Bangladeshis Have Had Enough

Tens of thousands of people took to the streets in Dhaka over the weekend to protest against the Bangladeshi government and demand the resignation of Prime Minister Sheikh Hasina. The protesters called for new elections amid growing political tensions, increasing suppression of dissent, a cost of living crisis, and broader concerns about the country’s fragile economy.

While the latest anti-government protests were triggered by the recent power cuts and a hike in fuel prices, they are only a symptom of Bangladesh’s deeper economic woes. The country’s foreign exchange reserves—thanks to a decline in garment exports and remittance inflows—are rapidly dwindling. From 2011 to 2021, the total foreign debt held by Bangladesh rose by 238 percent to $91.43 billion. (For context, Sri Lanka’s debt saw a rise of 119 percent during the same period—and that didn’t end well either.) In November, the inflation rate hit almost 9 percent, leaving thousands of unemployed garment workers now on the brink of hunger. It recently became the third South Asian nation, after Sri Lanka and Pakistan, to seek help from the International Monetary Fund (IMF) in 2022. 

Bangladesh, with its large youth population, was at the forefront of economic development in South Asia when the COVID-19 pandemic hit. Now the country’s rags-to-riches story is being undermined by its political and economic chaos. 

Bangladesh, like Britain, can claim that its woes are due to outside factors. But while the decline in global demand and supply-chain disruptions caused by the COVID-19 pandemic, and now Russia’s war in Ukraine, exacerbated Bangladesh’s problems, they existed long before 2020. 

“This is a crisis situation that has emerged out of the mismanagement of the government,” said Ali Riaz, the president of the American Institute of Bangladesh Studies. “Even if the COVID crisis was not there, even if the Ukraine crisis was not there, Bangladesh was still sleepwalking into this crisis.” 

The Russia-Ukraine war has sent energy costs soaring worldwide—but it has been particularly harsh for Bangladesh, which imports nearly 77 percent of its total oil and refined fuels. The country’s acute fuel crisis is bleeding into its ability to keep the electricity running, with 10-hour nationwide power cuts plunging the country into darkness. To add fuel to the fire, the government contracts several private electricity providers to keep the power grid on—yet subsidizes and pays them despite their failure to meet capacity needs. In a report released this year, Transparency International Bangladesh found evidence of corruption in all three power plant projects it examined.

Bangladesh’s infrastructure sector, the poster child of the country’s rapid economic development, is no different. This year, the government opened the much-anticipated Padma Bridge, which cost the government $980 million to build. While many at home and abroad cheered it on and praised the project’s benefits to the local community and transportation, it was hard to miss the controversy. In 2012, the World Bank was set to bankroll the Padma Bridge project and provide $1.2 billion in credit to the Bangladeshi government. However, after a special inquiry, it found a “high-level corruption conspiracy” among Bangladeshi government officials, the engineering company SNC Lavalin, and private individuals in connection with the project and ultimately decided to cancel its loan.

“The megaprojects that Bangladesh has generally invested in are right,” said Mushfiq Mobarak, a professor of economics at Yale University. “They are much more sensible megaprojects, which, in the long run, are going to be really great for the country.” But, he said, there’s a lack of effective oversight when it comes to building these projects, and the cost of construction is high.

In addition to the Padma Bridge, other prominent Bangladeshi megaprojects, such as the Dhaka metro rail and the Rooppur nuclear power plant, have been mired in allegations of corruption, fraud, and lack of transparency, which keep pushing the already high price of construction up. The cost of road construction is higher in Bangladesh than anywhere else in the world.

“It’s a combination of corruption not only in terms of exchange of bribes but in terms of abuse of power,” said Iftekhar Zaman, the executive director at Transparency International Bangladesh. “These infrastructure projects have been contracted out to corporate houses, not on the basis of actual strategic calculation of the needs of the country but on the basis of the profitability of the entrepreneurs.”

Profitability is hard to find. The nonperforming loan rate at Bangladeshi banks overall is about 9 percent; in previous years, the IMF found the amount of bad loans to be more than double of what was officially reported by the Bangladeshi government. An IMF team that visited the county in late October reemphasized the importance of strengthening the country’s financial sector—including reducing vulnerabilities and strengthening oversight. However, it did not provide a concrete plan. Runaway defaults at state and commercial banks are a recipe for broader financial instability, which would be poison for a government already struggling with concerns over its political legitimacy.

News Courtesy:

https://foreignpolicy.com/2022/12/14/bangladesh-protests-economic-crisis/?fbclid=IwAR3z8Gpm8y2lpvM3Sl1eUEglxNxs6WAn0gsQ054X9XWDf4OeczvX0e1b4lA