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Is Bangladesh becoming Sri Lanka or Pakistan?

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Immediately after Bangladesh sought US$4.5 billion loan from the International Monetary Fund (IMF), a section of the media particularly in India are showing this as a sign of Bangladesh going bankrupt and on the verge of facing a similar consequence of that of Sri Lanka and Pakistan.

Bangladesh, the third in South Asia to seek a IMF loan to reduce macro-economic risks and create financial buffers as surging import costs drain its foreign reserves after it was hit hard by high import prices, especially for gas, and a fall in exports as the global economy slowed down.

The IMF said Bangladesh was also interested in its new resilience and sustainability facility, which is aimed at helping countries face climate change challenges.

“The IMF stands ready to support Bangladesh, and the staff will engage with the authorities on program design as per the established policies and procedures of the fund”, an IMF spokesperson said. “The amount of support will be part of the program design discussions”.

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While a handful of countries have been forced to seek bailouts to avoid defaulting loans or being unable to pay bills, almost 90 countries have sought support from the IMF during the COVID pandemic, where Bangladesh did not seek any support.

The Washington-based International Monetary Fund can provide up to US$250 billion loans to its member countries from its US$1 trillion lending capacity. Bangladesh is one of the members of IMF.

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Talking to reporters, Bangladesh’s finance minister AHM Mustafa Kamal said, “If the IMF conditions are in favor of the country and compatible with our development policy, we’ll go for it, otherwise not. Seeking a loan from the IMF does not mean Bangladesh’s economy is in bad shape”.

Commenting on the possible amount of loan Bangladesh may get from IMF, an official of the international monetary organization said, “The IMF’s Resilience and Sustainability Trust caps funds at 150 percent of a country’s quota, which broadly reflects its relative position in the world economy, or, in Bangladesh’s case, a maximum of US$1 billion”.

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In the past IMF officials have insisted bailouts are accompanied by stringent demands for transparency about where the funds are spent. The lender has also demanded an end to subsidies for businesses and households that it considers unaffordable, as the price of any loan.

A Bangladeshi newspaper reported that the country wanted US$4.5 billion from the IMP, including for budgetary and balance-of-payment support.

Figures for Bangladesh’s foreign exchange reserves fell to US$39.7 billion in July – sufficient for just over five months’ worth of imports – down from US$45.5 billion a year earlier.

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Its July to May current account – which measures the gap between exports and imports – was US$17.2 billion in deficit, compared with a US$2.8 billion shortfall in the same period in 2021, as its trade deficit widened and remittances fell.

It is a big question – what happens if Bangladesh does not take loan from IMF or if the amount is just US$1 billion against the sought amount of US$4.5 billion? Political opponents of the ruling Awami League are spreading fear stating, the country’s economy is in dire crisis, which would result in a “total mess” or “catastrophe” by the end of 2022.

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Let us see some records to understand, if such predictions or forecasts are real.

Back in 1990, immediately at the end of the rogue rule of military dictator Hussain Muhammed Ershad, Bangladesh was a country with per capita income of less than US$500, where women have on average 4.5 children and where 44 percent of people were living in extreme poverty.

And today, Bangladesh’s GDP has increased more than eightfold. Women have two children on average, meaning parents have more money to devote to each child’s education, health and wellbeing — and banks have more savings to recycle to industry. The proportion of people living in absolute poverty has more than halved. The position of women has greatly improved.

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More girls are in secondary school than boys.

In 1971, when the country became independent, one in five children died before the age of five. Today that figure is one in 30. Yes, until now, Bangladesh suffers from environmental peril and high levels of corruption. But it does not have any political turmoil that it had even ten years ago. One cannot deny the fact that Bangladesh, a country which was labelled as a “bottomless basket” by Henry Kissinger — is a development success.

We need to remember – Bangladesh’s garment and textile exports grew from US$32mn in 1984 to US$34 billion today.

In 2020, Bangladesh earned twice as much from garment exports as all 54 African countries combined. Second are the remittances. Bangladeshis working abroad sent US$22 billion home in 2021 despite the challenges of COVID pandemic.

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Charlie Robertson, chief economist at Renaissance Capital, also puts Bangladesh’s development success down to three factors. (Economists like threes.) His are literacy, electricity and fertility. In his book The Time Travelling Economist, he argues that the prerequisites for industrial take-off are adult literacy above 70 per cent, electricity supply above 300 kWh per person and a fertility rate below 3 children — all tests that Bangladesh passes.

According to economists, Bangladesh today is where South Korea was in 1975, when it was on the cusp of a miracle. For Bangladesh, especially under the dynamic and brilliant leadership of Sheikh Hasina, the nation shall certainly overcome the current and very temporary financial challenges. Bangladesh will never become Sri Lanka or Pakistan. This country has already emerged as the economic star of Asia. With God’s blessings, our journey to further progress and prosperity shall continue.

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