Dark clouds again in the sky of the world economy

Rayhan Ahmed Topader :

Facing rising geopolitical tensions has added a new dimension to global economic instability.

Analysts believe that the global economy will face a major shock if the risk of an escalating military conflict in the Middle East is not controlled after the coronavirus pandemic and the Russia-Ukraine war.

Along with this, the instability created around the national elections can make this impact deeper and longer.

More than 200 million people from about 60 countries, including India, Indonesia, Bangladesh, Mexico, South Africa, United States and 27 countries of the European Union, will participate in these elections. Distrust towards the government is increasing around these elections.

Voters are bitterly divided and have deep and abiding concerns about economic prospects. Fulfilling electoral promises can push governments to tighten controls on trade, foreign investment and immigration.

According to the World Bank’s latest debt report, dependence on foreign debt has increased by four-quarters over the past decade. However, the growth trend is most noticeable in the next 4 years from 2018.

That said, every 1 year the liability has consistently increased up to 18 billion dollars. And until 2022, out of the total debt of 97 billion dollars, more than 75 billion will have to be paid in the long term. Experts say that in the coming year, the debt taken from various sources will have to be repaid.

Naturally, this will increase the pressure on the economy, and at the same time, the trend of increasing loans from expensive sources like China and Russia can increase the risk of Bangladesh’s economy.

The ongoing dollar crisis may add additional pressure. Their advice is to focus on reform.

Experts feel that the government is forced to turn to foreigners for operational and project expenses as revenue is not generated as expected from domestic sources.

In the past era, the big stick of Bangladesh’s development was a bunch of mega projects at extra cost.

However, most of this has been through foreign loans. As expected revenue from domestic sources has not been collected, dependence on foreign loans is increasing.

As a result, the amount filed has increased with time. According to the World Bank, 27 percent of the accumulated total loans are taken from the World Bank.

And 20 percent was given by the Asian Development Bank. And in this list, high interest China and Russia are emerging as new big sources. Whose possession is a total of 17 percent.

Another recently published World Bank report says Bangladesh’s debt has increased three times in 12 years.

However, the combined external debt of the world’s low and middle income countries has decreased in 2022.

Last year, the combined debt of low and middle income countries decreased by 3.4 percent, but Bangladesh’s increased by 6.59 percent.

Meanwhile, not only the debt has increased; according to the Department of Economic Relations, the government’s expenditure on principal and interest payments on foreign loans will increase by about 11 percent in the current fiscal year, more than the budget allocation, due to the weakening of the currency.

The Cambridge School’s role in global economic management in 2023, however, was not as positive.

Surprisingly, the primary reason for this is not the rise of a Chinese-led alternative economic system, although many predicted that. Rather, it was due to the internal crisis of the existing system, which further questioned its effectiveness and acceptability globally.

Only in the last 15 years have several missteps called into question its credibility and effectiveness.

Two events in particular this year have fueled global dismay about the Western-run system.

For example, Russia has managed to maintain its international trade relations despite the ban on Russia’s use of the international trading system SWIFT and the fixing of prices on the country’s oil exports.

Although the temporary system invented by Russian technologists in international trade and transactions is not at all cost-effective, the technology has greatly reduced the damage to the country’s economy and has been able to significantly help finance the war in Ukraine.

The US role in the war between Israel and Hamas has exposed the futility of the West’s commitment to human rights and adherence to international law.

A few days ago, Joe Biden admitted that millions of people around the world believe that Israel’s overreaction in response to the October 7 attacks by Hamas has caused it to lose international support.

The UN General Assembly voted on a ceasefire in its latest deliberations. 153 countries voted in favor of the ceasefire and only 10 countries voted against it.

The number of absent countries was 23. Several countries have lamented the failure to bring Israel to justice for its bombing of civilians and disregard for international law.

The United Nations Relief and Works Agency for Palestine, Filipe Lazzarini, has repeatedly referred to Gaza as hell.

Whatever their position in these events, countries have questioned the viability and acceptability of the Western-led world order.

Although the Western-run system has worked well for the world since World War II, reform is urgently needed.

If the current international framework is allowed to fail, the new Chinese approach will not only take its place, but will cause even more disaster.

This outcome will hurt all of us, albeit in the short term. Moreover, this new approach will also hamper our collective ability to deal with increasingly complex and protracted crises.

Diane Coyle, a professor of public policy at the University of Cambridge, said such policies would transform the economy into a very different world than the one we are used to.

In many places, stagnant incomes, declining living standards and growing inequality have already led to doubts about globalization. All in all ‘a world of shrinking trade is a world of shrinking income’.

In other words, the income of the people will decrease along with the decrease in trade.

It will further deteriorate the quality of life. Indonesia’s new president could change government policies on important minerals like nickel, and the US presidential election will certainly be the most important for the global economy.

The upcoming competition is already influencing decision making. Forecasts for the global economy next year are mixed so far.

Growth is slow in most countries and dozens of developing countries are at risk of defaulting on their debts.

In addition, security concerns are taking precedence over economic decisions as the world continues to fray in uneasy alliances and rival blocs.

Europe has sharply reduced its purchases of Russian energy in the wake of Moscow’s aggression in Ukraine.

However, China, India and Turkey have come forward to buy Russian fuel oil, gas and coal.

At the same time, amid tensions between China and the US, Washington is trying to reduce dependence on Beijing for raw material imports by offering incentives to traders.

Drone and missile strikes in the Red Sea by Iran-backed Houthi rebels are a sign of further division around the world.

The World Economic Forum’s mid-term survey found continued instability in geopolitical and geoeconomic relations among major economies to be of greatest concern.

(Writer: researcher and columnist
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