Hasina Seeks Modi's Help to Survive Bangladesh's Economic Crisis

Shaikh Hasina, the Prime Minister of Bangladesh, recently visited New Delhi to seek political and economic assistance from the Indian Prime Minister Narendra Modi. This summit was preceded by Bangladesh Foreign Minister Abdul Momen's trip to India where he said,  "I've requested Modi government to do whatever is necessary to sustain Sheikh Hasina's government".  Upon her return from India, Sheikh Hasina told the news media in Dhaka, "They (India) have shown much sincerity and I have not returned empty handed". It has long been an open secret that Indian intelligence agency RAW helped install Shaikh Hasina as Prime Minister of Bangladesh, and her Awami League party relies on New Delhi's support to stay in power. Bangladesh Foreign Minister Abdul Momen has described India-Bangladesh as one between husband and wife. In an interview with Indian newspaper 'Ajkal,' he said, "Relation between the both countries is very cordial. It's much like the relationship between husband and wife. Though some differences often arise, these are resolved quickly."  Both Bangladeshi and Indian officials have reportedly said that Sheikh Hasina "has built a house of cards". 

Bangladesh PM Shaikh Hasina (L) with Indian PM Narendra Modi

 British Indian analyst Dr. Avinash Paliwal explains Shaikh Hasina's current dilemma as follows: "Politically reliant on New Delhi, she (Hasina) is finding it increasingly difficult to manage the ramifications of India's turn towards Hindu nationalism that misuses migration from Bangladesh and the Rohingya crisis for domestic electoral gain". Justice Surendra Kumar Sinha, Bangladesh's former Chief Justice,  has said India is backing Sheikh Hasina's autocratic government for its own interest. Here's how prominent Indian journalist SNM Abdi explains Indian intelligence agency RAW's influence in Bangladesh: "India wields more influence in Bangladesh than the Security Council’s five permanent members put together. The Research and Analysis Wing (RAW) is the most dreaded outfit in the neighboring country surpassing even the brutally unforgiving RAB (Rapid Action Battalion). Hasina lives in mortal fear of RAW. She knows that she will be toppled if she displeases India. So she has adopted the policy of pleasing India to retain power at any cost".

Bangladesh has received wide acclaim for its remarkable economic success under the authoritarian leadership of Shaikh Hasina over the last decade. She has jailed many of her political opponents and hanged others. She has tamed the country's judiciary and gagged Bangladeshi mainstream media. What has helped her retain power is the fact she has New Delhi's support and she has succeeded in delivering rapid economic growth that has helped improve the lives of ordinary Bangladeshis. However,  a combination of current global inflation and the resulting economic crisis is threatening to unravel this formula.  

Bangladesh's currency has lost 11% of its value against the US dollar in just one week, import bill has soared by nearly 44%, forex reserves of $37 billion are falling and the revenue from ready made garments export and remittances is not keeping pace with the fast rising imports. Bangladesh is now seeking a $4.5 billion loan to cope with the situation. In addition, India has agreed to trade with Bangladesh in local currencies to reduce pressure on forex reserves. 

Bangladesh is not the only economy in trouble. The European Union, United Kingdom, Japan, Sri Lanka and Pakistan are also experiencing severe economic pain. India's forex reserves are falling and its current account deficit is rising as foreign investors pull out. High energy prices and the strong US dollar are hurting most of the world economies. Food and energy prices have shot up due to the Russia-Ukraine war. The US currency driven by aggressive US Federal Reserve policy of rate hikes has reached new highs. A stronger dollar for the US means cheaper imports, a tailwind for efforts to contain inflation, and record relative purchasing power for Americans. But the rest of the world is straining under the dollar’s rise, according to the Wall Street Journal

Views: 70

Comment by Riaz Haq on September 19, 2022 at 7:07pm

Bangladesh needs to rely less on EU, US markets


By Mostafiz Uddin

https://www.thedailystar.net/opinion/rmg-notes/news/bangladesh-need...

At present, around 60 percent of Bangladesh's garment exports go to the EU. Twenty percent go to the US. The rest are exported globally. These figures have changed slightly in recent years, with the EU gaining a larger share (up from around 52 percent over the past decade) at the expense of the US, where exports have fallen in terms of market share.

----------

In the US and Europe, a recession is coming. As an apparel maker, I can already feel the early signs of a storm heading our way. Orders have been decreasing for many of us in the industry since this summer, after picking up dramatically at the back end of last year.

The issues around a recession are well-documented. High and rising inflation in the US and much of Europe; soaring energy prices that are placing businesses and households under huge financial strain; fallout from the pandemic, which means many governments have huge debts and are unable to do much more to bail out economies – all of these are factors. Most seasoned economic observers believe that 2023 will be tough.

Comment by Riaz Haq on Wednesday

Bangladesh could be a test case for end of dollar dominance
By Abhishek G Bhaya

https://news.cgtn.com/news/2022-09-20/Bangladesh-could-be-a-test-ca...

Bangladesh is moving to trade in local currencies with two of its largest trading partners – China and India – in a decision that could well prove to be a test case for the end of the U.S. dollar's dominance in global trade.

Last week, Bangladesh allowed its banks to maintain accounts in Chinese yuan for overseas transactions to reduce dependency on the U.S. dollar as the South Asian country grapples to contain its dwindling foreign reserves.

And according to media reports on Monday, India's top lender, State Bank of India, has asked exporters to trade with Bangladesh in rupee and taka warning against settling deals in the U.S. dollar to avoid exposure to Dhaka's falling reserves.

The developments come amid calls from the Shanghai Cooperation Organization (SCO) – which has both China and India as its members – for increasing the use of national currencies for trade among the member countries at its leadership summit in the Uzbek city of Samarkand last week. Bangladesh is not yet an SCO member but has applied for observer status in the Eurasian organization.

The South Asian country's $416-billion economy is facing severe stress due to rapidly increasing food and energy prices with the prolonged Russia-Ukraine conflict further widening its current account deficit. Bangladesh is facing a shortage of foreign currency due to higher import bills and a steep fall in the Bangladeshi taka's value against the U.S. dollar in recent months.

The country's foreign exchange reserves fell from $48 billion last year to $37 billion as of last Friday, which is sufficient for import cover for only five months, according to data from Bangladesh's central bank.

No wonder, Bangladesh wants to lower trade dependency on the U.S. dollar and it does not see a problem in dealing in local currencies, as the country's Commerce Minister Tipu Munshi asserted last week. Responding to a query at an event in Dhaka, Munshi said that Bangladesh's finance ministry is studying the issue and working on ways to implement local currency trade with its key trading partners.

Last week, the Bangladesh central bank allowed local banks to carry out overseas transactions in Chinese yuan. It is important to note that China-Bangladesh bilateral currency cooperation dates back to 2018 when Dhaka had authorized dealers to maintain a foreign currency clearing account with the central bank in the Chinese yuan.

The Bangladesh Bank's latest decision followed demands from major business chambers such as the Metropolitan Chamber of Commerce and Industries (MCCI) of introducing a second currency besides the U.S. dollar for international trading amid the surging taka-dollar exchange rate.

The MCCI proposed the Chinese yuan as Beijing happens to be Dhaka's largest trade partner and also the largest source of imports. The fact that China already has a Cross-Border Inter-Bank Payments System (CIPS) with the Chinese yuan as the trading currency was also a factor in Bangladesh's decision.

If Bangladesh creates a mechanism for bilateral trade in local currency with India – its second largest trade partner – as well, as recent reports indicate, it will go a long way in reducing the country's dependence on the U.S. dollar for international trade.

Comment by Riaz Haq on Friday

Central banks around the world moved Thursday to combat the effects of a soaring #dollar and rising #inflation, joining the #US Federal Reserve in risking a recession to rein in climbing prices. #currency #economy #UK #England #Norway #SouthAfrica #Japan https://www.wsj.com/articles/bank-of-england-raises-rates-for-seven...
In a flurry of central-bank meetings from Norway to South Africa, many raised rates by larger-than-expected margins in a day that analysts at ING billed as “Super Thursday.”

The Bank of England raised its key interest rate for the seventh consecutive time on Thursday. Before the news came out, the British pound briefly touched its lowest point in 37 years against the dollar before recovering some of its losses to reach $1.13.

Even some countries that didn’t move rates—the Bank of Japan left its policy rate at its previous low level—took other action to ease the growing inflation pressure.

Japan said Thursday it intervened in currency markets to sell dollars and buy yen, the first such intervention in 24 years, to slow the recent fall in the Japanese currency. The yen fell to 145.87 to the dollar, its weakest level since 1998, before the intervention. It then surged to hit 141 yen, though still far off the 115 yen mark at which the dollar was trading earlier this year.

Finance Minister Shunichi Suzuki of Japan later said the government would act again if needed, without indicating the size of the intervention. “Although foreign-exchange rates in principle should be determined in the market, we cannot stand by idly when speculative and excessive moves repeatedly occur,” he said.

The central-bank meetings, mostly pre-scheduled, came after the Fed announced its 0.75-point increase the day before and capped a bustling week of global monetary-policy tightening. Many central-bank officials struggling with a crisis of public confidence after initially arguing that inflationary rises would be temporary, are now racing to raise interest rates to catch up with soaring prices, but not so fast that they trigger unnecessary economic pain.

Switzerland’s central bank joined the stampede toward higher rates by announcing an interest-rate increase that will put its benchmark lending rate above 0% for the first time since 2014, bringing an end to Europe’s last remaining experiment in setting negative interest rates. Sweden’s Riksbank lifted rates by 1 percentage point earlier this week, its largest increase in almost three decades.

Comment by Riaz Haq yesterday

#Bangladesh PM denounces 'tragedy' of rich nations on #climate."The rich countries, the developed countries, this is their responsibility. They should come forward. But we are not getting that much response from them. That is the tragedy" #Floods #Pakistan https://www.channelnewsasia.com/asia/bangladesh-pm-climate-change-r...

NEW YORK: A country of fertile, densely populated deltas, low-lying Bangladesh is among the most vulnerable nations in the world to climate change.

But the urgency of the situation is not being matched by actions of countries responsible for emissions, Prime Minister Sheikh Hasina said.

"They don't act. They can talk but they don't act," she told AFP on a visit to New York for the United Nations General Assembly.

"The rich countries, the developed countries, this is their responsibility. They should come forward. But we are not getting that much response from them. That is the tragedy," she said.

"I know the rich countries; they want to become more rich and rich. They don't bother for others."

Bangladesh has produced a miniscule amount of the greenhouse gas emissions that have already contributed to the warming of the planet by an average of nearly 1.2 degrees Celsius above pre-industrial levels.

The Paris accord called for US$100 billion a year by 2020 from wealthy nations to help developing nations cope with climate change. That year, US$83.3 billion was committed, including through private sources, according to Organization for Economic Co-operation and Development figures.

One key issue facing the next UN climate summit, to take place in Egypt in November, is whether wealthy nations also need to pay for losses and damages from climate change - not just to pay for adaptation and mitigation.

"We want that fund to be raised. Unfortunately we didn't get a good response from the developed countries," Hasina said.

"Because they are the responsible ones for these damages, they should come forward," the 74-year-old added.

Wealthy nations have agreed only to discuss the loss and damage issue through 2024.

This year's General Assembly featured repeated calls for climate justice. The leader of tiny Vanuatu urged an international treaty against fossil fuels while the prime minister of Pakistan warned that floods that have swamped one-third of his country could happen elsewhere.

--------------

"Local people also suffer a lot," Hasina said. "I can't say that they're angry, but they feel uncomfortable."

"All the burden is coming upon us. This is a problem."

The Rohingya refugees, who are mostly Muslim, live largely in ramshackle camps with tarpaulins, sheet metal and bamboo.

Bachelet on her visit said there was no prospect of sending them back to Buddhist-majority, military-run Myanmar, where the Rohingya are not considered citizens.

But in her interview, Hasina signalled that there were few options other than for the Rohingya to reside in camps.

"It is not possible for us to give them an open space because they have their own country. They want to go back there. So that is the main priority for everybody," Hasina said.

"If anybody wants to take them, they can take them," she added. "Why should I object?"

Comment

You need to be a member of PakAlumni Worldwide: The Global Social Network to add comments!

Join PakAlumni Worldwide: The Global Social Network

Pre-Paid Legal


Twitter Feed

    follow me on Twitter

    Sponsored Links

    South Asia Investor Review
    Investor Information Blog

    Haq's Musings
    Riaz Haq's Current Affairs Blog

    Please Bookmark This Page!




    Blog Posts

    Could Ukraine War Produce Another Gorbachev to Replace Putin?

    The mighty Russian military's recent string of losses to the much smaller Ukrainian forces are bringing back memories of the humiliating Russian defeat at the hands of the Mujahideen in Afghanistan in the 1980s. The Communist Party leaders who presided over the disgraceful Soviet exit were soon ousted from power and replaced by Mikhail Gorbachev. Gorbachev's attempts to reform the Soviet system…

    Continue

    Posted by Riaz Haq on September 24, 2022 at 9:00am

    Angelina Jolie Using Her Star Power to Help Pakistan Flood Victims

    Beautiful Hollywood star Angelina Jolie is known for her international humanitarian work as the United Nations Goodwill Ambassador. A winner of multiple awards including one Oscar and three Golden Globes, she is among the highest paid actors in the world. Jolie is currently visiting Pakistan to bring global attention to the immense suffering caused by devastating floods in the country, particularly in its southern Sindh province.  …

    Continue

    Posted by Riaz Haq on September 22, 2022 at 10:00am — 11 Comments

    © 2022   Created by Riaz Haq.   Powered by

    Badges  |  Report an Issue  |  Terms of Service