Is Bangladesh going the Sri Lankan way?

New Delhi: The Sheikh Hasina-led Awami League government in Bangladesh is currently facing the largest violent unrest by people against inflation and fuel price hike. Days after hinting at an impending economic crisis, the Bangladeshi government on Friday (August 5) increased the price of petrol by 51.7% and diesel by 45.2%.

According to a statement from the power, energy, and mineral resources ministry, the cost of petrol was increased by 51.2 percent to 130 taka (roughly ₹108) per litre, the cost of 95-octane petrol was increased by 51.7 percent to 135 taka (roughly ₹113), and the cost of diesel and kerosene has increased by 42.5 percent.

The ministry says the hike in fuel prices was unavoidable given current global market conditions. It also pointed out that the state-run Bangladesh Petroleum Corporation had lost more than 8 billion taka (about ₹667 crore) on oil sales in the six months leading up to July.

Several student organisations including Bangladesh Students’ Federation and the Progressive Student Alliance staged rallies protesting against the sudden increase in fuel prices, reports Dhaka Tribune.

Bangladesh’s economy

Reportedly Bangladesh is reeling under high inflation. The inflation rate in Bangladesh has been over 6% for the past 9 months, with the annual inflation rate in July reaching a high of 7.48%.

In addition, despite being one of the fastest-growing economies in the world, Bangladesh has witnessed a sharp dip in its foreign exchange reserves. As of August 3, 2022, it has around $39.67 billion dollars in foreign reserves, which can sustain only 5 months of imports.

Last month, Bangladesh sought $4.5 billion from the International Monetary Fund (IMF) to tide over its immediate economic woes, caused due to high import costs. Commenting on this, Finance Minister Mustafa Kamal said that the macroeconomic conditions of the country were firm and resounding and there is no cause for panic. Reportedly, the IMF can extend a maximum of $1 billion in financial support. Bangladesh has also sought $1 billion from Asian Development Bank.

Commenting on the recent developments, energy expert and retired professor of Dhaka University’s geology department Badrul Imam in an interview to Prothom Alo daily said that the increased fuel oil price at one go was unexpected for everyone besides the manner in which it was implemented.

He further says that after the Covid pandemic the BPC made profit close to Taka 400 billion. But it was not reflected in lowering of the petrol prices.

Criticising the country’s energy policy, he says that it seems we have gone wrong somewhere, though Bangladesh is a gas-rich country and that is recognised globally. Yet, we have fallen in a big crisis, as the government was not able to explore that gas productively and in time. He also criticised the government’s policy on being reliant on coal-based power plants when under the global action plan, all nations are supposed to close such plants.

The crisis in making
Though at a first glance, Bangladesh seems to be heading towards a crisis just like the Sri Lankan one, but economists are of the view that if corrective measures are taken immediately then Bangladesh might be able to ward off the larger crisis.

Sri Lanka recently experienced its greatest economic crisis since gaining independence from Britain in 1948, with inflation hitting a record high of 54.6% in July 2022 as compared to the previous year. This lead to the deposition of both the President and Prime Minister of the Rajapaksa clan, after violent unrest by the people.

In fact, both countries’ crises were exacerbated followed the Coronavirus pandemic, as it had negative effects on the tourism, which in both countries constituted a major inflow of foreign tourists and foreign currencies. But though the Sri Lankan crisis was also due to injudicious policies of the Rajapaksa government and its inability to repay the foreign debts particularly to China and the IMF, the Bangladesh’s case is a little bit different here.

Bangladesh is one of the 23 fastest developing economies of the world, its GDP has overtaken India’s GDP and the Sheikh Hasina government has not relied fully on the Chinese help under the garb of the BRI or GEP, so it has to worry less about repaying debt to China.

But overall, like Sri Lanka, Bangladesh too is reeling under the affects of the Corona pandemic and the on-going Russian-Ukraine war. The effect of these is being seen on less oil supply all over the world, leading to a huge increase in the price. These factors have contributed to increasing inflation all across the world.

But if the Sheikh Hasina government takes immediate judicious economic steps, then it might be able to stave off the turn of events like Sri Lanka, and it might be able to save its government and the country.

—–INDIA NEWS STREAM

(Asad Mirza is a political commentator based in New Delhi.)