In the coming months and years, Bangladesh, Sri Lanka and the Maldives will need to implement macroeconomic adjustment programs to maintain market confidence and retain access to external financing at a reasonable cost, which will prove politically challenging and could result in new episodes of social and political unrest in all three South Asian countries. In its most recent World Economic Outlook, the International Monetary Fund (IMF) highlighted the significant challenges that emerging and developing economies are experiencing, particularly in South Asia. Increasing interest rates in the United States and Europe have led to a strong U.S. dollar and higher debt servicing costs for the region's most financially vulnerable countries, including Sri Lanka (which defaulted on its debt last year), Bangladesh (which requested an IMF bailout last July to avoid such a default) and the Maldives (which the IMF sees at high risk of debt distress). If the governments of...
