Country’s leading economists have said Bangladesh’s economy may fall into a deep crisis unless it immediately frames and implements a package of comprehensive reforms and policies. The country now faces problems such as high inflation, increasing cost of the US dollar and rising pressure on foreign exchange reserves — stemming from factors such as Russian invasion of Ukraine, record energy prices and high commodity prices.
They had long suggested reforms in financial, revenue, and other sectors but the government did not carry out the reforms. It will now have to accept conditions from the International Monetary Fund (IMF) for reforms in various areas, sacrificing its policy sovereignty, to get a $4.5 billion loan. If we do not come up with immediate reforms, we will be in deep trouble, said the economists at a roundtable in the capital on Monday.
Meanwhile, Bangladesh’s request to the IMF for the bailout package over the next three years confirms that the country’s economy is facing a serious crisis. It is the third country in South Asia after Sri Lanka and Pakistan that knocked on the door of the IMF in recent months. While the economic crises in Pakistan and Sri Lanka were widely reported in international media. But Bangladesh’s situation flew under the radar for quite some time thanks to the government’s repeated denial of any impending crisis. Rather, it claimed that its request for “budget support,” an unrestricted loan with low interest which allows it to use the money as it wishes, is a preemptive measure and that the economy is not, in fact, in trouble.
However, our request 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 (JICA) just this year. Furthermore, 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. According to watchdog Global Financial Integrity,
Bangladesh has witnessed widespread money laundering. Between 2009 and 2018, annually $8.27 billion was siphoned through over-invoicing of the values of import-export goods. The growth of deposits by Bangladeshis in Swiss banks is indicative of capital flight. In 2021, it increased by 55.1 per cent, reaching 871 million Francs ($912 million).
Bangladesh’s pathway to the current economic crisis did not result solely from the pandemic and the Ukraine crisis. Thus, the IMF’s bailout package 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 current regime’s self-interested political vision.
