Was it just an election ploy in December 2023 and January 2004 to stir up anti-Indian sentiment amongst Maldivian voters? Or was it the lure of Chinese investment flowing into the Indian Ocean tourist haven? Whatever the reasons, Maldives President Mohamad Muizzu has made a sharp U-turn. He’s now on a state visit to India, bringing half his cabinet along, with stops in Delhi, Mumbai and Bengaluru.
Muizzu conspicuously broke tradition after taking office by visiting Beijing and Turkey whose president, Recep Erdogan, has been notably unfriendly to India. He also launched a highly public campaign to expel the 80 Indians armed forces personnel who operated a helicopter fleet in the Maldives. But money has a way of restoring old friendships. With the Maldives in a financial bind, India’s stepping in with $1 billion in aid. Sounds familiar? In 2022, India bailed out a near-bankrupt Sri Lanka with $4 billion, even surpassing the IMF’s $3-billion aid.
Are South Asia’s smaller nations becoming politically unstable due to financial hardship? Pakistan, Bangladesh and Sri Lanka are all relying on IMF assistance. The Maldives reckons Indian aid will be enough to avoid the IMF. Even Nepal tapped into a modest $41.3-million IMF extended-credit facility. Meanwhile, India’s foreign exchange reserves stand strong at $704 billion.
So, what went wrong for our neighbours? Sri Lanka’s tourism sector was devastated by the pandemic with a 73 per cent drop in visitors, triggering a foreign-exchange crisis. This meant the country didn’t have enough foreign reserves to import petrol which led to fuel shortages, huge petrol station queues and disruptions in power and transport. The Rajapaksa government even halted chemical fertilizer imports to conserve foreign exchange, claiming they were shifting to organic farming.
Nepal also suffered from the tourism collapse during Covid-19, pushing an estimated 20 per cent of its population back into poverty.
In Bangladesh, post-Covid, weakening textile exports and declining remittances from the huge army of nationals working abroad hit the economy hard. The Ukraine-Russia war then spiked crude oil prices. This forced the country into a $4.7-billion IMF bailout.
In dire straits
Turn the lens on Pakistan and the situation is even more dire. A serial IMF borrower, it’s taken an extraordinary 23 loans since 1947. But this time it’s much worse with the economy teetering on the brink of collapse. Inflation has been at a hard-to-imagine 30 per cent for almost three years. Petrol prices are at PKR 247 per litre, automobile production has crashed and cotton output is down to 2 million bales, 60 per cent lower than forecast production. Textiles are Pakistan’s key export.
Economic commentator Khurram Husain has grimly pointed out it’s impossible to predict what the economic crisis might lead to. “The inflation engulfing the country is no longer just an economic problem. It is a danger to the social order. It’s not clear when a tipping point will be reached, nor what it will trigger if and when it does arrive.”
Is it a coincidence that political turmoil has erupted in Bangladesh, Sri Lanka and Pakistan in the recent past? In Bangladesh, there are indications the army conspired to edge out Prime Minister Sheikh Hasina. But would they have made a move if the economy had been thriving?
In Sri Lanka, mobs burnt down the homes of several cabinet ministers and the residence of then-prime minister Gotabaya Rajapaksa in May 2022. The Rajapaksas were forced to flee the country and haven’t returned. The left-leaning JVP, which snared just 3 per cent of the vote in 2019, has swept to power under Anura Dissanayake
Head to Pakistan where the political upheavals continue. In May 2023, rioters ransacked the home of the Lahore corps commander. In Pakistan, attacking a senior general’s home is almost like destroying the holiest-of-holies.
Now Imran Khan’s supporters are on the move again and Islamabad and Lahore have been turned into armed camps. Intelligence analyst Damien Symon commented, “Islamabad has once again been turned into a container city, with hundreds of containers set up across the city to block anti-government protesters.” Khan has issued a long message to supporters on X urging them to head to Islamabad’s D-Chowk. All this comes just a week before the Shanghai Cooperation Organisation meeting in the city where tensions remain high as the military takes a tough stance to prevent Khan’s return to power.
Where does India stand in all this? For now, a stronger economy and democracy are keeping the country stable. But if we want a cautionary tale, we only need to look at our neighbours to see how quickly things can unravel.