Bangladesh PM Visits World Bank To Gain Support For Distressed Economy – Analysis
By Ahammad Foyez, Reyad Hossain and Shailaja Neelakantan
Bangladesh leader Sheikh Hasina met with World Bank officials in Washington on Monday, state media reported, in a visit that analysts described as an attempt to gain the lending institution’s support for her country’s distressed economy in an election year.
The prime minister’s meeting with bank officials, following a state visit to Japan and preceding a trip to Britain, were all meant to show she has the support of big international players, despite seemingly strained ties with the West over her government’s free speech and human rights record, the observers added.
Unusually, Hasina is not scheduled to meet with any United States government officials during her six-day stay in Washington – a reflection, one observer said, of tensions between the two nations lately.
Ostensibly, Hasina’s visit on Monday was to mark 50 years of the Bangladesh-World Bank relationship, according to the state news agency Bangladesh Sangbad Sangstha (BSS).
“We now wish to look into the future of our partnership. The World Bank must remain focused on its core purpose of poverty alleviation and development financing,” Hasina said during an interaction with the bank’s executive directors’ board, BSS reported.
“We also seek international support for trade diversification, investment promotion and domestic resource generation.”
Hasina reportedly expressed regret for the World Bank’s pulling out of financing Bangladesh’s largest infrastructure project, the Padma Bridge, which it did over concerns about corruption. Bangladesh then pledged to build the bridge itself.
For Ali Riaz, of Illinois State University, this event marking the 50th anniversary of the bank’s relationship with Bangladesh was a mere fig leaf.
Hasina’s trip has an economic and political dimension, the political science professor told BenarNews.
“In meeting with the World Bank, she is looking for its economic support. Bangladesh is in a very difficult economic situation – it is in dire straits,” Riaz said Monday.
“This situation is the making of this government’s economic policies of the last decade. Hasina thought she can get away with … ignoring the World Bank and the IMF [International Monetary Fund] despite borrowing heavily [from them] over the last decade.”
The political reason, Riaz said, has to do with criticism aimed at Bangladesh by the U.S., European Union members, the United Nations and international human rights groups, over what they say are egregious rights violations and suppression of free speech by the Hasina government.
Just last month, U.S. Secretary of State Antony Blinken expressed concern to Bangladesh about threats and physical attacks against the media, including under a draconian digital law, ahead of national elections. And that was not the first time that Washington had raised such concerns.
Hasina did not stay silent in the face of this rap on the knuckles.
She railed against Washington in parliament, saying the U.S. was working to bring an undemocratic party to power in her country through the upcoming polls. She also accused Washington of supporting corrupt people in Bangladesh.
“Now she is trying to demonstrate that all international actors are supportive of her. …At that time [when criticizing the U.S.] she was talking to her domestic constituency to show she is strong,” Riaz said.
“But at the same time, without the support of the U.S., etc., the economic and political situation will be very difficult for her. …She would like the upcoming election to be seen as legitimate by those who matter because she needs more money and needs legitimacy.”
‘A tinder box’
What has Hasina craving international legitimacy at this time, when she didn’t during previous elections in 2018 and 2014, is the reality that the nation’s economy is worse than it has been in years.
The professor said that while Hasina has suppressed any criticism of her government since 2011, this time around she fears that dissatisfaction may make its way to the streets.
“When you create a tinder box you never know … you live in a bubble and an echo chamber and believe everything is okay, until everything is not okay,” Riaz said.
The rise in commodity and fuel prices have hit the average Bangladeshi hard and the government has been disturbed by many recent protests about these issues, said Badiul Alam Majumdar, secretary of the civil society group, Citizens for Good Governance.
“The government has made an opposition-free political field in the last 15 years through oppression. [But now the] economic crisis has the potential to make the political situation more vulnerable,” Majumdar told BenarNews.
He was referring to the alleged crackdown on criticism of the administration through means such as the Digital Security Act – and its predecessor – which America’s top diplomat, Blinken, referred to last month.
“Therefore, the government’s immediate solution to face this economic crisis is to get foreign loans. The IMF and the World Bank are the best choice for it,” Majumdar added.
In fact, analysts said they hoped Hasina would bury the Padma Bridge issue after this trip.
“After this [Padma Bridge issue] there was no impact on lending,” Zahid Hussain, a former senior economist at the World Bank, told BenarNews.
“Bangladesh is the largest borrower country of the International Development Association (IDA) under the World Bank. And a major part of this loan came after the Padma Bridge issue.”
The World Bank has acknowledged Bangladesh’s successes. In a news feature on its website in January, the bank said the South Asian nation had “made enormous strides in the past 50 years.”
It said that Bangladesh had gone from being one of the poorest nations at its birth in 1971, to one of the fastest-growing economies.
“GDP per capita has increased from [U.S.] $134 in 1971 to $2,503 in 2021,” the bank said.
But Bangladesh is currently seeing “rising inflationary pressure, energy shortages, a balance-of-payments deficit, and a revenue shortfall,” the World Bank said last month in its twice-yearly update.
“Higher commodity prices have contributed to inflationary pressure. The balance-of-payments deficit reached $7.2 billion in the first half of FY23, up from $5.3 billion in FY22, creating considerable pressure on foreign exchange reserves,” the bank said in a press statement April 4.
“Domestic banks faced challenges with tighter liquidity and increasing non-performing loans. The fiscal deficit widened in FY23, with higher financing from domestic banks.”
The global lending institution said Bangladesh needed to diversify its exports, improve competitiveness, and embark on a comprehensive reform program, to reduce the “elevated risks” to its economic outlook.
On Thursday, the World Bank announced $1.25 billion financing for three projects in Bangladesh “to address key barriers to higher and sustainable growth.”
The Washington-based institution said the financing would support Bangladesh’s goal to achieve upper-middle-income country status by 2031.
“It will help develop a diversified and competitive private sector to create more and better jobs; promote socioeconomic inclusion to expand opportunities for all; and address climate and environmental vulnerabilities,” it said in a statement.
The Hasina administration meanwhile is scheduled to present its 2023 budget in June, and needs an infusion of money for that as well – for which the PM is hoping it can rely on the World Bank – said a former senior economist at the World Bank Group, M. Masrur Reaz.
“The biggest challenge is the instability of the balance of payments. To make the situation stable, more budgetary support will be needed beyond the support provided by the IMF,” he told BenarNews.
He was referring to the IMF agreeing in January to award Bangladesh a loan totaling about $4.7 billion to help preserve economic stability.
“If the balance of payments cannot be stabilized, if the U.S. dollar rises further before the election, if the reserves fall further then the economy will come under massive pressure. This will increase inflation, we are already in hyperinflation,” the economist observed.
That would lead to an even further increase in the cost of living, which has already risen, Reaz said.
“Such a situation can make people angry,” he said.