South Asian Economic Chaos: It’s High Time Rising Above Geopolitics

To depict the overwhelming hunger and economic distress of the Indian subcontinent in the wake of the Second World War, 20th-century Bengali-Indian poet, Sukanta Bhattacharya, wrote- “In the regime of hunger, the earth belongs to prose, the full moon burns like a loaf of bread”. In essence, life under extreme economic hardship has hardly any appeal to the serenity of a poem or the beauty of the moon.

Amid the ongoing devastating war in Ukraine and the pandemic yet to be receded, South Asian nations have been experiencing a staggering level of economic distresses, and consequent political upheavals- problems not spawned out of their fault. Rising commodity prices, disrupted supply chain, dwindling forex reserve and ever-increasing debt burden are already tipping them to the edge of collapse. Under the pandemic-propelled and war-induced economic hardship the South Asian countries going through, the geopolitical competition with no practical value to their problems is out-and-out unnecessary and will add further fuel to their already growing resentment.

Since the United States had begun to shift its strategic pivot to Asia, with an aim to counter China, the Asia-Pacific region has turned into a geo-strategic battleground between the rising power China and the established power US. In what is called ‘ The Thucydides trap’, while the former striving to extend its sphere of influence in keeping pace with its economic rise and the latter to retain its hegemonic primacy, they have locked in an unpropitious power struggle. This evolving geopolitical development has put the smaller South Asian countries, like most others across the world, into an ever-enduring balancing struggle between the emergent blocs.

For a long time, South Asian countries have maintained well-calibrated balancing relations with the competing powers- that has resulted in their national stakes, be it related to trade, security, or investment, having been distributed among the powers. This evenly divided diplomatic approach has been well reflected in their respective position on the UNGA resolutions brought against the Russian invasion. For instance, as an inevitable outcome of its long-pursued balancing diplomacy, Bangladesh’s trade interests in terms of exports are highly entrenched in the Western countries while its import and investment interests are overwhelmingly in China and other East Asian countries, placing it in an ambivalent in-between geopolitical position. Given their huge developmental and politico-economic challenges, countries in South Asia like Bangladesh could hardly afford to get embroiled in the geopolitical contestation or drift to any of the power camps.

Now come to the current chaos. Even prior to the Russian invasion of Ukraine, a number of countries in South Asia were in desperate straits due to the devastating fallouts from the pandemic. The war in Ukraine has further squeezed their post-pandemic recovery space, exacerbating already soaring inflation, increasing fiscal deficits, and deteriorating current account balances.

In response to the acute food shortage, Russia and Ukraine, with Turkey and the United Nations playing the mediatory role, reached a grain deal to facilitate the Ukrainian and Russian food export through the Black Sea corridor. In a gesture of goodwill, The United States and the EU sought “facilitate Russian food and fertilizer exports by reassuring banks, shipping, and insurance companies that such transactions would not breach Washington’s sanctions on Moscow”. But given the sheer size of the ripple impacts across the developing world, the gesture falls substantially short of what actually global powers should do to ease the pain inflicted upon them- particularly from the fuel and debt crisis.

The south Asian region is traditionally a net importer of commodities, with electricity production immensely dependent on imported oil and Liquified Natural Gas (LNG). Like many other cases in South Asia, Bangladesh, having done a tremendous job in the power sector over the last decade, has recently plunged into a severe electricity crisis. But it is not due to any power- generation-capacity shortage, in a country with an installed capacity to generate 25,500 megawatts, but due to the shortage of the primary fuel (natural gas, oil, and coal). The volatile international energy market combined with unprecedented local currency depreciation against the Dollar -both ensued by both the war and subsequent sanctions- has already surged its import bill by 46%, with the current account deficit increased by over 82% in the fiscal year.

Regarding the external debt distress, the picture is even bleaker, with almost all the South Asian countries’ debt-to-GDP ratios having crossed the dangerous limit. From Sri Lanka, the first domino to fall in the face of a global debt crisis, to Pakistan, now Bangladesh, the number of countries seeking loans from IMF amid the rising import bills and widening trade deficit is increasing. With Sri Lanka having plunged into unprecedented political mayhem, resulting, in big part, from the menacing economic spill-over impacts from both the war and sanctions, now the ubiquitous question asked across the region is: which country is next to Sri Lanka?

Given the current cold war spectrum between China and the USA across the Asia-Pacific, a tug of war has been seen on the rise over the decade around pulling the smaller South Asian countries to their respective camp. Now those countries are struggling under the debris of debt, spiraling inflation, and consequent political upheaval. Both the US and China have considerable geopolitical and economic stakes across the region. Given that China is the largest individual creditor in the region and the USA is the supreme stakeholder in the western-led financial and economic institutions, both can in collaboration play major role in salvaging the region from the havoc. But if both powers stick to their narrow geopolitical interests other than collaborating in alleviating the current chaos, smaller countries in South Asia will lose appeal to the much-touted and lofty ideological rhetoric from both contesting powers- US’s ‘prosperous and democratic Indo-pacific’ or China’s shared ‘common prosperity’.    

Sumaya Barsha
Sumaya Barsha
Completed M.S.S in International Relation from University of Dhaka Analyst and Freelance Journalist