Economy
Bloomberg lauds PM Sheikh Hasina for reforms to maintain economic stability
The globally famed Bloomberg news agency has praised Bangladesh Prime Minister Sheikh Hasina for her “timely reform steps” to negate the impacts of the worldwide economic crisis in Bangladesh, predicting the initiatives to elect her government for the fourth straight term in the next general elections.
“She is expected to win a fourth straight term in the elections,” BSS reports quoting Bloomerg’s article, which simultaneously suggests Sheikh Hasina “needs to push more reforms to receive all funds.”
“Prime Minister Sheikh Hasina is widely expected to win a fourth straight term in national polls expected by January 2024 — not least because many of her opponents are behind bars or ensnared in legal cases”.
Bloomberg published the article against the backdrop of Bangladesh’s receipt of International Monetary Fund (IMF) loans which it attributed to the South Asian country’s timely reforms to maintain economic stability ahead of the next national election.
The article commented that Sheikh Hasina’s victory was expected not merely “because many of her opponents are behind bars or ensnared in legal cases” but due to her success in ensuring economic stability.
Following is the full Bloomberg article headlined “Bangladesh Leader Bets IMF-Mandated Rigor Will Pay Off in Polls” with two sub-heads:
Sheikh Hasina needs to push more reforms to receive all funds
She is expected to win a fourth straight term in the elections
Government leaders across the world have often balked at implementing reforms agreed with the International Monetary Fund for fear of being penalized at the ballot box. Bangladesh Prime Minister Sheikh Hasina isn’t one of them.
Her quick execution of IMF mandates have stood out in South Asia where Pakistan is still fiddling with fuel subsidies just as it inches closer to reviving a bailout. Sri Lanka has delayed local municipal polls as it raised taxes and interest rates to clinch IMF funds last week.
Bangladesh, which in July became the last of the three countries to ask for IMF support, was the first to get loans approved after swiftly raising energy prices. Prime Minister Sheikh Hasina made no apologies for the move.
“Gas and electricity supply can be provided if all agree to pay the purchasing costs,” she said a week $4.7 billion in IMF loans were secured on Jan. 31. “How much subsidy can be given? And why should we continue subsidies?”
Such comments are typically unheard of as elections approach: All three nations face key votes over the next 18 months. But unlike leaders in Sri Lanka and Pakistan, PM Sheikh Hasina is widely expected to win a fourth straight term in national polls expected by January 2024 — not least because many of her opponents are behind bars or ensnared in legal cases.
“If the ruling party manages to maintain economic stability, that could preempt anger or public sentiment that works against the government,” said Michael Kugelman, director of the Wilson Center’s South Asia Institute. “PM Sheikh Hasina certainly has the credibility to pull this off.”
In contrast, Pakistan Prime Minister Shehbaz Sharif polled low in a survey ahead of elections later this year and has been blamed by voters for the economic crisis. While Sri Lankan leader Ranil Wickremesinghe has pushed through reforms, he depends on the support of a party run by a powerful clan and will need to seek a new mandate in presidential elections due September 2024.
PM Sheikh Hasina is banking on her government’s move to go to the IMF to show to markets and voters that she has prevented the $460 billion Bangladeshi economy from going the way Sri Lanka has with a default. Pakistan is also facing the prospect of a default.
Bangladesh went to the IMF as it grappled with an energy crisis with commodity prices soaring last year due to Russia’s war in Ukraine, while the rising costs of imports widened the trade deficit. The local currency depreciated by a fifth and reserves fell to the lowest in three years.
By winning access to IMF funds, Sheikh Hasina’s government is gaining some time to fix the economy before the elections. Signs of a weakening economy could well trigger public anger against the premier who has overseen growth of more than 6 pecent on average for the past 14 years though it slowed to about 3.5 percent during the pandemic.
The first review of the IMF program is set for the second half of 2023, and Bangladesh Mission Chief Rahul Anand sees the authorities “taking comprehensive steps” to unwind subsidies and move to a market-driven exchange rate.
Bangladesh has received $476 million under the facility so far. Further disbursements depend on the government ensuring reforms for the financial sector, ranging from the central bank pursuing an independent monetary policy to reducing non-performing loans and spurring climate change funding.
During the eleventh month of the current fiscal year, the country’s foreign currency reserves have fallen below $19 billion for the first time. After paying off some import bills, the reserves have now stood at $18.26 billion on Sunday.
According to the International Monetary Fund (IMF), as of May 8, the total foreign currency reserves of the country were $19.82 billion.
Mohammad Mezbauul Haque, the spokesperson of Bangladesh Bank, informed that through the Asian Clearing Union (ACU), the central bank has paid off import bills totaling $1.63 billion over the past two months.
However, Bangladesh Bank maintains that after paying off the import bills, the foreign currency reserves now stand at $23.71 billion.
According to the Central Bank’s accounts, the reserves were $25.27 billion on May 8.
The Dhaka Stock Exchange (DSE) and the DSE Brokers Association (DBA) have expressed gratitude towards Prime Minister Sheikh Hasina for her directive to list government companies in the capital market, a move hailed as timely and positive.
The directive was issued during the recent meeting of the Executive Committee of the National Economic Council (Ecnec) last Thursday.
Dr. Hafiz Muhammad Hasan Babu, Chairman of DSE, described the directive as a significant step towards enhancing the dynamics of the capital market. He emphasized that besides invigorating the capital market, this move would also attract foreign investment and promote sustainable development.
Despite previous efforts, government institutions had not been listed in the stock exchange, according to a notification issued by the DSE. The Prime Minister’s directive is seen as a pivotal step towards revitalizing and expanding the economy.
Dr. Babu further remarked, “The listing of reputable companies in the capital market, as directed by the Prime Minister, will greatly benefit the country’s economy. It will also enhance investor confidence.”
Similarly, the DBA released a notification applauding the Prime Minister’s directive, terming it as positive and timely for the capital market.
Saiful Islam, President of DBA, expressed optimism about the directive’s potential to accelerate the country’s capital market and overall economy. He pledged support to relevant government departments and regulatory bodies in implementing the directive, ensuring its positive impact on the economy, including the capital market.
India has expressed interest in financing Bangladesh’s Teesta project, announced Foreign Minister Hasan Mahmud. Speaking to reporters after a meeting with Indian Foreign Secretary Vinay Mohan Kwatra, Mahmud stressed the importance of aligning the project with Bangladesh’s needs. He confirmed discussions on the Teesta issue during the meeting. Mahmud also affirmed Prime Minister Sheikh Hasina’s upcoming visit to New Delhi, indicating that the finalization of the date would depend on the formation of the new Indian government following ongoing elections.
Meanwhile, the IMF has approved a $1.15 billion staff-level loan for Bangladesh in its third tranche. Mahmud noted the ongoing elections in India and the subsequent formation of the new government as factors influencing the scheduling of PM Hasina’s visit.
When asked about the sequence of visits to India and China, Mahmud suggested Delhi’s geographical proximity to Bangladesh. Diplomatic sources suggest PM Hasina’s visit to India is planned for early July, following India’s elections.
Pre-election surveys indicate strong prospects for Indian Prime Minister Narendra Modi’s re-election. Modi previously congratulated PM Hasina on her electoral victory in January, expressing optimism about strengthening ties between the two nations.
The last bilateral engagement between the prime ministers occurred during the G-20 Leaders Summit in September 2023. Modi is expected to invite South Asian and BIMSTEC leaders to his swearing-in ceremony, fostering regional cooperation.
Addressing border killings, Mahmud emphasized the government’s commitment to ending such incidents and promoting the use of non-lethal weapons by border forces. Discussions also covered enhancing physical and people-to-people connectivity, including cooperation with India to import hydropower from Nepal and Bhutan through India. Mahmud highlighted the need to further ease visa restrictions to strengthen people-to-people relations.
