Apart from being located in South Asia, Sri Lanka, Pakistan and Bangladesh have the common weakness of being very vulnerable to exogenous shocks, particularly those related to the commodity cycle and climate change. The Covid-19 epidemic and the very sharp rise in commodity prices in 2021 and 2022 have therefore exacerbated the macroeconomic imbalances of these countries, whose public finances and external accounts were already fragile. Consequently, Sri Lanka defaulted on its external debt in 2022. This is not yet the case in Pakistan, although the risk is very high. As for Bangladesh, it has been much more resilient to shocks than its two neighbours and should escape a default.
