Bangladesh heading towards economic crises

By Ali Husnain

Bangladesh which is being claimed to be developing economically since last decades but now in fact the contemporary situations has led the state into serious economic crises. The economic relations with India were being claimed as the economic development of Bangladesh but in fact it was the development of Indian economy on the ground but apparently Bangladesh. The political situation in Bangladesh is again a point of concern which is also becoming hindrance in the way of progress and development. The national interests are being neglected for the sake of the party’s or self interest. Bangladesh under the government of AL’s chairperson Sheikh Hasina has gone through different developments but it was also pushed into different other crises. Likewise the failure of the conduction of free and fair elections by the ruling party in Bangladesh during last decade has also become black spot on the current government which means the government priorities autocracy over democracy neglecting the opinion of the people of the state. Moreover, sheikh Hasina enhanced relations and strengthening ties with India made her to be claimed as pro Indian but her slogan which was developmental ties which are now being proven as wrong due to the current situation in Bangladesh.

Furthermore, external factors which were part of the policy of the government such as high cost of infrastructure projects, often described as “mega projects”, crisis in the banking sector due to widespread default of loans, waste of resources in the energy sector, Capital flight, notwithstanding, are those domestic areas tied to government policies can be identified as sources of the present crisis. Recently, In March 2022, the government celebrated its success in extending electricity coverage to the entire country. This, however, came at a high price.

Moreover, Dhaka’s search for financial support is not limited to the IMF. Besides requesting from the World Bank a one billion dollar loan, an estimated $2.5-3 billion have been solicited from several multilateral agencies and donor nations (such as the Japan International Cooperation Agency, or JICA) just this year. Considering that ongoing austerity measures including power cuts, restricted use of foreign currency, and fuel rationing are yet to make any major dent in the crisis. The government claims that the country will weather shrinking foreign exchange reserves, a growing trade deficit, record inflation, daily depreciation of the local currency, and an intense energy crisis—is doubtful. As the IMF and other multilateral agencies open their purses to Bangladesh, it is also imperative to understand how the country arrived here.

The government of Bangladesh would like everyone to believe that the economic slowdown from the COVID-19 pandemic and the global impact of the Ukraine-Russia war are to be blamed for its current plight and the most important reason but this only tells part of the story which is ignorable as well. If we look into the depth and on ground realities there are number of misled polices adopted by Dhaka in order to get financial support and any portray the picture of developments which Bangladesh has never seen before. Bangladesh received at least $1.7 billion in loans from multilateral agencies by June 2020, and by October 2021 it had borrowed at least three billion dollars from development partners as budget support to combat the adverse impacts of the pandemic. It is reported that budget support received from various multilateral agencies 2019-2020 and 2021-2022 amounted to $5.8 billion. Moreover, Dhaka received $732 million from the IMF as a balance of payment support and $1.4 billion from the World Bank to implement the countrywide vaccination program. During COVID-19 period it obtained sixty-one million doses of COVID-19 vaccines from the United States, free of cost. The government also offered various stimulus packages and repeatedly claimed that its economy not only turned around, but was on the road to a dramatic recovery, with such optimism echoed by the World Bank.

The fact and figures reveals that the fallout from the pandemic should have been addressed in the past year with significant support from external sources, and that the government has been taking loans in recent years despite claims of robust economic growth. Two consecutive fraudulent national elections, held in 2014 and 2018, have created a de facto one party system without check and balance. As international lenders such as the IMF negotiate more loans for the current government, donors should understand that throwing more money at Dhaka will not bring an end to the crisis. Moreover, the requesting party should also know how to arrange or when to return the loan.  A bailout will only act as a band aid. It may stop the bleeding for the moment, but there is no guarantee that it will magically solve the crisis without reforming an economic system tied deeply to the regime’s self-interested political vision.

 

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