Skip to main contentSkip to main content
You have permission to edit this article.
Edit
AP

Inflation, unrest challenge Bangladesh's 'miracle economy'

  • Updated

DHAKA, Bangladesh (AP) — Standing in line to try to buy food, Rekha Begum is distraught. Like many others in Bangladesh, she is struggling to find affordable daily essentials like rice, lentils and onions.

“I went to two other places, but they told me they don’t have supplies. Then I came here and stood at the end of the queue,” said Begum, 60, as she waited for nearly two hours to buy what she needed from a truck selling food at subsidized prices in the capital, Dhaka.

Bangladesh’s economic miracle is under severe strain as fuel price hikes amplify public frustrations over rising costs for food and other necessities. Fierce opposition criticism and small street protests have erupted in recent weeks, adding to pressures on the government of Prime Minister Sheikh Hasina, which has sought help from the International Monetary Fund to safeguard the country’s finances.

Experts say Bangladesh’s predicament is nowhere nearly as severe as Sri Lanka’s, where months’ long unrest led its long-time president to flee the country and people are enduring outright shortages of food, fuel and medicines, spending days in queues for essentials. But it faces similar troubles: excessive spending on ambitious development projects, public anger over corruption and cronyism and a weakening trade balance.

Such trends are undermining Bangladesh’s impressive progress, fueled largely by its success as a garment manufacturing hub, toward becoming a more affluent, middle-income country.

The government raised fuel prices by more than 50% last month to counter soaring costs due to high oil prices, triggering protests over the rising cost of living. That led authorities to order the subsidized sales of rice and other staples by government-appointed dealers.

The latest phase of the program, which began Sept. 1, should help about 50 million people, said Commerce Minister Tipu Munshi.

“The government has taken a number of measures to reduce pressures on low-income earners. That is impacting the market and keeping prices of daily commodities competitive,” he said.

The policies are a stopgap for bigger global and domestic challenges.

The war in Ukraine has pushed higher prices of many commodities at a time when they already were surging as demand recovered with a waning of the coronavirus pandemic. In the meantime, countries like Bangladesh, Sri Lanka and Laos — among many — have seen their currencies weaken against the dollar, adding to the costs for dollar-denominated imports of oil and other goods.

To ease the strain on public finances and foreign reserves, the authorities put a moratorium on big, new projects, cut office hours to save energy and imposed limits on imports of luxury goods and non-essential items, such as sedans and SUVs.

“The Bangladesh economy is facing strong headwinds and turbulence,” said Ahmad Ahsan, an economist and director of the Dhaka-based Policy Research Institute, a thinktank. “Suddenly we are back to the era of rolling power cuts, with the taka and the forex reserves under pressure,” he said.

Millions of low-income Bangladeshis, like Begum, whose family of five can barely afford to eat fish or meat even once a month, still struggle to put food on the table.

Bangladesh has made huge strides in the past two decades in growing its economy and fighting poverty. Investments in garment manufacturing have provided jobs for tens of millions of workers, mostly women. Exports of apparel and related products account for more than 80% of its exports.

But with fuel costs so high, authorities shut diesel-run power plants that produced at least 6% of total production, cutting daily power generation by 1,500 megawatts and disrupting manufacturing.

Imports in the last fiscal year, ending in June, 2022, rose to $84 billion, while exports have fluctuated, leaving a record current account deficit of $17 billion.

More challenges are ahead.

Deadlines are fast approaching for repaying foreign loans related to at least 20 mega infrastructure projects, including the $3.6 billion River Padma bridge built by China and a nuclear power plant mostly funded by Russia. Experts say Bangladesh needs to prepare for when repayment schedules ramp up between 2024 and 2026.

In July, in a move economists view as a precautionary measure, Bangladesh sought a $4.5 billion loan from the International Monetary Fund, becoming the third country in South Asia to recently seek its help after Sri Lanka and Pakistan.

Finance Minister A.H.M. Mustafa Kamal said that the government asked the IMF to begin formal negotiations on loans “for balance of payments and budgetary assistance.” The IMF said it was working with Bangladesh to draw up a plan.

Bangladesh's foreign reserves have been falling, potentially undermining its ability to meet its loan obligations. By Wednesday they had dropped to $36.9 billion from $45.5 billion a year earlier, according to the central bank.

Usable foreign reserves would be about $30 billion, said Zahid Hussain, a former chief economist of the World Bank's Dhaka office.

“I would not say this is a crisis situation. This is still enough to meet three months of imports, three and half months of imports. But it also means that … you do not have a lot of room for maneuvering on the reserve front,” he said.

Still, despite what some economists say is excessive spending on some costly projects, Bangladesh is better equipped to weather hard times than some other countries in the region.

Its farm sector — tea, rice and jute are major exports — is an effective “shock absorber,” and its economy, four to five times larger than Sri Lanka’s, is less vulnerable to outside calamities like a downturn in tourism.

The economy is forecast to grow at a 6.6% pace this fiscal year, according to the Asia Development Bank's latest forecast, and the country's total debt is still relatively small.

“I think in the current context, the most important difference between Sri Lanka and Bangladesh is the debt burden, particularly the external debt,” said Hussain.

Bangladesh’s external debt is under 20% of its gross domestic product, while Sri Lanka’s was around 126% in the first quarter of 2022.

“So, we have some space. I mean debt as a source of stress on the macroeconomy is not much of a much problem yet,” he said.

Waiting in a line to buy subsidized food, 48-year-old Mohammed Jamal said he was not feeling such leeway for his own family.

“It has become unbearable trying to maintain our standard of living," Jamal said. “Prices are just out of reach for the common people,” he said. “It's tough living this way.”

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.


Subscribe to stay connected to Tucson. A subscription helps you access more of the local stories that keep you connected to the community.

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Related to this story

Most Popular

The U.S. outbreak seems to have peaked in August. But experts worry there's a growing blind spot about how the virus may be spreading among men with sexual contact. They say it may never be eliminated.

This year’s Nobel Prize in physiology or medicine has been awarded to Swedish scientist Svante Paabo for his discoveries on human evolution. Thomas Perlmann, secretary of the Nobel Committee, announced the winner Monday at the Karolinska Institute in Stockholm, Sweden. The medicine prize kicked off a week of Nobel Prize announcements. It continues Tuesday with the physics prize, with chemistry on Wednesday and literature on Thursday. The 2022 Nobel Peace Prize will be announced on Friday and the economics award on Oct. 10.

The Biden administration has an ambitious goal for America: ending hunger in the U.S. by 2030. The administration's plan includes expanding monthly benefits that help low-income Americans buy food. It also seeks to promote healthy eating and physical activity so that fewer people are afflicted with diabetes, obesity, hypertension and other diet-related diseases. Expanding Medicaid and Medicare access to obesity counseling and nutrition are part of the strategy. President Joe Biden is hosting a conference this week on hunger, nutrition and health, the first by the White House since 1969.

A prosecution expert testifying in the penalty trial of Florida school shooter Nikolas Cruz is disputing defense testimony that his birth mother drank heavily during pregnancy. Forensic psychiatrist Dr. Charles Scott told Cruz's jury Tuesday that there is scant evident supporting the defense's contention that his biological mother drank fortified wine and malt liquor during her pregnancy. Cruz's attorneys have argued he has fetal alcohol disorder syndrome, which led to his murder of 17 people at Parkland's Marjory Stoneman Douglas High School in 2018. He has pleaded guilty. The trial will determine if he is sentenced to death or life in prison.

President Joe Biden says his administration's goal of ending hunger in the U.S. by the end of the decade is ambitious but doable, if only the nation would work together. It was the president at his most optimistic, sketching out a future where no child in the U.S. would go hungry, and diet-related diseases would diminish because of better, healthier food alternatives and access to vast outdoor spaces. Biden says, “Everyone, everyone has an important role to play.” According to federal officials, some 10% of U.S. households in 2021 suffered food insecurity, meaning they were uncertain they could get enough food to feed themselves or their families.

When then-Gov. Paul LePage endorsed Donald Trump for president in 2016, LePage credited himself as a prototype for the insurgent candidate. Now, with LePage running for a third term after a brief retirement to Florida, he rarely talks about Trump in campaign events and media interviews, and LePage's advisers say his hiatus from politics changed him. LePage's efforts at distancing himself from Trump are particularly notable because LePage once invited comparisons to Trump — and made them himself. LePage is seeking to unseat Democratic Gov. Janet Mills in November and become the longest-serving governor in Maine's history.

Listen now and subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | RSS Feed | Omny Studio

Get up-to-the-minute news sent straight to your device.

Topics

News Alerts

Breaking News