Source: AUN News
Bangladesh’s DHAKA The government of Bangladesh announced it was asking the International Monetary Fund for assistance just a week after implementing planned power outages in response to the country’s skyrocketing fuel prices, following two other South Asian countries that had done so recently.
Government representatives said that the lack of foreign exchange reserves was why Sri Lanka and Pakistan sought I.M.F.’s help.
Bangladesh’s finance minister, A.H.M. Mustafa Kamal, stated on Wednesday, “we can’t print money; we have to earn it.” “Our hardworking employees who work or conduct business abroad help us generate revenue. They are the engine that propels our economy.
Amidst worries about a worldwide recession, exports and money transferred from Bangladeshis abroad have decreased.
Developing nations whose economies rely on imported petroleum are taking a severe hit from high inflation brought on by Russia’s invasion of Ukraine. Governments struggle to maintain sufficient foreign reserves to purchase cooking gas, diesel, and other commodities that are becoming more and more expensive as trade imbalances deepen.
In Sri Lanka, where drivers must wait days in line to refuel, the government defaulted on its debt in April, setting off a crisis that resulted in this month’s president’s removal. Observers worry that other nations may see a similar upheaval.
“The first to collapse was the government of Sri Lanka. Because of inflationary pressures, there have already been demonstrations against high food and fuel prices in at least 17 nations, according to Samantha Power, administrator of the US Agency for International Development, who was speaking Wednesday in New Delhi at a meeting on the world food crisis. We know that Sri Lanka’s administration won’t likely be the last to fall if history is any indication.
When global inflation struck, significantly eroding Nepal’s foreign reserves, it had not fully recovered from the shocks of the epidemic and a decline in Mount Everest tourists. Nepal is one of the poorest countries in the area.
The government of Nepal spends around 5% of its annual budget on importing gasoline, diesel, and other petroleum products, and its debt to India, its primary fuel supplier, has reached dangerous heights.
Rationing of fuel by the government has raised consumer costs even further.
Taxi driver Rajendra Tamang in Kathmandu’s capital claimed fuel costs have doubled since last year.
“Once the cost of petroleum is increased, everything costs more, from tea to clothing and travel. The cost of food has also gone up. The cost of housing is rising, he declared.
“However, my income is declining. He continued that people won’t take a cab unless there is an emergency.
Similarly, India’s foreign reserves are being depleted by a growing deficit.
According to figures from the central bank, the nation’s foreign exchange reserves decreased by $7.5 billion in the week that ended July 15, or more than 6% less than during the previous year.
India has attempted to address the issue by continuing to import cheaper Russian oil and prohibiting wheat exports, preventing the nation from facing the scarcity that some of its neighbors are currently experiencing.
However, inflation is already becoming apparent.
Protesters rocked India’s Parliament this week as opposition leaders called for a debate on the country’s skyrocketing food prices. Rahul Gandhi, a member of the Indian National Congress and a leader of the opposition, was briefly detained on Tuesday after staging a demonstration outside the Parliament against rising costs and unemployment.
These actions have sparked a backlash from the populace and exacerbated the political crisis the nation is already experiencing as it battles a collapsing economy, a weakening currency, and double-digit inflation.
Bangladesh stood out among South Asian nations that showed significant economic decreases in 2020. The second-largest in the world, its booming export-garment sector contributed to the economy’s expansion.
However, the invasion of Ukraine and the rise in commodity prices have proven to be more difficult.
Due to the excessive expense of diesel, the government started scheduling power outages last week and has since permanently shut down all diesel-powered power facilities. Additionally, it has mandated that gas stations close at least once every week.
Rising fuel prices are impacting the profit margins of the clothing business.
The assembly lines at Lyric Industries, a Bangladeshi clothing maker, must run on diesel generators due to regular power outages, according to Showkat Osman Heera, the manager of the company.
We only needed 100 to 150 liters of diesel per day before t the most recent power outage; today, we require more than 1,000 liters, according to Mr. Heera. “Although we haven’t yet missed any shipments, we could run into serious problems if this situation persists.”
The finance minister, Mr. Kamal, downplayed Bangladesh’s economic fragility by claiming last week that the nation would not require IMF assistance. He didn’t explain his Wednesday U-turn.
According to Rashed Al Mahmud Titumir, chairman of the Department of Development Studies at the University of Dhaka, the country is dealing with a challenging scenario.
“The Covid-19 pandemic and the Russian invasion of Ukraine have caused two external shocks to Bangladesh’s economy,” he remarked. Bangladesh’s ability to tolerate or absorb this external shock is limited.
Analysis by: Advocacy Unified Network