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After Lanka and Pakistan, now Bangladesh lines up before IMF for bailout

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After the collapse of the Sri Lankan economy, attention has turned to the state of affairs in other South Asian countries such as Pakistan, Bhutan and Bangladesh. All three countries have either curtailed imports or are planning to do so, to salvage their fast-depleting foreign exchange reserves and avoid a Lanka-like forex crisis.

While the presence of Pakistan, which is deeply indebted to China like Lanka, and tourism-dependent Bhutan has taken a massive blow from the pandemic-induced travel restrictions on the list of troubled economies is not surprising, that of Bangladesh is. Just last year, the tiny nation was celebrated for beating India in per capita income.And the UN decided to graduate it from the least-developing country category to the developing country grouping by 2026.

Bangladesh seems to have lost that momentum as Dhaka is now beseeching the IMF for a $4.5 billion bailout package to tide over its deepening economic crisis.It has also knocked the doors of the World Bank and Asian Development Bank seeking immediate relief of $1 billion from each.So, what went wrong? Bangladesh’s $ 416 billion economy is heavily dependent on its garment industry which survives on exports mostly to Europe, the US and Latin American countries.

It has been supporting the country’s growth for years but things changed dramatically following the Ukraine war pushing the prices of everything up. In response to the soaring energy prices, the Sheikh Hasina-led government was forced to introduce scheduled outages that directly impacted the textiles industry which relies on an uninterrupted power supply.  On the other hand, demand also dwindled as retailers in the US and European markets — the biggest customers of Bangladesh’s garment products — started holding or cancelling orders due to disruptions and uncertainties in their own economies due to the war in Ukraine.

According to the latest available data, Bangladesh’s foreign exchange reserves stand at $39.67 billion as of July 20, which is sufficient for just four months’ worth of imports — slightly higher than the IMF’s recommended three-month cover.Just for comparison, the forex reserves were $ 45.5 billion in the year-ago period.

The country is reeling under inflation, too. In June, price rise hit a nine-month high of 7.56%, taking the average inflation for 2021-22 to 6.15%, overshooting the revised annual target of 5.9%.Bangladesh’s imports stood at $81.5 billion between July 2021 and May 2022, up 40% from a year earlier, according to Bangladesh Bank data.As a result, the current account deficit — the shortfall between exports and imports — widened over six times to $17.2 billion in the first 11 months of fiscal 2021-22.

While the Bangladesh finance minister A H M Mustafa Kamal is confident that the IMF aid will help the country tide avoid a crisis, such bailouts always come with strings attached. The Washington-based multilateral lender is known to put stringent conditions for its loans.

According to a report in The Daily Start newspaper, the conditions could include withdrawal of energy subsidies, implementing a fuel pricing mechanism, removing interest rate caps on lending and borrowing, resetting the mechanism to calculate foreign currency reserves, taking steps to increase revenue base, and strengthening corporate governance in the banking sector.

Of these, removing energy subsidies for consumers will be a major challenge for the government as it could trigger public anger. Negations on this clause is likely to drag the process.Obtaining IMF loans is a long process. An IMF delegation is expected to visit Dhaka in September to discuss the terms and conditions.By December, the deal is expected to be locked in for placing at the IMF’s board meeting in January. The question is, will Dhaka be able to manage things till then. (NIE)



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Sun directly overhead Pomparippu, Anuradhapura, Mihinthale, Galenbindunuwewa, Agbopura and Serunuwara about 12:11 noon today (11)

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On the apparent northward relative motion of the sun, it is going to be directly over the latitudes of Sri Lanka from 05th to 15th of April in this year.

The nearest areas of Sri Lanka over which the sun is overhead today (11th) are Pomparippu, Anuradhapura, Mihinthale, Galenbindunuwewa, Agbopura and Serunuwara about 12:11 noon.

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Opposition NCM against Energy Minister defeated

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A no-confidence motion brought by the Opposition against Energy Minister Kumara Jayakody was defeated in Parliament yesterday by a majority of 104 votes.At the end of the debate, 49 members voted in favour of the motion, while 153 voted against it.

The motion, submitted to the Speaker on 19 March, was signed by Opposition Leader Sajith Premadasa, SJB MPs, and other Opposition members.

It accused Minister Jayakody of failing to ensure the procurement of adequate and quality coal for the Lakvijaya Coal Power Plant in Norochcholai, alleging that such negligence amounted to a breach of ministerial responsibility over a critical national energy asset.

The motion also cited ongoing legal proceedings against the Minister, noting that he has been indicted by the Commission to Investigate Allegations of Bribery or Corruption and produced before the Colombo High Court under Section 70 of the Bribery Act, in connection with alleged acts of corruption during his tenure as Procurement Manager of the Ceylon Fertiliser Company Limited.

The motion read: Vote of No Confidence against Kumara Jayakody, Minister of Energy,— Whereas the Provision in Section 6 of the Part III of the Code of Conduct for Members of Parliament which states that: “The Members shall on all occasions act in accordance with the public trust entrusted with them and shall always behave with probity and integrity, including the use by them of any public resources.” has been violated; And whereas the following rules of conduct set out in Section 9 of the Part V of the Code of Conduct for Members of Parliament have prima facie been breached, namely:- “(a) to be conscience; (c) to act so as to merit the trust and respect of the people; (e) to hold themselves accountable for the conduct and duties for which they are responsible;” And whereas it is observed that the Minister has failed, in his capacity as a Minister of the Cabinet of Ministers, to discharge the fundamental duties incumbent upon him in accordance with Article 28 of the Constitution;

And whereas it is established that the Minister of Energy has failed to discharge his primary duty of ensuring the procurement of adequate and good quality coal for the Norochcholai Lakvijaya Coal Power Plant;

And whereas such gross negligence in overseeing a critical national energy asset constitutes a fundamental breach of ministerial responsibility;

And whereas the Minister of Energy has failed to carry out the subjects and functions vested in him by the Notification of Gazette Extraordinary No. 2412/08 of 25th November 2024 of the Democratic Socialist Republic of Sri Lanka, including taking necessary steps to reduce the losses at the institutional management level and technical damages that occur to the electricity generation and distribution system and reduction of costs for generating electricity and removal of uncertainties during generation;

And whereas the Commission to Investigate Allegations of Bribery or Corruption has filed formal indictments before the Colombo High Court against the incumbent Minister of Energy under Section 70 of the Bribery Act (Chapter 26) for the offence of “corruption” in connection with acts of corruption allegedly committed while he was serving as the Procurement Manager of the Lanka Fertilizer Company;

And whereas, in light of the foregoing, the Minister of Energy has irretrievably forfeited the confidence of Parliament and the people of Sri Lanka by causing losses to public finances, endangering national energy security, corruptly mishandling the procurement process, being subjected to active judicial proceedings for the offence of “corruption”, and betraying the Government’s own “anti-corruption mandate”, and his continued tenure as the Minister of Energy is contrary to the public interest, the rule of law, and the principles of good governance;

That this Parliament resolves that it has no confidence in the competence of Kumara Jayakody, Minister of Energy to function as a Minister of the Cabinet of Ministers any longer.”

by Saman Indrajith

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Chinese Ambassador assures Lanka  China will not allow a fuel crisis to develop here

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Qi Zhenhong

Chinese Ambassador to Sri Lanka Qi Zhenhong yesterday assured that China would not allow a fuel crisis to arise in Sri Lanka, under any circumstances, reaffirming Beijing’s continued support to the country.

The Ambassador made these remarks addressing the media after attending a dry ration distribution programme for 350 low-income families at Sri Chandananda Buddhist College, at Asgiriya, in Kandy.

Highlighting the longstanding ties between the two countries, Ambassador Qi said China has consistently stood by Sri Lanka and remains ready to extend assistance whenever required.

Amid concerns over global energy disruptions, stemming from the ongoing Middle East conflict, he noted that several countries are already facing difficulties, but stressed that China is prepared to support Sri Lanka at any time.

He said that any potential fuel shortage in Sri Lanka could be managed with the involvement of China’s Sinopec.

Reiterating Beijing’s commitment to Sri Lanka’s economic recovery and development, the Envoy also expressed hope that the current ceasefire in the Middle East would hold, while assuring that China stands ready to respond to any future developments and assist Sri Lanka as needed.

By SK Samaranayake

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