Bangladesh Financial Crisis; How Many ‘Sri Lanka’ is Yet To Face?

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Do you know the 1 USD exchange rate exceeds 94 Bangladeshi Taka? Bangladesh is seeking IMF to grant some sort of financial relief. Union planning minister Shamsul Alam said,” Our balance of payments is in the negative zone. We need to stabilize our exchange rate”.

Bangladesh In The Dark: After Sri Lanka, Another Indian Neighbor Is Facing Crisis | Times Now News | TIMES NOW
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According to economists, the Bangladeshi taka has actually lost value relative to the US dollar over the last three months by almost 20%. Following a recent visit by its officials to Bangladesh, the Washington-based lender reportedly requested $4.5 billion, according to the local newspaper “the Daily Star.” Following the Russian war on Ukraine, authorities were dealing with a “crisis” caused by rising global gasoline costs. The local currency’s decline has further harmed the country’s finances, causing a $17 billion current account imbalance. Due to the global economic downturn, several South Asian countries are dealing with soaring prices and declining state finances. 

The country’s imports are set to reach $85 billion by this year, while exports won’t be more than $50 billion. And, the trade deficit of $35 billion can’t be bridged by remittances alone; this shows that they have to live with around a $10 billion shortfall this year. 

According to the opposition- Bangladesh Nationalist Party– the administration is responsible for the problem, which charges that it wasted money on billions dollar vanity projects. The economically poorer segments of Bangladeshi society are suffering greatly as a result of the rising prices of necessities. Over the past six months, Sri Lanka has been engulfed in economic turbulence, suffering significant shortages of basic necessities and running out of fuel, medicines, and foreign reserves, all while experiencing a serious balance of payments crisis. The expert also noted that Bangladesh’s foreign exchange reserves had decreased over the previous eight months from $48 billion to $42 billion.

Prime Minister Sheikh Hasina’s administration has taken several actions to reduce spending and preserve foreign exchange reserves. She has taken several actions to reduce spending and preserve foreign currency reserves. It has chosen to halt official travel abroad and postpone certain less significant projects that depend on imports from other nations. In addition, Hasina advised everyone to contribute by practicing austerity and using caution while making financial decisions. The impoverished must be provided with commodities and products that the government subsidizes. They should also receive additional financial assistance from a social security system. 

Despite Bangladesh’s minimal default risk, Moody’s Investors Service reports that economic pressure is growing on the country. “We expected deterioration in the current-account deficit due to lower remittances, lower demand for exports, and of course high fuel and food prices,” Moody’s Chautard said. 

Bangladesh’s export-oriented garment sector, which is the backbone of the country’s economy, gets negatively impacted as the sales decline in its key markets of Europe and the US as a result of a recession in the world economy. Bangladesh’s second-largest source of foreign exchange is Remittances, where clothing is at the top.

The USA is increasing the interest rates, and many countries in South Asian regions are in turmoil due to inflation and the shrinking of foreign reserves as investors are taking back their money from these developing nations. Problems of livelihood among the lower class and non-repayment of loans are the major problem in the South Asian nations. Recently, Pakistan and Bangladesh have asked the IMF for assistance this year. 1USD exchange rate is greater than 128 in Nepal, >216 in Pakistan, >87 in Afghanistan, and>80 in India and Bhutan. Let’s wait; who is the next? 

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ABHIJEET ANAND

Sociologist, Engineer, and Content writer

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