EUROPE ASIA FOUNDATION - INSIGHTS
Bangladesh and Pakistan - Two Very Different Trajectories
Seventy five years ago they were one, but 52 years ago Bangladesh gained Independence from Pakistan. The contrast in the countries' development couldn’t be more stark.
Consider some data - Bangladesh has presented a budget of USD 71 billion and has a growth rate of 7.5%. Compare that to Pakistan’s growth rate which is only 3.5% and inflation cost is 21%. Bangladesh has almost USD 31 billion reserves for the new fiscal year whereas Pakistan has less than USD 4 billion and that includes loans from friendly nations. Bangladesh’s exports have reached USD 52 billion in the 52 years after its independence, whereas Pakistan’s exports are still at USD 31.78 billion. In the current year, Bangladesh’s export target is USD 67 billion whereas Pakistan’s export target is USD 38 billion. And Pakistan is able to provide export and services only up to 21.5 billion dollars, which is much lower than its target.
There is little doubt that Bangladesh has left Pakistan behind in all sectors of the economy in 2023-24. In fact, Bangladesh has proven to be the best performing economy in South Asia, post-pandemic.
Bangladesh’s Economic Progress
Since its independence in 1971, Bangladesh has made remarkable economic progress, evolving from a low-income to a lower-middle-income country. Bangladesh underwent a sectoral transformation in employment and GDP growth, transferring labour from the low-productive agriculture sector to the high-productive manufacturing and service sectors. Its agricultural sector remains essential for the economy and food and nutrition requirements despite having a gradually declining share of GDP and employment. Bangladesh has been implementing many safety-net programs which include both cash and in-kind contributions to the poor. In 2015, the Government of Bangladesh announced a comprehensive National Social Security Strategy (NSSS) to ensure a comprehensive social protection system for all. Microfinance has been prevalent in Bangladesh. Since the establishment of Grameen Bank in 1983, both the number of subscribers and the number of disbursements increased exponentially.
A GDP of $411 billion, compared to Pakistan’s GDP of $347 billion, makes Bangladesh the 33rd largest economy in the world. Experts forecast that the economy’s size could double by 2030. The garment industry, which includes nearly 25 lakh of the 42.2 lakh females in the workforce, undoubtedly contributes significantly to the transformation of Bangladesh from a “basket case” into a robust economy, thanks largely to good governance.
Pakistan’s Political Chaos and Economic Mess
On the other hand, since independence, Pakistan has faced many social and administrative issues resulting in economic problems. Economic, social, and administrative problems have amalgamated and engulfed the whole nation like an epidemic. At a time when global markets — and geopolitics — are wracked by instability, Pakistan is facing a deflating economy, spiralling inflation, the rising arc of terrorism and a political system near paralysis, and not the least the aftermath of the most catastrophic flooding the country has ever seen. The most critical issue facing Pakistan today is poor governance which has negatively contributed to the empirics of economic growth through increased poverty directly and through increased social evils, such as crimes, indirectly. Added to this, Pakistan today has a government that can neither wield power nor surrender it; an opposition so rancorous that it cannot figure out how to recapture the power that was snatched out of its hands a few months ago.
The cost of external and internal debt servicing has increased due to the rupee’s decline and tightening of interest rates. This means the government will only continue to borrow more debt from commercial banks. The result is political paralysis, amid an economy burdened with pressures of unmanageable proportions. Banks will keep investing funds in government debt papers instead of lending to the private sector. The private sector’s credit appetite is already low thanks to the withdrawal of subsidies, high energy prices and very high interest rates.
Currently, Pakistan’s economy has far exceeded its threshold level of public debt and is unable to pay it. According to an IMF report, the country needs a $7bn loan to tackle this crisis and in the three years leading up to 2026, Pakistan must repay a total of $75bn, or $25bn per year.
Human Development Paradox
Aside from this, there are other areas of the human development index where Bangladesh has progressed far ahead of Pakistan.
Consider these simple health indicators: Pakistan is one of the two remaining countries in the world where poliomyelitis (polio) is prevalent despite billions of dollars that have been spent on eradication efforts. Bangladesh was declared a polio-free country by the regional certification committee of WHO almost a decade ago, in 2014.
Pakistan has the world’s largest population of patients infected by the Hepatitis C virus, surpassing even China, despite the fact that medicines to treat it are available cheaply with a cure rate of 97-98%. In Bangladesh only 7% of the population is affected by the serious Hepatitis C virus.
Take also for instance education. Bangladesh has made notable progress in elementary school enrollment, reaching almost 100% in some forms of elementary schools, whereas in Pakistan 44% of students aged five years to 16 years are currently out of school.
These are just a few examples from the larger human development parameters on which Bangladesh has gone far ahead of Pakistan. Both countries share a bitter historical past and today they stand poles apart in terms of development and also in terms of social fabric. While Pakistan continues to be mired in political instability, corruption, social injustice, and economic disparity fueled the emergence of various manifestations of terrorism, whereas for Bangladesh secularism was a foundational tenet, and characterised by a burgeoning export-driven economy that leads South Asia in a number of key human development indicators. Ironic indeed that while one became the ‘Asian Tiger’ the other has become a ‘terror epicentre.’
Bangladesh has achieved much to overcome its challenges. The EU ought to do more to assist Bangladesh, which faces an existential threat: climate change. With its unique position as one of the world's most densely populated countries, combined with its geographical nature: low lying on fertile plains with largest river delta in the world, it is extremely vulnerable to devastating changes in weather patterns and rising sea levels. Pakistan deserves attention, but it cannot be a black hole of development aid spending and donors need to have assurace that funds are not being siphoned off, but are being used in an efficient way to help build a stronger society - perhaps learning some lessons from its neighbour Bangladesh. If the EU provided countries like Bangladesh with the level of resources it targets towards Pakistan the results would be dramatic.