Standing in line to try to buy food, Rekha Begum is distraught. Like many others in Bangladesh, she is struggling to find affordable daily essentials such as rice, lentils and onions.
“I went to two other places, but they told me they don’t have supplies. Then I came here and stood at the end of the queue,” said Begum, 60, as she waited for nearly two hours to buy what she needed from a truck selling food at subsidized prices in the capital, Dhaka.
Bangladesh’s economic miracle is under severe strain, as fuel price hikes amplify public frustrations over rising costs for food and other necessities. Fierce opposition criticism and small street protests have erupted in recent weeks, adding to pressures on the government of Bangladeshi Prime Minister Sheikh Hasina, which has sought help from the IMF to safeguard the country’s finances.
Experts have said that Bangladesh’s predicament is not nearly as severe as Sri Lanka’s, where months’ long unrest led its long-time president to flee the country and people are enduring outright shortages of food, fuel and medicines, spending days waiting for essentials.
However, the country faces similar troubles — excessive spending on ambitious development projects, public anger over corruption and cronyism, and a weakening trade balance.
Such trends are undermining Bangladesh’s impressive progress, fueled largely by its success as a garment manufacturing hub, toward becoming a more affluent, middle-income country.
The government raised fuel prices by more than 50 percent last month to counter soaring costs due to high oil prices, triggering protests over the rising cost of living. That led authorities to order the subsidized sales of rice and other staples by government-appointed dealers.
The latest phase of the program, which began on Sept. 1, should help about 50 million people, Bangladeshi Commerce Minister Tipu Munshi said.
“The government has taken a number of measures to reduce pressures on low-income earners. That is impacting the market and keeping prices of daily commodities competitive,” he said.
The policies are a stopgap for bigger global and domestic challenges.
The war in Ukraine has pushed prices of many commodities higher at a time when they already were surging, as demand recovered with a waning of the COVID-19 pandemic. Meanwhile, countries such as Bangladesh, Sri Lanka and Laos — among many — have seen their currencies weaken against the US dollar, adding to the cost of imported oil and other goods.
To ease the strain on public finances and foreign reserves, the authorities put a moratorium on big, new projects, cut office hours to save energy, and imposed limits on imports of luxury goods and other non-essential items.
“The Bangladesh economy is facing strong headwinds and turbulence,” said Ahmad Ahsan, an economist and director of the Dhaka-based Policy Research Institute, a think tank. “Suddenly we are back to the era of rolling power cuts.”
Millions of low-income Bangladeshis, such as Begum, whose family of five can barely afford to eat fish or meat even once a month, still struggle to put food on the table.
Bangladesh has made huge strides in the past two decades in growing its economy and fighting poverty. Investments in garment manufacturing have provided jobs for tens of millions of workers, mostly women. Exports of apparel and related products account for more than 80 percent of its exports.
However, with fuel costs so high, authorities shut diesel-run power plants that produced at least 6 percent of total production, cutting daily power generation by 1,500 megawatts and disrupting manufacturing.
Imports in the last fiscal year, ending in June, rose to US$84 billion, while exports have fluctuated, leaving a record current account deficit of US$17 billion.
Deadlines are fast approaching for repaying foreign loans related to at least 20 mega infrastructure projects, including the US$3.6 billion River Padma bridge built by China, and a nuclear power plant mostly funded by Russia.
Experts have said that Bangladesh needs to prepare for ramped-up repayment schedules in 2024 and 2026.
In a move economists view as a precautionary measure, Bangladesh in July sought a US$4.5 billion IMF loan, becoming the third country in South Asia to recently seek its help after Sri Lanka and Pakistan.
Bangladesh’s foreign reserves have been falling, potentially undermining its ability to meet its loan obligations. By Wednesday they had dropped to US$36.9 billion from US$45.5 billion a year earlier, according to the central bank.
Usable foreign reserves would be about US$30 billion, said Zahid Hussain, a former chief economist of the World Bank’s Dhaka office.
“I would not say this is a crisis situation. This is still enough to meet three months of imports, three and half months of imports, but it also means that you do not have a lot of room for maneuvering on the reserve front,” he said.
Still, despite what some economists say is excessive spending on some costly projects, Bangladesh is better equipped to weather hard times than some other countries in the region.
Its farm sector — tea, rice and jute are major exports — is an effective “shock absorber,” and its economy, four to five times larger than Sri Lanka’s, is less vulnerable to outside calamities, such as a downturn in tourism.
The economy is forecast to grow at a 6.6 percent pace this fiscal year, according to the Asia Development Bank’s latest forecast, and the country’s total debt is still relatively small.
“I think in the current context, the most important difference between Sri Lanka and Bangladesh is the debt burden, particularly the external debt,” Hussain said.
Bangladesh’s external debt is under 20 percent of its gross domestic product, while Sri Lanka’s was about 126 percent in this year’s first quarter.
Waiting in a line to buy subsidized food, 48-year-old Mohammed Jamal said he was not feeling such leeway for his own family.
“It has become unbearable trying to maintain our standard of living,” Jamal said. “Prices are just out of reach for the common people. It’s tough living this way.”
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