Bangladesh’s economy was already under much stress due to the COVID-19 pandemic, however, the global political and economic situation has not made it any easier for this South Asian country’s economy to bounce back up. Bangladesh is already the third country after Pakistan and Sri Lanka to apply for a bailout from the International Monetary Fund (IMF) to avoid “running out of cash” (The Guardian).
Why was the decision made?
It comes as no surprise that the pandemic has slowed down the global economy and that in 2022, countries are still desperately trying to resolve the issues that came with this pause such as inflation, the supply chain crisis, etc. On top of that, the ongoing conflict between Russia and Ukraine has had consequences that are felt everywhere with prices of energy and food growing at a fast pace.
The global economy by itself has been predicted to go into recession, and thus Bangladesh is struggling due to the substantial fall in exports and rising prices of imports that grow by the day. Despite many countries seeking help from the IMF during the pandemic, only several (including Bangladesh) have sought bailouts to avoid going into debt or “being unable to pay the bills” (The Guardian). Talks about Bangladesh’s bailout are expected to begin after the IMF and World Bank annual meetings in October, which is also when the size of the loan will be decided.
On the 22nd of August, Bangladesh Cabinet Secretary announced that schools will now be closed on Saturdays in addition to Fridays and office hours will be lessened, in order to reduce the electricity shortage experienced in the country. In the past month, petrol prices increased by 50% while the prices of diesel and kerosene rose by at least 40% as well. Thus, it comes as no surprise that frustrated citizens have taken to the streets to protest the insupportable fuel prices.
Up until COVID-19 slowed its quick development, Bangladesh’s economy was “one of the fastest-growing in the world for years.” The economic growth was largely due to Bangladesh’s garment industry, which exports to retailers in Europe, the US, and South America. This industry is likely to suffer from the slowdown in the global economy as well, especially if demand falls in Europe and the United States. However as the global economy recovers, it will only be beneficial for Bangladesh’s financial state to be on the mend, ready to supply other countries with their main exports.
As for the IMF, Bangladesh has expressed its interest in its resilience and sustainability facility, which is designed to help countries resolve climate change challenges. Aside from that, however, the IMF is open to supporting Bangladesh in its economic crisis and has said that “staff will engage with the authorities on program design”.
The IMF is eager to support Bangladesh and will start negotiating the amount of the loan sometime after the October meeting between the IMF and the World Bank. Despite this, prices are continuing to rise not only in Bangladesh but internationally, as the conflict between Russia and Ukraine doesn’t seem to be near its end. This has already caused various protests in many countries due to inflated costs of energy and food, which in low-income countries, affect citizens even more. However, with countries trying to become less reliant on Russia for their energy supply, it is interesting how they will come back from this crisis in the years to come.
Inman, Phillip. “Bangladesh to Hold Talks with IMF after Applying for Bailout.” The Guardian, 28 July 2022, http://www.theguardian.com/world/2022/jul/28/bangladesh-to-hold-talks-with-imf-after-applying-for-bailout.
Lawder, David. “IMF Says It Is Working with Bangladesh on RST Loan with “Safeguards.”” Reuters, 3 Aug. 2022, http://www.reuters.com/markets/us/imf-says-it-is-working-with-bangladesh-rst-loan-with-safeguards-2022-08-03/. Accessed 29 Aug. 2022.
“Now It’s Bangladesh’s Turn to Ask the IMF for a Loan.” http://www.aljazeera.com, 27 July 2022, http://www.aljazeera.com/economy/2022/7/27/now-its-bangladeshs-turn-to-ask-the-imf-for-a-loan. Accessed 29 Aug. 2022.