Bangladesh’s government asked for help from the International Monetary Fund just a week after putting in place planned power outages to deal with the rising cost of fuel. Two other South Asian countries have also done this in recent months.
Officials from the government said that the country was running out of foreign currency, which is why both Sri Lanka and Pakistan asked the IMF for help.
The finance minister of Bangladesh, A.H.M. Mustafa Kamal, said on Wednesday, “We can’t just print dollars; we have to earn them.” “The hard work of our people who work or do business abroad brings us money. They are the engine that keeps our economy going.”
After Pakistan & Sri Lanka now Bangladesh seeks $4.5 billion bailout package from IMF for budgetary needs.
Chinese debt trap, Western debt manipulations or country’s bad policies, who is to be blamed now?
— The Poll Lady (@ThePollLady) July 26, 2022
Fears of a global recession have caused both money sent from Bangladeshis living abroad and exports to go down.
Russia’s invasion of Ukraine has caused high inflation, which hurts developing countries whose economies depend on importing fuel. As trade deficits grow, governments are having a hard time building up enough foreign reserves to buy diesel, gasoline, and cooking gas, which are getting more and more expensive to import.
Sri Lanka’s government stopped paying its debts in April, which caused a crisis that led to the president’s resignation this month. Drivers there have to wait in line for days to get gas. People who watch the world worry that other countries could also have trouble.
“The government of Sri Lanka was the first to fall. Because of inflationary pressures, there have already been protests about food and fuel prices in at least 17 countries,” Samantha Power, the head of the U.S. Agency for International Development, said at a meeting on the global food crisis on Wednesday in New Delhi. “If history is any guide, we know that Sri Lanka’s government won’t be the last to fall.”
Nepal is one of the poorest countries in the area. It hadn’t fully recovered from the effects of the pandemic and the drop in tourism to Mount Everest when global inflation hit, which made its foreign reserves even smaller.
The office of Sri Lanka’s prime minister was taken over by protesters this month.
Nepal’s government spends about a fifth of its budget on importing diesel, gas, and other petroleum products. Its debt to India, which is its only source of fuel, has grown to dangerous levels.
Fuel rationing by the government has made prices for consumers go up even more.
A taxi driver in Kathmandu, Rajendra Tamang, said that the price of gas has nearly doubled in the past year.
“Once the price of fuel goes up, the price of everything goes up, from tea to clothes to travel. The prices of food have also gone up. “Rents are going up,” he said.
“But I’m making less money. “People won’t take a taxi unless they’re in trouble,” he said.
In the same way, India’s foreign reserves are being used up by a growing deficit.
According to data from the central bank, the country’s foreign exchange reserves fell by $7.5 billion in the week ending July 15. This is more than 6 percent less than the same week last year.
India has tried to deal with the problem by continuing to buy cheaper oil from Russia and banning the export of wheat. These steps have kept the country from running out of food like some of its neighbours have.
But people are starting to feel inflation.
This week, there were protests in India’s Parliament after opposition leaders asked for a meeting to talk about rising food prices. Rahul Gandhi, an opposition leader from the Indian National Congress party, was held for a short time on Tuesday after he protested against rising prices and unemployment in front of Parliament.
Wednesday, there were protests in India because food prices are going up and unemployment is high.
Pakistan reached a preliminary deal with the IMF this month to bring back a $6 billion bailout programme. This came as the country was getting close to a balance of payments crisis.
The deal broke a deadlock in talks that had been going on for months. It came after Pakistan’s Prime Minister, Shehbaz Sharif, took tough economic steps to meet IMF demands, such as raising electricity rates, fuel prices, and government subsidies.
People are upset about these moves, which have made the country’s political crisis worse at a time when the economy is falling apart, the currency is losing value, and inflation is in the double digits.
Bangladesh was different from the other South Asian countries that saw big drops in their economies in 2020. Its second-largest export industry, which makes clothes to sell abroad, kept the economy growing.
Last week, the government started cutting power as planned and shut down diesel-powered power plants for good because diesel is so expensive. It has also told gas stations to close at least once a week.