Defying pattern despite worries
With Sri Lanka and Pakistan in economic and political turmoil, there are fears about a similar crisis developing in Bangladesh. However,
economists are of the view that the country’s economic parameters remain healthy.
TWO SOUTH ASIAN NATIONS ARE PASSING through a traumatic phase. Sri Lanka faces an unprecedented economic crisis that has driven the island state, once a formidable economy, into a serious political crisis. In Pakistan, where no elected Prime Minister has lasted a complete term since the country’s independence in 1947, there is political chaos following the ouster of Imran Khan as Prime Minister.
The crises in the two countries may have different causes, but they point to an uncertain future for democratic and economic stability in the subcontinent, especially after two years of the devastating COVID pandemic. While Imran Khan’s failure in politics and his defiant U-turn from the West may have sealed the cricket star-turned politician’s fate, the Sri Lankan crisis was caused by the ruling family’s injudicious policies and utter indifference to the plight of the people. The developments in these two countries have prompted a section of politicians and analysts in Bangladesh to ponder over Bangladesh’s future, although it has been managing its economy and social sectors well, with no significant political instability in sight.
The question is: do the two examples indicate any destabilisation in a country like Bangladesh? The opposition political parties seemed to see a “crisis” ahead. The alarm they raise comes in the context of their failure to mobilise the public against Sheikh Hasina’s government. The opposition has been alleging that her last two governments came “through fraudulent elections” and were “authoritarian” and “repressive”.
COMPARISON WITH PAKISTAN
Bangladesh saw the murder of the nation’s founding father, Bangabandhu Sheikh Mujibur Rahman, by a group of disgruntled military officers in 1975. The country has passed through two successive military regimes headed by General Ziaur Rahman and General H.M. Ershad, when democratic polity, the Constitution and the secular spirit of national independence were shattered. Yet, the situation in Bangladesh is far from the reality of Pakistan today. Democracy in Pakistan has never been given a fair chance to consolidate in the last 75 years, largely because of the military establishment’s direct or indirect interference in politics, which began with the brutal Bengali genocide and mass rapes in East Pakistan, now Bangladesh, in 1971. Imran Khan’s collapse was widely anticipated when he bulldozed a parliamentary move, most unethically. Besides, Army Chief of Staff General Qamar Javed Bajwa had openly opposed Imran Khan’s position on the Ukraine war. In the end, Khan fell on his own sword, even though the charge of “conspiracy by a foreign power” (the insinuation was against the United
States) remained unanswered.
In Bangladesh, on the contrary, Sheikh Hasina enjoys a huge parliamentary majority and the opposition MPS are too few in number to challenge her authority. Besides, MPS in Bangladesh risk losing membership of the parliament if they defect to other parties. Also, the Bangladesh army, after initial post-independence disorder, has developed as a disciplined and professional force showing full allegiance to the country’s Constitution and democracy. A stringent constitutional provision is in force prescribing harsh punishment in case of any adventure. Therefore, the prospect of a repetition of the Pakistani example is not supported by logic.
THE SRI LANKAN EQUATION
The Bangladesh Nationalist Party (BNP), the main challenger of Bangladesh’s long-time ruling party Awami League, foresees a Sri Lanka-type crisis in Bangladesh. It is now led by Tarique Rahman, son of the imprisoned former Prime Minister Khaleda Ziason. He, too, is convicted by the courts in corruption cases and leads the party from exile in London.
The BNP, its long-standing ally the Jamaat e Islami, and other smaller parties have taken to the streets protesting against high commodity prices. They allege that the prices of rice, pulses, oil, salt, sugar, vegetables, fish, meat and of fuel had gone up because of the “greed and corruption of traders loyal to the government”. Prices have indeed risen and people are not happy about it, but no substantial political unrest is in sight yet. BNP secretary general Mirza Fakhrul Islam Alamgir, however, keeps calling upon the government to step down.
GOVERNMENT’S DENIAL
Sheikh Hasina has brushed aside fears of any Sri Lanka-type scenario. She shrugged off fears over the country’s economy suffering a reversal because of external debts, as had happened in Sri Lanka. “To those who are writing up stuff against us, I repeat—we don’t run the state reading those reports.” Under Sheikh
Hasina, Bangladesh has transitioned from a least developed country (LDC) to a developing country.
She told the parliament in the first week of April that Bangladesh has “never been and won’t be a defaulter because the base of our economy is very strong, and we’re very much alert”. Her remarks came after Jatiya Party (JP) chairman G.M. Quader, brother of General Ershad, expressed fears about whether Bangladesh would be able to repay its loans if the three main planks of the country’s economy—rmg (readymade garments) export, remittances and agriculture—took a hit.
In a recent assessment, the National Board of Revenue (NBR) and the Finance Division have concluded that Bangladesh’s foreign debt is not yet at a “risky level”. Inflation in Bangladesh is now below 6 per cent, and despite the impact of COVID and the Ukraine war, the country has been able to achieve a 6.94 per cent growth and per capita income has increased to $ 2,511.
Many economists believe that fears about Bangladesh’s economic debacle are unfounded. They feel the economies of Bangladesh and Sri Lanka cannot be fully comparable. Despite the pandemic, Bangladesh’s remittance earnings and RMG exports are increasing. While the economy in many countries faced hardships because of the pandemic, Bangladesh retained an even pace of development. The country’s Planning Minister M.A. Mannan said: "The comparison [with Sri Lanka] was unacceptable. I can say we take every bit of precaution while running our economy.”
Nevertheless, a number of analysts feel that Bangladesh should take a few lessons from the Sri Lankan disaster. Among them is Mamun Rashid, who however admits that there is no comparison with the island-nation’s present situation.
Remarkably, Bangladesh has no shortage of food and staples are not dependent on imports. Power is another success story. The country has a foreign exchange reserve of $44.40 billion. In contrast, Sri Lanka has a reserve of less than $2 billion. Noted economist Mirza Azizul Islam says that the fears that are being
touted are “baseless” as Bangladesh is on the right track.
There is both hope and some scepticism surrounding the country’s mega projects, which require heavy investment. Some quarters are sceptical about them as megaprojects have caused the downfall of many countries.
There are scores of smaller projects that have paid social and economic dividends. Alongside, there are at least 10 mega projects under way, including the huge 6-km-plus multipurpose bridge over the mighty Padma river constructed with domestic funding. The bridge, to be commissioned this year, will connect the southern region with the capital by road and rail. All heavilyfunded projects, including the Metrorail and Karnafully river tunnel, are expected to yield positive results. Mirza Azizul Islam observed: “In my opinion, none of the mega projects Bangladesh is implementing is unnecessary; the country will get the returns once these projects are implemented, helping to increase both investment and employment; and GDP growth will also get boosted.”
Yet, the fears persist. The economist Anu Muhammad spoke of how Sri Lanka’s economy was brought to its knees despite the high per capita income that the country enjoyed, which is higher than that of Bangladesh, India and Pakistan. “The increase in commercial debt dependence, the reckless mega projects, the widespread corruption led by one family, as well as the unfavourable international situation have put Sri Lanka’s economy on the streets. The high per capita GDP in South Asia has not been able to save the country,” he said. But he admitted that a similar scenario was unlikely in Bangladesh.
Commenting on fears that Bangladesh may go the Sri Lanka way, Nazneen Ahmed, UNDP’S Country Economist to Bangladesh, said: “It is better not to pay heed to this. All the indicators of the economy reserves are positive.”
In Sri Lanka, a country of two crore people, the per capita debt is 5.5 times higher than Bangladesh’s. In 2019, Sri Lanka’s foreign debt amounted to 42.8 per cent of its GDP. Bangladesh’s foreign debts currently amount to less than 13 per cent of its GDP.
CHALLENGES
While some precautions may be warranted in view of the Sri Lankan situation, the country seems to be at no risk of the kind of crisis that grips the island state. The economy is on track and the country’s repayment record is spotless. In this context, Prime Minister Sheikh Hasina has said: “It’s true that we are taking [foreign] assistance for development. But Bangladesh is the only country that is not a defaulter. We have always paid off our loans on time, no matter the sum or the source. And that was the case even during the pandemic.” She urged the people to ignore misinformation.
A section of experts, however, think that several factors need close attention. Professor Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue (CPD), said: “The Sri Lankan crisis once again reminds us of the importance of export diversification…..if we are complacent and our decision-making is not evidence and data-driven, then our macroeconomic quality will suffer and put an adverse effect on economic momentum.”
According to some analysts, the worry is that Bangladesh has not taken any major stride toward diversification of its export basket; garments are the major exports. Remittances, also a prime source of foreign exchange, survived the pandemic. But many experts see a weakness in this source of foreign exchange because it is too dependent on a few markets, especially the West Asian markets. As far as foreign debt is concerned, some analysts say, the challenge is not how much is borrowed, but how cost-effectively projects are implemented, so that the earnings can be maximized, reducing the debt burden. The cost is high if wastage and corruption are taken into account.
Another positive aspect is that Bangladesh’s rural economy has progressed. A World Bank study says: “The rural economy in Bangladesh has been a powerful source of economic growth and has substantially reduced poverty, especially since 2000, but the remarkable transformation and unprecedented dynamism in rural Bangladesh are an underexplored, underappreciated, and largely untold story.” It adds: “The achievements of Bangladesh in improving food security and human development outcomes for its people are impressive and widely recognized. Less well appreciated is the story behind that story—the achievements of Bangladesh in agriculture.”
The Asian Development Bank (ADB) has projected Bangladesh’s GDP growth in 2021-22 to be 6.9 per cent, which is significant considering the challenges under which it is achieved. In a recent letter to the Prime Minister celebrating 50 years of diplomatic relations, U.S. President Joe Biden termed Bangladesh a model of growth and stability. He also lauded Sheikh Hasina’s leadership and the resilience and creativity of the Bangladeshi people over the last few decades. Notably, Bangladesh did not fully endorse the U.S.’ position on Ukraine. It abstained from voting on two crucial United Nations resolutions condemning the Russian invasion and suspending Moscow from the Human Rights Commission, though it voted for the resolution mandating humanitarian assistance for war-torn Ukraine.
The ruling party will face a crucial general election in late 2023. Sheikh Hasina, who is leading the government for a record third straight term, is likely to face an antiincumbency sentiment despite remarkable economic progress. The election will be held in the backdrop of frequent allegations of corruption, human rights abuses and fraudulent elections by the BNP and other smaller opposition parties, including the fundamentalist Jamaat e Islami. Many Western countries and rights bodies have also questioned Bangladesh’s record on the democracy and human rights fronts while praising its remarkable growth in socioeconomic sectors under Sheikh Hasina. m Haroon Habib is a Bangladeshi writer, journalist and analyst. He can be contacted at hh1971@gmail.com