Home ›› 19 Mar 2023 ›› Front
The government borrowed from the International Monetary Fund (IMF) in a bid to navigate the economic crisis, created by a lack of democratic accountability. But the debt burden solely falls on public shoulders, as they are the ones paying for the skyrocketing costs of living.
This impact is twofold, as the people of Bangladesh will have to bear the burden of IMF debt repayment as well.
Experts, at a webinar titled “IMF Debt: Who’ll gobble it up, and who’ll pay?,” expressed fear that under the pressure of an influential quarter, the government will not be able to introduce reforms for cutting default loans or increase the Tax-GDP ratio, which are key IMF conditions.
Addressing the event, organised by Forum for Bangladesh Studies (FBS) on Saturday, speakers say the conditions IMF offered to the country are not nearly as difficult compared to those received by Pakistan and Sri Lanka, because Bangladesh sought loans, not a bailout.
However, to meet those conditions, the government increased the prices of fuel and electricity to cut subsidies, leaving the people to bear the brunt of the crisis.
Prof Anu Muhammad of Department of Economics at the Jahangirnagar University said, “The government is increasing fuel and power prices to reduce subsidies as per IMF conditions, and these prices will increase further in the coming days.
“But the IMF should seek an explanation on why fuel and power subsidies are increasing.”
Prof Muhammad, a leader of the National Committee to Protect Oil Gas Mineral Resources Power and Ports, added, “These subsidies are going up as a result of continued capacity charge payments to private power plants, many of which are sitting idle.
“We could build two Padma bridges with the amount of capacity charges paid so far.”
The economist pointed out, “The public will have to repay the IMF loan, while bearing the inflationary pressure to get this loan. But the beneficiary of this loan will be the influential quarters who are controlling everything.”
Speakers at the webinar said the IMF loan that the government is getting every FY is less than Bangladesh’s remittance income of one month. In February, Bangladesh earned $1.56 billion in remittance, while the IMF loan tranches will be less than $1 billion each FY.
Responding to a question as to why the government is taking the IMF loan, eminent economist Ahsan H Mansur replied, “The government can show the world that the condition of Bangladesh is still good due to the IMF loan. That will reassure other lenders.
The former IMF official said if the World Bank does not provide budget support, then the Asian Development Bank (ADB) will not provide it either. There may be more crises ahead for Bangladesh.
Regarding the IMF loan, Mansur said, “This money is of little significance for an economy such as Bangladesh, but this policy support is necessary. The people however will not get the benefit of this loan unless reforms are made to increase the Tax-GDP ratio, or decrease defaulted loans.
Speakers said the ongoing economic crisis in Bangladesh has created an imbalance in the economy.
The Covid-19 pandemic and Russia-Ukraine war are not the sole reasons behind this crisis, money laundering, low Tax-GDP ratio, holding onto appreciation of Taka, and keeping the interest rate at 9 per cent is also responsible, they added.
On the issue, Mansur said, “There has been a kind of financial polarisation. A lot of money has gone into the hands of some big group companies. As a result, the overall economic balance is being destroyed and the people are under pressure.”
Badiul Alam Majumdar, secretary at Shushashoner Jonno Nagorik (SHUJAN) said the economic crisis is not a disease, but a symptom.
The real disease is the lack of democratic responsibility. No one cares whether the people are in pressure or not.
“Unless voting rights are ensured and institutions are strengthened, there will be no real cure for the current crisis.”
Development researcher and author Faiz Ahmad Taiyeb said, “The ongoing crisis has been made critical by increase in loan write-offs, liquidity crisis in the Islamic banks and increasing fuel prices.
“The new government that will come in the future will have to face more economic crises.”
The IMF approved a $4.7 billion loan for Bangladesh to support the country’s economic policies in a development that is expected to calm the jitters surrounding the health of the Bangladesh economy.
The decision came in the meeting of the IMF’s executive board on January 30 this year.
This is Bangladesh’s 13th loan from the lender, with the previous package taken in 2012. The first instalment of $476.27 million came in February, and it will be followed by six equal instalments of $708.7 million.