Muhammad Rayhan Ahmed is JURIST’s Bangladesh correspondent and a law student at the University of Dhaka. This is his inaugural report.
“No one believed. They listened at his heart.
Little—less—nothing!—and that ended it.
No more to build on there. And they, since they
Were not the one dead, turned to their affairs.”
These lines are from Robert Frost’s critically acclaimed poem “Out, Out”. They can help us comprehend the current situation in Bangladesh. In the poem, the words ‘Little-less-nothing’ indicate that the severely wounded boy is going to the land of eternity by degree. He is gradually dying. These words depict a vivid picture of his death. The last two lines provide a horrific reflection on contemporary society’s attitude towards such a tragic incident. Here, the people of Bangladesh are the boy and ‘they’ are the government.
Many of us may have heard about the so-called domino effect in which one event causes a series of like events to happen one after another. Currently, we hear talk of a domino effect in South Asian countries. After the dreadful economic and political crisis in Sri Lanka, experts fear that other countries in this region may face a similar situation. Unfortunately, Bangladesh is on this list of countries.
Why do experts fear this? The question is even more interesting because South Asian country’s $416 billion economy has been one of the fastest-growing in the world for years. In fact, in November 2021, the United Nations decided to strike Bangladesh off its list of the world’s least developed nations.
So what went wrong with Bangladesh? Is Bangladesh heading toward a Sri Lanka-like crisis?
The government of Bangladesh could brush this question aside in one sentence: “Bangladesh is not Sri Lanka!” But such a facile dismissal begs the question: does trouble always come with a warning? Let’s see what’s really happening.
Here are the reasons why there is cause for concern in and about Bangladesh:
- Depleting forex reserves
Forex reserves, or foreign exchange reserves, are assets that are held by a nation’s central bank or monetary authority. Forex reserves are essential to fulfill international trade obligations and foreign payments. During emergencies, countries use them to maintain domestic economic stability. Bangladesh is witnessing a constant decline in its forex reserves. As reported by several sources, the country’s foreign exchange reserves stood at $39.67 billion as of July 2022, sufficient to cover only about five months of imports, down from $45.89 billion a year earlier.
- Gigantic loans for ‘white elephant’ projects
In recent years, Bangladesh has taken on foreign loans to fund what critics call ‘white elephant’ projects, which are exorbitant but utterly unprofitable. These superfluous mega-projects could bring about difficulties at the time of repayment of loans. For instance, Bangladesh has taken a loan of $12 billon from Russia for a nuclear power plant that has a production capacity of only 2,400 megawatts. Bangladesh can repay the debts in 20 years but the installments will be $565 million per year from 2025. In total, the country will likely have to repay $4 billion per year from 2024, as installments for foreign loans. Experts fear that Bangladesh won’t be able to repay those loans at that time because of the shortage of income from the mega-projects.
- Rising inflation rate:
An optimal inflation rate helps a country to boost its economy. The optimal inflation rate is often considered to be around 2%. According to the latest report of Bangladesh Bureau of Statistics (BBS), the inflation rate in Bangladesh was 7.56% in June, 2022, breaking all the inflation records in the country for the last nine years. Moreover, on 5th August, 2022, the government of Bangladesh hiked up fuel prices by around 50%, the largest hike since the country gained independence in 1971. This is a move that will trim the country’s subsidy burden but put more pressure on inflation. The Bangladesh government hiked fuel prices because it needs a $4.5 billion loan package or a bailout from the International Monetary Fund (IMF). Bangladesh’s trade deficit has reached $33.25 billion and remittances are down by 15%. Furthermore, as I said earlier, its forex reserves have also fallen below $40 billion. The IMF will only issue a loan if the government approves withdrawal of subsidies from the energy sector, along with other terms and conditions.
But the common people of Bangladesh have to bear the brunt of the rising fuel prices and the rising inflation. Poverty has been a curse for Bangladesh since its independence. As stated in a recent survey, 18.54% of Bangladesh’s population was living below the poverty line in May, 2022. Ongoing inflationary pressures, further compounded by the Russia-Ukraine war, have acutely affected the real income, food security and essential daily expenditures of low-income households in Bangladesh and significantly disrupted their economy recovery from the Covid-19 shock. In addition, electricity outrages are frequent and lengthy, sometimes for up to 13 hours a day. Diesel power plants across the country have been taken off the grid, while some gas-fired plants remain idle. The government has imposed measures such as electricity rationing, import curbs, and cuts to development spending and have urged mosques to curtail the use of air conditioners to ease pressure on the power grid. Blackouts have hit industrial activity and triggered public protests.
A silent famine is prevailing across Bangladesh as food and commodity prices soar to record highs. As the cost of living rises in the country, poor people’s earnings are becoming worthless. Everything has been so expensive that they can’t buy enough rations to feed their family. Like the boy in Frost’s “Out, Out” poem, these people are gradually dying. The government has no control over the market because some of its own leaders and devotees are heads of syndicates. Though Bangladesh is in a much better position than Sri Lanka in terms of all economic indicators, some experts speculate that Bangladesh’s increasing trade deficit and foreign debts could lead to a similar crisis unless the government takes pre-emptive measures. If the government fails to deal with the crisis, the day is not far when, just as happened in Sri Lanka, Bangladeshi ministers and MPs will be seen half-naked on the streets and people will be seen swimming in Bangabhaban’s swimming pool.
