Bangladesh’s miracle economy under heavy pressure, anger over corruption nepotism, bad trade balance

Rekha Begum stands in line to buy food. He is angry. disappointed Like many in Bangladesh, he struggled to afford necessities such as rice, pulses, and onions. In the capital Dhaka, food is sold in trucks at subsidized prices. There he stood in line for almost two hours. At that time, 60-year-old Rekha Begum said, I went to two other places. They told us there is no offer.

The rise in fuel prices has fueled people’s frustration with the rising prices of food and other essential goods. Bangladesh’s miracle economy is under great pressure. Criticism from the opposition was strong.

There have been protests in the streets for weeks. This has increased the pressure on the government. On the other hand, the government has enlisted the help of the International Monetary Fund (IMF) to protect the country’s economy. This is stated in a report by the AP news agency.

Experts say the situation in Bangladesh is not as dire as in Sri Lanka. After months of protests and unrest, Sri Lankan President Gotabaya Rajapakse had to flee the country. There are still acute shortages of food, fuel, and medicines. For daily necessities, one has to stand in long lines. The situation in Bangladesh is not like that, but it suffers from the same problem. Ambitious development projects cost extra. There is public anger at corruption and nepotism. The trade balance has weakened. These trends undermine Bangladesh’s remarkable progress. The clothing sector makes an important contribution to this economy. On this basis, Bangladesh is moving towards a middle-income country.

Last month, the government raised fuel prices by at least 50 percent to counter rising commodity prices due to high oil prices. This sparked protests against the rising cost of living. As a result, the government ordered rice and other goods to be sold at subsidized prices through government-employed dealers.

The program was last launched on September 1. Commerce Minister Tipu Munshi said about 5 crore people will benefit from this. He also said the government has taken several measures to ease pressure from low-income people. Which will affect the market and the prices of daily necessities will be competitive.

These policies will undergo temporary changes to address broader global and domestic challenges.
Even as demand increased after the coronavirus pandemic, commodity prices soared. In addition, the war in Ukraine at that time caused the prices of many products to skyrocket. During this period, the local currencies of many countries such as Bangladesh, Sri Lanka, and Laos weakened against the dollar. This has led to an increase in the price of imported goods such as oil and other commodities against the dollar.

Authorities have imposed a moratorium on major new projects to ease pressure on public finances and foreign reserves. Shorter office hours to save energy. Imports of luxury and non-essential goods such as sedans and SUVs have been imposed.
Ahmed Ahsan, economist, and director of the Dhaka-based Policy Research Institute said Bangladesh’s economy is facing serious adversity and instability. Suddenly we are back in the era of blackouts. Foreign reserves are under pressure. Rarely, millions of low-income Bangladeshis in a family of five like Rekha Begum can afford fish or meat once a month. They still struggle to get food on the table.

Bangladesh has made great strides in economic growth and poverty reduction over the past two decades. Investments in the clothing industry have created employment for thousands of people. Most of them are women. More than 80 percent of Bangladesh’s total exports consist of made-up clothing and related products. But because of the high fuel prices, the authorities have shut down diesel plants. At least 6 percent of the total production came from these plants. As a result, 1500 MW less electricity is produced per day. It disrupts the factory.

Imports rose to $84 billion in the fiscal year ending June 2022. And exports have declined. There is currently a record deficit of $17 billion.

More challenges lie ahead.
The deadline for the repayment of foreign debts related to at least 20 mega infrastructure projects is fast approaching. These include the $3.6 billion Padma Bridge built by China, a nuclear power plant funded almost entirely by Russia. Experts say Bangladesh should prepare the payment schedule for these projects between 2024 and 2026 approaches. In July, Bangladesh applied for a $4.5 billion loan from the International Monetary Fund (IMF). Economists see this as an early warning. Bangladesh is the third country in South Asia after Sri Lanka and Pakistan to request this aid.

Finance Minister AHM Mustafa Kamal said the government has started formal talks with the IMF on a loan called ‘Balance Payments and Budget Support’. The IMF said it is working on plans for Bangladesh.

Bangladesh’s foreign reserves are falling. Bangladesh’s ability to repay those debts is declining. Foreign exchange reserves fell to $36.9 billion on Wednesday, according to central bank data. A year ago, that was $45.5 billion. Zahid Hossain, the former chief economist of the World Bank’s Dhaka office, said the usable amount of foreign currency will be $3,000 million. So I wouldn’t say it’s a crisis. With this money, three or three and a half months can be imported. But it means you don’t have enough space for the reserve.

Still, some economists say Bangladesh is in a better position to deal with the situation than many other countries in the region, despite some cost-cutting projects. It has an agricultural sector – as tea, rice and jute are important export products. These sectors can withstand additional pressure. Its economy is four to five times larger than that of Sri Lanka. This prevents the tourism sector from collapsing due to natural disasters. According to the latest forecast from Asia Development Bank, Bangladesh’s economy will grow by 6.6 percent this fiscal year. And the country’s total debt is relatively small. Zahid Hossain said: In the current context, I think the biggest and most important gap between Sri Lanka and Bangladesh is the debt burden. Especially foreign debt. Bangladesh’s external debt is less than 20 percent of the national growth. And in the first quarter of 2022, the amount was about 126 percent in Sri Lanka. Zahid Hossain said, so we’re in better shape.

Mohammad Jamal, 48, was waiting in line to buy subsidized food. He said he felt no relief for the family. In his words, life is becoming more and more unbearable. The price of the product goes beyond the reach of the common man. It’s hard to live like this.

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