How Bangladesh went from an economic miracle to needing IMF help – NPR

by | Nov 9, 2022 | Financial

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Women manufacture clothes in Dhaka, Bangladesh on Aug. 29. The ready-made garment (RMG) industry in Bangladesh is now a mainstay of the country’s economy. Today, Bangladesh is one of the world’s largest garment exporters, with the sector accounting for more than 80% percent of Bangladesh’s exports.

Mustasinur Rahman Alvi/Eyepix Group/Future Publishing/Getty Images

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MUMBAI — It was a rags to (relative) riches story. In 50 years, Bangladesh went from what U.S. diplomats once called a “basket case” to what the World Bank now calls “an inspiring story of growth.” Its garment factories helped pull millions out of poverty, especially first-time female workers. Life expectancy rose by more than 50%. Infant mortality declined by almost 90%. Last year, the International Monetary Fund predicted Bangladesh’s gross domestic product would soon exceed that of Denmark or Singapore. Per capita, its GDP is already bigger than neighboring India’s. Just months ago, Bangladesh was grabbing headlines as an “economic miracle.” But all of that is now threatened by a global economic slowdown that’s wreaking particular havoc in developing countries like Bangladesh. On Wednesday, the IMF reached a preliminary deal with Bangladesh to provide a $4.5 billion rescue package of loans.

It’s the third South Asian country, after Pakistan and Sri Lanka, to seek IMF support this year. What happened to Bangladesh? It’s impossible for Bangladesh, a young country of about 170 million, to bullet-proof itself from the current global economic slowdown, because it’s so entwined with the rest of the world: It’s the second-largest clothing exporter, behind China. It has a big diaspora that sends remittances home. And the government relies on imported fuel to run its electricity grid. So the country’s economic health largely rests on those three things — exports, remittances and fuel prices — all of which have taken a hit in recent months.

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Vehicle drivers queue to refill their vehicles with compressed natural gas at a CNG station in Dhaka on Oct. 15.

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“Things have gone from bad to worse, given the current volatility in the global economy,” says Farria Naeem, an economist at the International Growth Centre and London School of Economics.

In August, Bangladesh’s inflation rate hit 9.52% — the highest in more than a decade. Ping-ponging garment factory orders mean Bangladeshi exports decline

The ready-made garment industry is the engine of Bangladesh’s economy. It accounts for more than 80% of the country’s exports. It’s contributing an increasing amount to the global economy too. The government forecasts that by 2025, Bangladeshi factories will produce 10% of the world’s apparel. When COVID-19 hit, Bangladesh’s garment industry was devastated. Factories shut, and at least a quarter of their workforce — 1 million people — lost their jobs. Many of them went hungry.

Last year, as consumer spending bounced back in the West, factory orders slowly started returning to Bangladesh. And early this year, they skyrocketed. In June, Bangladesh exported more than $4 billion in apparel — a single-month record. But a month later, amid global inflation, orders plummeted again — by a whopping 30%.

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Women manufacturing clothes in Dhaka, Bangladesh on Aug. 29.

Mustasinur Rahman Alvi/Eyepix Group/Future Publishing/Getty Images

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Mustasinur Rahman Alvi/Eyepix Group/Future Publishing/Getty Images

“Export figures were really strong for 14 months in a row, but they took a big dip by September. This is at least partially tied to fresh economic pains in the West,” Naeem explains. “If there is a recession in the West, our exports are hurt.” Bangladeshi workers are already feeling the pinch. “They are not getting overtime now. Many of them live not only on their wages, but work extra hours. Without that, it’s difficult to survive, especially with inflation,” says Taslima Akhter, president of Bangladesh Garment Workers Solidarity, a labor group.
A majority of Bangladeshi garment workers are women. (Estimates range from 58% to 80%.) While higher-paid factory supervisors tend to be men, most of the women earn minimum wage — which is 8,000 taka, or …

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