South Asia's sovereign debt problem

South Asia is struggling to balance sovereign debt and fiscal space.

- BIGYAN BABU REGMI AND SISIR BHANDARI

The region's debt has risen faster than in any other emerging region due to persistent fiscal deficits. By 2023, the government debt had surged to 77 per cent. In 2022, Sri Lanka entered a sovereign debt crisis and defaulted, followed by a narrowly avoided default by Pakistan in 2023. Bangladesh's reach for IMF support further illustrates the severity of dwindling reserves. The leading economy of South Asia, India, also carries higher public debt levels at 80 per cent of its GDP, whereas smaller states like Nepal, Bhutan and the Maldives rely on concessional finance to stay afloat.