The normal flow of international funding to Bangladesh has recently decelerated due to political reasons rather than purely economic ones. The upcoming national election is playing a significant role in determining the distribution of foreign funds. The International Monetary Fund (IMF) has hinted at postponing the release of the next portion of its $5.5 billion loan program. Their stance reflects a desire to synchronize with the incoming elected government to ensure the continuation of reforms, hinting at potential economic repercussions if there are any disruptions to the election process.
It is crucial to recall the reasons behind Bangladesh seeking assistance from the IMF initially. The Hasina administration’s portrayal of economic prosperity masked underlying structural deficiencies. Despite the facade of stability, the country faced worrisome issues like dwindling foreign reserves, ongoing inflation, and poor tax collection. Despite these challenges, under the current interim government, the economy has displayed signs of stabilization and progress, thanks to the necessary but painful reforms introduced under the IMF program. This progress, though fragile, represents a hard-won achievement that must be safeguarded. It is imperative for the new government, irrespective of its leadership, to continue on this path.
At present, what is urgently required is the prompt execution of the scheduled national election in February to establish a government with a legitimate popular mandate. Any disruptions or compromises in this electoral process could have severe repercussions on the economy and beyond. Only a legitimately elected government will possess the necessary political strength to finalize ongoing reforms.
Nevertheless, with the election looming in four months, major political parties are embroiled in disputes regarding the neutrality of the interim government and the Election Commission. Allegations of manipulation from both sides have been rampant, with accusations of favoritism in administrative reshuffles and appointments. This environment of suspicion and political maneuvering raises concerns about the democratic transition and the election itself, potentially unsettling investors, lenders, and development partners.
Global financial institutions have made it clear that they demand stability and predictability. The current reform agenda, which targets banking inefficiencies, revenue enhancement, and subsidy removal, is deemed essential albeit painful. A timely election is crucial to reassure entities like the IMF, the World Bank, and foreign investors that Bangladesh remains a reliable and stable investment destination. On the contrary, any disruptions or delays in the election process could lead to a loss of confidence. The IMF program could face a standstill, putting at risk the remaining $1.9 billion. Apart from immediate financial consequences, internal unrest could deter foreign investments and endanger Bangladesh’s reputation as a dependable manufacturing center.
It is imperative for political parties to transcend partisan disputes and view the election as a linchpin of national economic resilience. The government must stand firm in ensuring that the election proceeds smoothly and according to plan.