The story of Sri Lanka is a classic example from a South Asian developing country where one family’s rule has rotten the system of governance. The myopic approach has resulted in a chaotic situation in the country. The island nation has succumbed to financial default owing to its economic mismanagement by Rajapaksa’s government. Some people believe that poor economic management on the part of successive governments is to blame for the current crisis, which they call the worst in several decades. These governments are held responsible for creating and maintaining a twin deficit consisting of a budget shortfall and a current account deficit. As per Asian Development Bank’s report, Sri Lanka can be considered a “classic” example of a “twin deficits economy.” Twin deficits mean that a state’s national expenditures are greater than its national revenue,” and its “production of tradable products and services is insufficient.” If we see the situation in Pakistan, one can draw a fine comparative analysis between Pakistan and Sri Lanka.
For Sri Lanka, the current crisis was hastened by deep tax cuts promised by Rajapaksa during a 2019 election campaign and enacted months before the COVID-19 pandemic, which wiped out swathes of the country’s economy. Credit rating agencies downgraded Sri Lanka when the pandemic depleted its tourism economy and foreign workers’ remittances, virtually locking it out of international financing markets. As a result of the loss of access to those markets, Sri Lanka’s foreign exchange reserves fell by about 70% in two years. After reversing its decision to ban all chemical fertilisers in 2021, the Rajapaksa government hurt the country’s farm economy, causing a decline in vital rice production.
The two brothers, President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa faced two separate but related problems as a result of the country’s twin budget deficits. They had to handle the most difficult economic circumstances. Also, their inability on the economic front caused country-wide massive protests that ended their power. Both challenges came at the same time. The protests in Colombo’s streets reached their climax when the protestors not only wanted to remove the two brothers from their positions but demanded an end to the Rajapaksas’ rule over the country in its entirety by ousting other family members and relatives from their ministries. This could not be easily tolerated in a country where the elite gripped the resources and shared among the ruling family. It is important to mention that the Lankan nation has remained in a constitutional crisis since 2018. Sri Lanka’s form of governance has been going through a major decline. A political crisis triggered an economic crisis in the country.
Pakistan’s woes demonstrate that, although desirable, abolishing governing dynasties and the executive presidency is not a cure for Sri Lanka.
As for Pakistan, a political crisis threatens to destabilise the country at a time when stability is needed to avoid an economic crisis elsewhere in South Asia. Former Prime Minister Imran Khan was ejected earlier on 10 April by a vote of no confidence. A new government led by Shehbaz Sharif, the brother of previous Prime Minister Nawaz Sharif, was installed at a difficult moment for the country.
Similarly, many aspects of the Sri Lankan crisis have parallels in Pakistan. Inflation is skyrocketing, it was 12.7% in March, and after one month, it reached 13.4%. The Pakistani rupee is devaluing rapidly against the dollar that has reached PKR200 in the interbank, the market highest in Pakistan’s history. Moreover, like its Sri Lankan counterpart, both the fiscal and current account deficits have gotten out of hand. A balance of payments crisis is a possibility that is lurking around the corner.
The political and constitutional crisis in the backdrop of appointing Hamza Sharif as Punjab Chief Minister and Shahbaz Sharif as Prime Minister has emboldened the current economic crisis. The Sharif family, along with other political parties, has preferred to oust Imran Khan. Their action against the former government has acted as a catalyst in the current economic downturn. For their political interest, they have put the nation’s economic survival at stake. Besides, since the installation of the new government, Prime Minister Shahbaz Sharif seems to be taking constant directions from his elder brother Nawaz Sharif. Another significant difficulty for him would be to take any tough economic measures through his unwieldy cabinet, which is packed with adversaries from across the political spectrum, from the centre-left Pakistan People’s Party to the radical Jamiat Ulema-e-Islam.
Pakistan’s woes demonstrate that, although desirable, abolishing governing dynasties and the executive presidency is not a cure for Sri Lanka. Pakistan has a ceremonial president and has seen its macroeconomic conditions deteriorate under Khan who is clearly a celebrity, though not from a dynasty.
The coalition government has hastened to oust Imran Khan because of their own political insecurities and elections reforms concerns. They do not seem to be motivated by the welfare of the people. Rather their confusion in the past one month since the formation of the new government has unfolded their lack of understanding of the dwindling economic situation in Pakistan. The system of democracy has been fooled in Pakistan under constitutional clout. The Sharif family’s central positions in the capital and the largest provincial seat with important decision-making and consultation for Pakistan being done for the time being in political capital London indicate that Khan’s struggle against dynastic politics is fitting because in Pakistan political consciousness has crippled and economic indicators have worsened over the years. The current political instability has infused an economic mess that has symptoms to change into a full-blown economic fiasco. Before it gets too late, elections should be called in to stop further political led economic uncertainty in Pakistan.