Bangladesh looks West and is set to lose

The long suffering citizens of Bangladesh brace for the impact of the Trump tariff typhoon on top of the suffocation of an IMF-run economy. This temporary government is willingly gulping down all the pills prescribed by the IMF. As if that institution were like a medical team, flown in to cure the sick patient.     

It forgets that Donald Trump and Scott Bessent effectively own the IMF. Washington retains veto power. So the Trump team has two levers to pull: direct tariffs and indirect IMF conditionalities. The Chief Adviser, apparently a proponent of progressive politics, publicly praised the IMF in London last month. Just how he squares that with his desire for 'zero poverty' and 'zero unemployment' is a mystery.   

The IMF has offered dozens of loan programmes to Bangladesh and Pakistan (and all over the Global South). Inequality keeps rising. The rich get richer. Poverty increases. Austerity is the permanent policy. Cuts to budgets prevent job creation. Cuts in subsidies raise the cost of essentials. Slashing public budgets, mandating higher interest rates reduces growth. Free floating the currency, when mismanaged, raises risks and prices. The not-so-hidden objective is to free up money to repay foreign creditors. It also encourages a sell off of national assets to Big Business (invariably from abroad). The opaque, no-tender sell off of Chittagong Port terminal fits right in (right out of the Awami League playbook, by the way). 

The Bangladesh Bank Governor enthusiastically raises interest rates to double figures. Think-tanks and industrialists keep telling him that this means business will not take out loans (at an eyewatering 15 percent). So, less jobs, less exports, less duties, less revenues. The governor remains unmoved. An ex-employee of the IMF, he is a true believer. By autumn, he will be crowing that inflation has come down. But he, and the finance minister will not dwell on the anaemic economic growth rate of 3 to 4 percent. For a Least Developed Country, that resembles a recession. Cure the fever but don’t treat the patient.  

The IMF pressures for a substantial rise in government revenue collection. Given Bangladesh has the lowest percentage compared to GDP on the subcontinent, this is not a controversial aim. But why does the state need an external institution to point this out and manage the process? Many of the business elites and some co-opted intellectuals support the IMF in this and its austerity measures. They have little or no faith in their political governments. In social media posts, one can discern their glowing comments about the foreign backed “technocratic” regime in 2007-8 and their high hopes for this interim government. 

They show a strong willingness to cede sovereignty in order to “get the house in order”. Some of these powerful individuals want the country to modernise and believe this is the best method. Yet, they do not justify this with examples from East or Southeast Asia as to how and why IMF-World Bank prescriptions have worked. This is undoubtedly because, unless they have been living under a rock, they know that these prescriptions have not worked. 

It reflects a rejection of dysfunctional domestic politics. One can sympathise with their frustration with the two-family feud and overall mismanagement. One must disagree with their posture.

In the meantime, the economy, especially foreign reserves, is still afloat because workers abroad are remitting record amounts of money through official channels. They send within two months the equivalent of the entire multi-year loan of the IMF. They could fund a home-grown economic emergency programme. 

The old Awami League apparatus for hyper-hundi capital diversion is temporarily out of order. The crooks have absconded. New structures are not yet in place. After the election normal service will resume. Hungry hyenas must be fed.

Tariffs and the North-South question 

Last month, China offered all of Africa free trade – zero tariffs. Bangladesh has had almost the same facility, but, with the exception of a few boxes of sought after mangoes, its neoliberal elites cannot manage to diversify exports. 

The United States, even before Trump, has not been so forthcoming.  It refuses to bring back the benefits of the General System of Preferences (GSP). Rehman Sobhan’s CPD calculates this means one billion dollars worth of tariffs is collected on Bangladeshi exports to the United States. Every single year. The US charges a weighted average of 15 percent on imports from Bangladesh. Dhaka’s (after rebates) is only two percent. On top of this is a further Trump tariff, with demands to purchase his goods and services. Note the soothing words in Dhaka about how more imports from the United States is almost a good thing. No outrage, no anger, no indignation about how unfair and unjust this is.    

The EU maintains GSP preferences. The EU is a far bigger market than the United States – the latter is only the single largest national market. Vietnam, far more dependent on the United States consumer than Bangladesh, just announced it has joined BRICS as a partner. Malaysia and Indonesia are already in. Not everyone is cowering over Trump’s tirades. They are negotiating, but they are also broadening their options. Do the Dhaka elites lobby hard to join BRICS? What is the medium-term strategy regarding other international trade and economic organisations? Isolation is the default policy.

Debt, loans and geopolitics 

China and Japan are the largest individual creditors. Each with 10 to 13 percent. However, more than half of total debt is owed to Western- and Japanese-dominated multilateral institutions.

Whether China or Japan is the largest bilateral creditor skews the full story – as the Anglophone elites mean it to, to hold a vulnerable population hostage to their narrow ideology. China and Japan do not merely lend. They build. How many bridges, ports, roads, rail and airports have been built by China and Japan, compared to that by the United States or the EU? The issue with the “mega-projects” was not their size nor funder. China’s BRI allows for Bangladesh to choose its own projects and then present a financial case. 

Had there been an integrated strategy to ensure infrastructure linked to export industrialisation, then the dollars could have been earned to pay back the foreign debt. The Awami League decided on projects without figuring out how to repay external loans. They jacked up cost projections, which led to capital flight. They also allowed Delhi vetos on which projects would not see the light of day. Another surrender of sovereignty.         

Earlier this year, Touhid Hossain was successful in his request for Beijing to reduce the interest rate on bilateral debt from 3 percent to 1 percent. The subsequent trip by Yunus elicited commitments for even greater Chinese investment, including industrial relocation to Bangladesh.  

Then the Rasputin National Security Adviser – a first in that position for Bangladesh, no less, but in keeping with Bangladesh’s tradition of nepotism in politics, he is a relative of another powerful adviser and a Yunus favourite, Adilur Rahman – decided to clandestinely intervene in Myanmar. Humanitarian corridor today, weapons conduit tomorrow. Doing so would threaten China’s vital economic and security interests in Rakhine state. Without even a courtesy conversation with Ambassador Yao Wen.

Nor with the Chief of the Bangladesh Army, Waker-Uz-Zaman, who should be the actual person responsible for national security. Will China provide capital to build up this country if it is then undermined by such shadowy actions, on behalf of a far distant superpower? Another instance of giving away sovereignty. For what reward? All the talk from Yunus about “becoming a part of the Chinese economy” was just talk. It was meant to rile up Delhi elites. The eyes in Jamuna prefer looking west. Just like in 2007. 

Beijing is probably as unimpressed by this regime as the previous one. The visit by the BNP’s Mirza Fakhrul might prove to be significant in terms of geopolitical positioning. Or it might not. Moreover, the government-in-waiting has revealed no new thinking on economic transformation and sovereignty. The post-election honeymoon could be very brief.●

Farid Erkizia Bakht is a writer and analyst.