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South Asia not ready for common currency
(Daily Star/ANN) South Asia is not yet ready for a common currency, said economists from countries in the region at the opening of a two-day 14th South Asia Economic Summit in Sheraton Dhaka on Saturday.
However, integration in trade and investment, increased mobility and people-to-people connectivity will provide the incentive for monetary cooperation in the region, they told a session on macroeconomic cooperation and the possibility of a common currency.
South Asia accounts for nearly one fourth of the global population and it has the market and ability to grow together, said the economists at the event being hosted by the Centre for Policy Dialogue.
Yet it is the least integrated in terms of trade, said Zahid Hussain, former lead economist at The World Bank, Bangladesh.Intra-regional trade accounts for 5 percent of South Asia’s total trade whereas the share of intra-regional trade in the Association of Southeast Asian Nations (Asean) region is 25 percent, he said.
South Asia is diverse in land area, gross domestic product or economic output, and population but the region’s countries have similar levels of human and economic development which calls for increased integration, he said.However, there is a lot of barriers to mobility, he said, citing non-tariff barriers, complicated visa policies and rigid bureaucracies.
“There is high sensitivity to national sovereignty. National currencies evoke strong attachment and emotion,” said Hussain at the event.
Political will to give up fiscal and monetary autonomy is also necessarily to go for a common currency, he said.
Complementarity in trade and free flow of labour and capital among the members can make cooperation over a currency more likely, he said.
Several countries have taken steps to reduce dependence on the US dollar and Bangladesh also took bilateral initiatives to settle trade in Chinese yuan and Indian rupee in 2022 and 2023, said Hussain.
However, the response with regard to trade in rupee is muted while exporters in China prefer receiving payments in dollars, euro and pound sterling, he said.There is persistent and growing trade deficit among Bangladesh, China and India, which makes trade in rupee and yuan limited here, he said.
Bangladesh’s average monthly trade deficit is $1.13 billion with China and $644 million with India.Comparability of economies is needed for a common currency, said Md Habibur Rahman, chief economist at Bangladesh Bank. “We are not right there…We can search for an appropriate time and opportunity for this,” he said.
A mechanism enabling independence is needed to avoid sanctions, said Abid Qaiyum Suleri, executive director at Sustainable Development Policy Institute, Pakistan.
Pakistan is relying on barter trade with countries such as Afghanistan, China and Russia, he said.
“Instead of losing hope on a common currency, we can explore so that we reduce dollar dependence,” said Suleri.
Posh Raj Pandey, senior economic advisor of the finance ministry of Nepal, proposed for establishing a regional financial market in this regard.
Use of the US dollar for international transaction settlement is declining, said Professor Sachin Chaturvedi, director general of the Research and Information System for Developing Countries, India.
International transactions other than that of the US dollar accounted for 9 percent of total global trade in July 2022 and it rose to 14 percent in December the same year, he added.
“This is an indication of rising arrangement of settlement in non-dollar,” he said, adding that 38 countries have shown interest to trade with India in rupee.
However, to make trade in the rupee popular between Bangladesh and India, a large line of credit in rupee is needed, said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.
“Otherwise, the performance we have seen is dismal…We also should think of currency swap to protect against external shock,” he said.
Countries should start with trade facilitation for economic integration and go for common documentation for customs, encourage firms to invest regionally and foster people to people connectivity, said Mansur.
Visa issuance and border control is quite pervasive and old fashioned, he said.
The economist also suggested harmonisation of tax and trade policies among members of the South Asian Association for Regional Cooperation.
“We also need monetary policy harmonisation. We need to think about bringing inflation close to each other and currency stability. Cooperation at the institutional level is critical,” he said.
The Parliamentary watchdog Committee on Public Enterprises (COPE) has found that there were fake documents regarding the importing of medicines under the emergency procurement system in 2022 and 2023.
This was revealed during a COPE meeting held at Parliament probing the transactions of the National Medicine Regulatory Authority (NMRA).
NMRA CEO Saveen Semage told the committee that several fake documents have been found due to the lack of registration of medicines.
Stating that six such fake documents were found last year alone, Semage said he had recorded statements regarding each of the documents with the Financial Crimes Investigation Division.
He revealed that, however, no investigations have been conducted yet into the incidents.
“We have documents with confessions from a woman accepting that fake documents had been made. However, a statement has not even been recorded from that woman yet,” he said.
Meanwhile, COPE member MP Asitha Niroshana Egoda Vithana also revealed that the highest number of waive-off registrations (WOR) for medicines had been obtained in 2022 and 2023.
He said 656 such WORs had been obtained in 2022 and 261 in 2023, adding that this proves that discrepancies have taken place during the emergency procurement of medicines during these periods.
Furthermore, Deputy Director General of the Medical Supplies Division of the Health Ministry, Dr. G. Wijesuriya said discussions are underway on allowing the State Pharmaceutical Corporation (SPC) to directly import essential medicines.He pointed out that it was essential to take a policy decision in this regard as a solution to mitigate such discrepancies.
The Batalanda Commission report was tabled in Parliament on Friday by the Leader of the House and Transport Minister, Bimal Ratnayake.
Minister Ratnayake announced that the government has decided to forward the report to the Attorney General for legal advice. Additionally, a Presidential Committee will be appointed to provide guidance and recommendations on how to proceed with the findings of the report.
Ratnayake said that the Cabinet of Ministers, along with President Anura Kumara Dissanayake, has made a policy decision to take necessary action in response to the report. He reassured the public that steps are being taken to ensure that such a dark chapter in the country’s history is never repeated.
Minister Ratnayake said that a two-day debate on the Batalanda Commission report will be scheduled in Parliament at an appropriate time, allowing for a detailed discussion on the report’s findings and recommendations.
The report, which will be printed in all three official languages—Sinhala, Tamil, and English—will be made available to the public in the near future. Ratnayake confirmed that printed copies would be provided to members of Parliament as well as the general public for their review.
The Leader of the House further revealed that there are 28 evidence volumes associated with the commission’s work, which will be submitted to Parliament at a later date for further scrutiny.
Ratnayake said that as entire country concerned of the Batalanda Commission’s findings, the government’s commitment to addressing the issues raised and preventing future atrocities stands clear. The next steps, including legal action and policy recommendations, will be shaped by expert advice and informed parliamentary discussions, he said.
Governor of the Central Bank Dr. Nandalal Weerasinghe on Friday (14) emphasized the importance of promoting a sustainable and cost-effective construction industry in the country, highlighting key challenges and opportunities in the sector.
Speaking at ‘Construction Expo 2025’, Dr. Weerasinghe underscored the need for Sri Lanka to align with global trends in sustainable construction, integrating cost-effective energy solutions and eco-friendly building practices.
“I must say my views here are not necessarily as Governor of the Central Bank of Sri Lanka, but as a person looking at this construction industry and how this can be developed and what the issues are. Sustainability in construction is essential, not just for new projects but also for existing buildings,” he noted.
Dr. Weerasinghe acknowledged that the construction sector has been one of the hardest-hit industries due to multiple economic pressures in recent years including the decline in public investments, high material costs and the industry being dependent on government projects.
The CBSL Governor, who acknowledged that the government faced fiscal constraints, limiting infrastructure spending and delaying payments to contractors, said that however, the outstanding arrears had now been settled.
“Government did not have space to spend money for public investment, especially construction that had a significant impact on the industry in the last couple of years, plus the government inability to pay the arrears for a long period. That was an issue we all recognize that has been one of the adverse impacts the industry had in the past”, he expressed.
“Also the cost of materials went up significantly, partly because of foreign exchange shortages. As a result, the shortage had shot up the prices of construction materials, as well as depreciation of the currency, high interest rates, finance costs, and other factors. We all recognize that it had an adverse impact on the industry. It’s one of the worst affected industries because of all these factors.”
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