Bangladesh Economic Crisis Explained!

Price rise and Inflation crippling the economy of other South-Asian nations, after Sri Lanka and Pakistan now Bangladesh's economy is in the red zone. We will understand the reason behind Bangladesh's economic crisis, low forex reserves, high inflation rates, repercussions of price rise, Bangladesh's plan of action and the International approach to stabilise South Asia.

PRESENT SITUATION OF BANGLADESH ECONOMIC CRISIS

Bangladesh currently seeks IMF's help to keep its economy from a certain collapse. It had requested $4.5 Billion from IMF. The country's foreign exchange reserves had fallen by 10% compared to the previous year's data and amounted to $41.82 Billion at the end of June and are presently at $39 Billion. Bangladesh is the eighth-most populous country with a population of 165 Million, and according to calculations present level of reserves can only last for a few months.

RACE AGAINST TIME, REPERCUSSIONS CATCHING UP

• Trade Deficit- An increase in trade deficit is visible. It widened by $37.3 Billion from July 2021 to May 2022, in the same time period import surged to $39 Billion while export rose to $39.5 Billion at a significantly slower pace.
• High Inflation- Retail Inflation is at 8 year high of 7.56% in June 2022 due to the price rise of crude oil and food items as the result of the Russia-Ukraine conflict.
• Remittances- Remittances fell by 5% in June to$1.84 Billion, this was the result of migrant workers losing jobs due to the COVID 19 pandemic.

BANGLADESH'S PLAN OF ACTION TO ESCAPE THE CRISIS

Bangladesh fears being in the same state as Pakistan is in right now (read about Pakistan's Economic Crisis). Therefore took certain steps to prevent the economic crisis, as follows:

Indian Foreign minister- S. Jaishankar & Bangladesh Foreign minister- A.K. Abdul Momen

1. Bangladesh looks to obtain Crude oil at a cheaper price. Bangladesh's foreign minister A.K. Abdul had asked for India's assistance on how to import Russian crude oil while evading the sanctions currently enforced.
2. Bangladesh's administration had put a stop to foreign tours for the time being as well as, put a ban on the imports of luxury items.
3. Approached IMF for assistance, being well aware of market present conditions and by studying the global events since Russia's invasion of Ukraine(Read about it here) Bangladesh have an estimate of future turn of events, thus it had requested $4.5 Billion as a loan from IMF.

INTERNATIONAL APPROACH TO STABILISE SOUTH ASIA

A solution with wide coverage and a better outlook of the situation in South Asia is to revive the groupings and organisations that have an aligned interest with the nations in the south. An organisation like SAARC, South Asian Association for Regional Cooperation, a regional intergovernmental organisation and geopolitical union of states in South Asia can act as an international stage to voice regional issues and suggestions to global issues, as it comprises 21% of the world's population and 5.21% of the global economy with Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka as its members.

Major support can be provided by India as it is the only nation that has a zero percentage of going into recession as per Bloomberg's report, whereas, Sri Lanka has 85% and Pakistan have 20%.

WHAT IF INTERNATIONAL MONETARY FUND REFUSES TO ASSIST?

If IMF refuses to assist, Bangladesh could possibly turn to China for assistance, as they say, desperate time, desperate measures. And in order to counter China's rising influence around its regional proximity, India may end up providing assistance to Bangladesh which can very well amount to $1 Billion.

Bangladesh statistics on import of Food items, Gas production and Power generation.

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