bilateral lenders to the Maldives, which is made up of 1,192 coral islands scattered across the equator.

Beijing has pledged more funding since the 2023 victory by Muizzu, who thanked China for its “selfless assistance” in providing development funds.

Muizzu was welcomed in New Delhi in October by Indian Prime Minister Narendra Modi, who rolled out financial support to bolster the archipelago’s struggling economy.

Official data showed the Maldives’ foreign debt at $3.37 billion in the first quarter of 2024, equating to around 45% of GDP.

China accounted for about 20% of the external debt, while India owned just under 18%.