Western commentary likes to file these under “South Asian instability,” but a closer look suggests something more structural: both countries were shaped by the same colonial extraction model, and took some catastrophically bad decisions.
Although Bangladesh did not end up with that specific headline, by 2025 it had accumulated its own set of misfortunes, including the highest inflation in South Asia; a banking sector riddled with bad debt, as a result of which the regulators had given up on pretending the situation was any different; and a political system that changed administration twice within eighteen months.
Western commentary likes to file these under “South Asian instability,” as if the region simply has some kind of chaotic hobby. A closer look suggests something less mysterious and more structural: both countries were shaped by the same colonial extraction model, offered the same prescriptions by the same institutions, and took some catastrophically bad decisions entirely on their own initiative, which is the part their own leaderships would prefer forgotten.
The Plantation and the Jute Sack
Neither economy was born poor by accident. British Ceylon was deliberately arranged to have a tea and rubber plantation economy, which was operated for the advantage of London, the land being taken from the Kandyan highland communities and labour being brought in from South India under conditions no different from indenture.
Bengal experienced a similar change: having for centuries been a region known for textile production, it was systematically de-industrialised in order that it could supply raw jute and cotton to the British mills, the finished cloth being shipped back for the Bengalis to purchase. This was not merely an example of accidental underdevelopment; it was a deliberate policy put into effect through the use of tariffs, land settlement, and the normal mechanisms of the empire.
What is worth noting, which further complicates the tidy morality tale, is that Sri Lanka did not start from the back of the pack. At independence in 1948, it stood second only to Japan on most Asian socio-economic indicators, ahead of South Korea in per capita income as late as 1960, with a welfare state, free education, free healthcare, and subsidised rice that was the envy of much of the developing world.
Bangladesh’s starting position in 1971 was harsher. A nation born out of war, genocide, and famine, seceding from Pakistan at enormous human cost, with the Soviet Union’s diplomatic and military backing (including UN Security Council vetoes and naval deterrence in the Bay of Bengal against a US carrier group sent to intimidate India) proving decisive to its very existence.
Sheikh Mujibur Rahman’s government leaned toward a Soviet-style model of nationalisation in the immediate post-war years, before his 1975 assassination reversed that trajectory almost overnight. Both nations were handed, at their respective founding moments, genuine choices about which development road to take. Both eventually found themselves walking down a road paved largely by others.
The IMF Years: A Shared Curriculum
From the late 1970s onwards, both countries became regular clients of the Bretton Woods institutions, and the recommendations hardly ever changed: currency devaluation, the removal of subsidies, privatisation, trade liberalisation, and austerity. Sri Lanka adopted an early form of this approach after 1977; Bangladesh has been in and out of IMF programmes for decades, its economy having been steadily geared towards a single, extremely simple formula, namely, sewing garments at a low cost, shipping them to Western retailers, and keeping wages low so that the contracts continue to come.
By the 2020s, ready-made garments accounted for roughly four-fifths of Bangladesh’s export earnings, an almost monocultural dependency far more extreme than anything the colonial jute economy ever managed. Sri Lanka drifted toward a comparable dependency on services: tourism, apparel exports, and remittances from citizens working abroad, together supplying the foreign currency the domestic economy could no longer generate on its own.
Both economies were nudged, loan cycle after loan cycle, into supplying cheap labour and raw exports to wealthier markets while capital-intensive, higher-value industry stayed firmly parked in the Global North. Neither Colombo nor Dhaka was ever seriously encouraged by its major creditors, to build the kind of protected domestic manufacturing base that had earlier allowed South Korea or, later, China to climb the value chain.
The Washington Consensus, as applied in South Asia, was remarkably good at producing export platforms and remarkably indifferent to producing industrial sovereignty. The human cost of that arrangement is easy to state in the abstract and harder to sit with in the particular.
The same garment sector in Bangladesh, built to Western retailers’ exact specifications on cost and turnaround, produced the 2013 Rana Plaza building collapse, over a thousand dead workers and a global scandal that briefly embarrassed the brands sourcing from it before business largely resumed as before.
Sri Lanka’s version of this same dependency manifests in its remittance economy: hundreds of thousands of Sri Lankans, disproportionately women, working as domestic labour in the Gulf states, sending home the dollars that prevent the balance of payments from collapsing outright.
Both are, in their own way, exports of cheap labour dressed up as development strategy. The plantation logic simply relocated from the tea estate to the factory floor and the foreign household.
Where the Captains Steer Themselves Onto the Rocks
This subject is owed some honesty, because blaming everything on Washington and London lets two domestic political classes off far too easily. Sri Lanka’s collapse has a name and a date attached to it that no foreign institution forced into existence. In 2019, Gotabaya Rajapaksa’s government pushed through massive, unfunded tax cuts as a “populist” gesture, blowing a roughly $1.4 billion hole in state revenue at precisely the wrong moment.
Then, in April 2021, with foreign reserves already draining and the treasury needing to cut its fertiliser import bill, the government banned all chemical fertiliser overnight and ordered the country’s two million farmers to go fully organic, a policy dressed up in the language of “sustainable food systems” but which even Rajapaksa himself later admitted was driven by fiscal, not agronomical causes.
Rice yields fell by roughly a fifth within six months; the country that had long fed itself was suddenly importing hundreds of millions of dollars of rice while even its signature tea export collapsed alongside it. Add to this a borrowing spree for prestige infrastructure (the Hambantota port among them), a project whose 99-year lease to a Chinese state company became a global shorthand for “debt trap diplomacy,” even though the more sober accounts show it was a lease Colombo itself solicited to plug a liquidity hole its own governance decisions had created, not a hostile foreclosure.
The debt was real; so was the domestic decision-making that produced it. Bangladesh’s more recent unravelling follows a similar pattern of self-inflicted wounds layered atop structural fragility. During Sheikh Hasina’s fifteen-year rule, the central bank was repeatedly tapped to finance state spending the government couldn’t otherwise cover, an old inflationary trick that eventually caught up with the currency.
Politically connected borrowers extracted loans from state banks that were, by credible estimates, never intended to be repaid, with a considerable share allegedly siphoned into property abroad, leaving the banking sector, by late 2025, with a capital adequacy ratio that had turned negative.
When student protests forced Hasina’s exit in August 2024, the interim government under Muhammad Yunus inherited this mess along with a mandate it never quite managed to convert into stability; growth cratered, and by February 2026 the country had swung again, this time to a BNP government under Tarique Rahman, which now finds itself negotiating yet another round of IMF conditionality to keep the lights on.
A tax-to-GDP ratio around 7 percent, less than half the average for countries at Bangladesh’s income level, testifies to decades of a political elite unwilling to tax itself properly, preferring instead to borrow, subsidise selectively, and hope exports would keep covering the gap.
The Road Not Taken
The instructive comparison isn’t between Colombo and Dhaka alone; it’s between both and the handful of states that, faced with similar pressure, said no. When the 1997 Asian financial crisis hit, Malaysia’s Mahathir Mohamad refused the IMF programme that Thailand, Indonesia, and South Korea all accepted, imposing capital controls and pegging the ringgit instead, a move the Fund itself condemned at the time.
By most honest accounts, Malaysia’s recovery was no speedier than Korea’s, but it did not turn over domestic monetary policy to an external board of overseers, and it did not leave the country’s industrial base fire-sold to foreign buyers during the panic. Vietnam offers an even starker contrast. The Communist Party’s 1986 “Đổi Mới” reforms liberalised the economy slowly and on Hanoi’s own terms, with state-managed markets, a deliberate industrial-zone strategy, and land reform without total abandonment of central planning.
And by 2023, Vietnam’s GDP had overtaken Malaysia’s, a result achieved without ever surrendering the steering wheel to Washington. That is not to say that Sri Lanka or Bangladesh could have simply copied Kuala Lumpur or Hanoi whole. Geography, colonial legacy, and political culture are different. But it does undermine the fatalistic idea that South Asian debt crises were inevitable as opposed to the result of particular, refusable choices made, over and over again by particular governments.
Conclusion: Victims Who Also Held the Wheel
The honest verdict on both countries is neither the comfortable “poor victims of Western finance” narrative nor its mirror -image, “They only have themselves to blame.” Both are true simultaneously. Sri Lanka and Bangladesh were assembled, by empire and then by decades of conditional lending, into economies structurally dependent on low-value exports and foreign currency inflows they don’t control: tea and tourism in one case, T-shirts and remittances in the other.
That dependency was not accidental, and the institutions that enforced it rarely offered a serious alternative. But within that constrained field, both countries’ ruling elites made specific, avoidable decisions: tax giveaways; a fertiliser ban announced with no agronomic study; central-bank financing of political patronage; and banking sectors looted by the well-connected, which turned structural vulnerability into acute catastrophe.
Malaysia and Vietnam prove the constraint was never absolute. The tragedy of Colombo and Dhaka is not that the system was rigged against them, though it largely was, but that when moments arrived to defy it, as Kuala Lumpur did in 1998, their own leaderships chose instead to double down on the arrangements that were already failing them.
And that lesson is not exclusive to these two countries I have chosen to cover here; it is a phenomenon, a syndrome of dependency and seeping sovereignty, caused by economic failures, whether these failures are self-inflicted or externally imposed. But countries of the global south mostly choose not to learn the lesson.
And this is exactly what needs to change.
Tamer Mansour, Egyptian Independent Writer & Researcher
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