Democracy Versus Development – Why Bangladesh Needs A Course Correction
Bangladeshi Prime Minister Sheikh Hasina inaugurated the iconic Padma Bridge in June 2022, on the outskirts of the capital city of Dhaka – the 6.15 kilometre railroad bridge was a litmus test for the nation to overcome, and according to the ruling Awami League regime, symbolized to its people, the resilience, strength and collective tale of a proud national journey. The Ministry of Finance categorically indicates that the country financed the bridge domestically – after multilateral institutions such as the World Bank backtracked on promised funding, by accusing state actors of rampant corruption in the undertakings of the project. Yet – a message from the very top of the political leadership, was that of a country which was marching towards development – by investing in substantial infrastructural projects to enhance connectivity and regional economic capacity. And the Padma Bridge – locally made and financed – is therefore to most, a living embodiment of modern Bangladesh. A nation which can hold its head high – and do so without the permanent support and guidance of western powers.
The story of Bangladesh is indeed quite incredible. It celebrated its 50th Anniversary as an independent nation in 2021 — rising from the status of a war torn agrarian society to one which has increasingly been deemed the toast of the developing world. The underlying theme being — a holistic transition from poverty towards development. However, against the harsh backdrop of ongoing global political uncertainty and the realities of a post-pandemic international order — Bangladesh faces endemic and long-term economic sustainability concerns, which has forced its government to seek a colossal USD 4.5 billion loan package from the IMF. The country has indeed impressed one and all with its exceptional story of economic resilience and social persistence during the past five decades. Nevertheless today, this nation of 160 million people is tasked with addressing the one key narrative which a government that has been in office for 14 years, prizes more than anything — its cherished economy is struggling and in undesirable waters. And subsidiary concerns — ranging from its inability to host credible general elections, accusations of human rights violations to widespread corruption in the public sector — has put Bangladesh in a seemingly distressing inflection point in its history.
From Rags to Riches — Marching Towards Development
Up until the 2000s, academic focus towards Bangladesh centred around its public health and environmental challenges. However when Sheikh Hasina — the daughter of the nation’s principal political architect Sheikh Mujibur Rahman — came to power in 2008, she proclaimed her vision to champion Bangladesh towards being a developmental miracle. Doing so required steely determination, political acumen and a branding strategy that would influence allies and international diplomatic circles — and Hasina being a shrewd and experienced political operative, did so successfully. Successive governments under her singular control have invested heavily in digital technology, power-generation, agriculture and infrastructural development. Aided by the strong performance of its primary financial wheels — the textiles industry and the remittance sector — Bangladesh was declared the 41st largest economy in the world by the IMF recently.
In fact — the numbers if looked at deeply, are quite remarkable. Poverty rates reduced to 14 per cent in 2021 compared to 43 per cent in 1991. Furthermore, improvements across health and educational indicators in particular, over the past 30 years — is seen positively by both citizens and political observers alike. However at the core of it — Prime Minister Hasina has navigated national and international conversations towards one key metric as prima facie evidence of her political success. Her government has presided over periods of rapid economic enhancements since 2011, exemplified by GDP growth rates of above 6 percent (except 2020).
International recognition has indeed come from all corners. The UN approved Bangladesh to graduate from Least Developed Country (LDC) status by 2026 — a landmark achievement in itself. On a more symbolic front, Sheikh Hasina has received acclaim for her decision to open national borders and host over 1.1 million Rohingya refugees from neighbouring Myanmar — showcasing to the global community, Bangladesh’s commitment to protecting populations fleeing persecution. Most recently, media conglomerate Nikkei on the other hand, ranked Bangladesh 4th amongst 121 countries in its COVID-19 Recovery Index. The Hasina government is one of and for development, and of course, it is a regime of the people and for the people — this messaging, whether it be accurate or not, has been repeated extensively by the highest to the lowest ranked member of the ruling Awami League, in recent years. And while this narrative may have merit — domestic challenges on non-economic fronts have remained constant and widespread. Today — as Bangladesh faces a direct threat to the supposed economic stability that it has cultivated over the past decade — citizens murmur indications of their dissatisfaction towards an administration which has overseen unprecedented levels of nominal growth, nevertheless within an environment of shrinking democratic activities and a systematic degradation of the rule of law.
Bangladesh Today — A Crisis Brewing
More than the pandemic itself, rising global prices and inflationary pressures as a result of the Ukraine-Russian War, has questioned the very fabric of the Bangladeshi economy. The IMF as a result, was called into action recently — the government requested a whopping USD 4.5 billion in the form of what is essentially a bailout package. The multilateral agency has historically offered capacity-building guidelines, directed financial support and provided policy recommendations to Bangladesh since 1972. Notably, Bangladesh received USD 987 million in budgetary support in the form of an IMF approved Extended Credit Facility in April 2012 to assist in restoring nationwide macroeconomic stability — following the Great Recession. In 2020 the IMF announced emergency COVID-19 support towards the country in the form of loans totalling to USD 732 million via its Rapid Credit Facility and Rapid Financing Instrument — indicating that it aimed to assist the government in addressing immediate healthcare needs, social protection programmes and balance of payment challenges.
In the past couple of months, civil society leaders and seasoned economists have expressed concerns regarding the socio-economic implications of rising import costs and receding foreign currency reserve levels — which sat at USD 39.8 billion in July 2022, the lowest since October 2020. This presently allows Bangladesh to cover import expenses for roughly 5 months. The current account deficit hit an all-time record high of USD 14.07 billion in July 2022 — with an increasing trade gap forcing the government to revisit a wide range of multidimensional policy decisions.
A series of proactive austerity measures — including production halts on diesel-run power plants and a simultaneous decision to implement area-based power cuts across the country — have been set in motion with the aim of restricting fuel imports and cutting down on import costs. Reducing stress on foreign currency reserves in line with mitigating the effects of the rising current account-deficit, remains a top macroeconomic objective — and the IMF loan request is part of a wider strategy to borrow funds to narrow the widening deficit and level up on falling foreign currency reserves. Similar request to organizations such as the Asian Development Bank have also been made by the Government. The Hasina government announced its decision to hike fuel prices by more than 50 per cent at one go, with the stroke of a pen in the first week of August — with headline inflation standing at 7.48 per cent in July, these austerity measures have put the country right at the heart of a cost of living crisis. The local currency — Taka — is devaluing remarkably down the barrel compared to leading currencies such as the US Dollar and the Euro. And while exports and remittances remain relatively stable — the increased cost of imports has pushed the entire nation towards a major crisis that is hitting at the core of the middle class.
It is commonly agreed upon in Bangladesh and in most post-colonial societies in fact, that Bretton Woods institutions such as the IMF and the World Bank have often used their political clout to control and constrain developing nations. Words have not been minced by leading politicians of the Awami League in the recent past, to criticize these institutions as vehicles of imperial enterprise — there is as such, resentment towards these Washington-based multilateral institutions with respect to the Padma Bridge, with this issue remaining at the core of domestic politics throughout the past decade. Going to the IMF — for Sheikh Hasina — is therefore nothing short of an emergency measure that she would definitely, hoped to have avoided. Irrespective of the truth when it comes to pointing out the political overreach of the IMF and the World Bank, the reality is that the Bangladeshi economy is indeed in trouble — one which has its roots, if not primary accelerators, within its domestic economic policymaking and governance apparatuses.
Effective Governance, Accountability and Democracy — Path Towards Stability
International politics aside — Bangladesh needs to reflect on its own trajectory to understand the origin of the crisis it faces. Today’s economic challenges is a clear-cut vantage point to understand the procedural cracks and policy failures with respect to economic and political decision making — because pervasive concerns remain institutionalized across Bangladeshi society in forms and across structures in public life, that will have long-lasting generational effects. The current regime has failed for one — to constrain a looming liquidity crisis stemming from an intensely unstable banking system, that has acted as a barrier to holistic economic development in the past decade. A culture of loan defaulting, non-performing loans and corruption has engulfed the banking system and frankly, humiliated the development narrative sold by the ruling regime. A mirage of sorts — where a cyclical process of public sector banks being bailed out and newer institutions replacing them across the aisle, that too under the tacit protection of the state — was crafted with the intention of showcasing the stability of the economy and to supposedly save powerful and politically-connected individuals, from prosecution.
Secondly — corruption, in key macroeconomic sectors such as power generation, infrastructural development, education and healthcare, and more broadly speaking, in the form of outward money laundering — is telling of the nature of who primarily benefitted from the decade of development seen in the country. Between 2009 and 2018, the country lost approximately USD 8.27 billion on an average annually, via money laundering schemes, according to a report published by Global Financial Integrity — add to this, Bangladeshi account holders across Swiss Banks have skyrocketed in the past couple of years. Corruption and wealth concentration at the hands of a few is further indicated by the fact that the country has been witnessing its highest levels of income inequality in its national history in recent years — that too during a period where overall poverty is shrinking and aggregate wealth increasing. Therefore — citizens are asking certain core questions, if not on the streets, then on social media. Is Bangladesh overspending compared to its economic capacity? Is Bangladesh investing in mega-projects as a means to maintain sustained levels of public sector corruption? Is the state responsible for its inability to maintain stability in the banking sector? Are unfettered levels of domestic capital being laundered out of the country under the protection of the state?
And importantly, Bangladesh perhaps faces its biggest challenge in establishing itself as a democratic nation — where people’s rights are protected by the constitution and via a representative parliamentary system. Democracy brings with it accountability, checks and balances, the rule of law and importantly, an institutional mechanism to address systematic challenges — one only needs to refer to the case of Sri Lanka to understand the importance of democracy, accountability and the rule of law, in enshrining economic development or stability (or lack off). The two recent general elections held in 2014 and 2018, unfortunately failed to represent the tenets of free, fair, credible and inclusive exercises — Sheikh Hasina won without much opposition, that too in the backdrop of law enforcement agencies acting as additional wings of the ruling party. The people lost their ability to vote and elections have become farcical according to observers — the opposition Bangladesh Nationalist Party, which in truth has its own skeletons, have been sidelined and weakened via judicial cases and political harassment. Its leader and Prime Minister Hasina’s chief opponent, three-time premier Mrs. Khaleda Zia, has been convicted of corruption charges by a judicial system, that has been criticized for being partisan to the government’s wishes. More importantly — people have lost their interest in electoral politics, primarily in fear of persecution for speaking out. All in all — politics in Bangladesh, is on its death bed.
Controversial legal architectures such as the draconian Digital Security Act — which has been accused of being a prescribed vehicle to target freedom of speech and expression — have been used and misused by a law enforcement infrastructure criticized for its egregious use of state power. Most recently, the Rapid Action Battalion — the elite anti-crime and anti-terror force — was sanctioned by the US State Department in reflection of growing human rights concerns. Keeping these issues in mind, without understanding and receiving a comprehensive and accurate public mandate, and without listening to alternative political views, any decision that the government takes today to address its economic challenges — is perhaps an incomplete measure that fails to recognize the all-inclusive tests being faced by the nation. And while the government has been quick to refer to international metrics which shine a positive light on the its nominal economic successes, it has failed to put apt notice to its receding performance across social indicators in arenas such as governance, rule of law, human rights and democracy.
In summary — the narrative sold by Sheikh Hasina and her regime is that of development over democracy. It is a principle which says that either you are with us — or against us. In the short-run — such a narrative may work and it has provided tools to market certain undisputed and credible successes of the country. But this narrative fails to have a contingency plan — one which the regime could have tapped into at a time of economic crisis such as this. And it pains me to say that Bangladesh — the country I continue loving and calling home — has taken a rapidly unsustainable and undemocratic path towards development. And that path — in coherence with struggles on establishing the rule of law, accountable governance schemes and an inclusive parliamentary system — will act as a barrier for the sustenance of its economy and its future potentials.
About Me:
I am a Freelance Columnist for the Bangladeshi media platforms — The Daily Star and Dhaka Tribune. I am currently pursuing a Masters of Public Policy degree at the Max Bell School of Public Policy @ McGill University. I can be reached at: aftab.ahmed@alum.utoronto.ca
