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Annual Report 2002

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South Asia

• Afghanistan
• Bangladesh
• Bhutan
• India
• Maldives
• Nepal
• Pakistan
• Sri Lanka

Despite the challenges faced in the region, the overall economic performance of the South Asia DMCS—Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka—was satisfactory, with the region recording growth of 4.2% in 2002. Security deteriorated in some South Asia DMCs, with a subsequent negative impact on economic growth and poverty reduction. Erratic weather patterns, which produced droughts and floods in different parts of the region and affected agriculture sector output, also took their toll on the region’s economic growth. The region still faces some important macroeconomic challenges. The fiscal deficit in several countries is large and needs to be contained. The region also faces uncertain external demand for its exports, and while the current account of the balance of payments of most countries improved, this was largely due to depressed demand for imports. The foreign exchange reserves of most countries increased during the year and there was also a moderate appreciation of the currencies against the US dollar. The high price of oil is adversely affecting the balance of payments and there could be some reduction in the level of foreign exchange reserves.

Given the region’s pervasive poverty, ADB focused its operations in the region in 2002 on poverty-reducing interventions. ADB and its development partners help Afghanistan in its reconstruction efforts and assist Sri Lanka in its postconflict rehabilitation (see the Special Theme chapter). ADB continued to assist the South Asia DMCs by supporting social and physical infrastructure projects, improving governance, strengthening institutions and building capacity, reforming sector policies, promoting private sector initiatives, and improving public sector resource management.

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