The depths of debt

SALEEM SAMAD

Developing countries such as Bangladesh are struggling to balance fighting Covid-19 and keep up with their growing public debt

The global leaders have realized that the coronavirus crisis has jolted the world from a slumber, to understand that the crisis has unveiled the spectre of a larger global crisis.

The health care crisis and its cascading economic consequences are predicted to further plunge many countries in the developing world into an unprecedented crisis, further pushing millions of people into poverty and starvation.

These conditions shine a strong light on the continuing debt problem that stands in the way of people’s survival -- the fight against inequality, the realization of their human rights, sovereignty and the self-determination of people, economic, gender, and ecological justice, and the pursuit of a dignified life.

Hundreds of international, regional, and civil society organizations (CSOs) including Action Aid, CADTM International, Oxfam, Third World Network, joined by 120 Bangladesh NGOs led by Coast Trust, are demanding to suspend the realization of debt instalments for all public debts of developing countries combating the Covid-19 pandemic so that the ongoing coronavirus crisis is not aggravated.

They call upon world leaders, national governments, and financial institutions both public and private, to take urgent action in compliance with their obligations and responsibilities, and commit to unconditional cancellation of public external debt payments.

The CSOs demanded the suspension of all instalments of public debt for at least the financial year 2020-2021 so that countries can develop the capacity to combat the pandemic and overcome the impact of this disaster on its citizens’ health, food, and economic vulnerabilities.

An international statement issued during Global Week (October 10-17) of action for debt cancellation sought the decisive and full solution to the debt problem as part of the profound transformation of economic and financial systems that the present crises so urgently demand.

Meanwhile, the CSO network appealed to the World Bank, International Monetary Fund (IMF), Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), and other bilateral, regional, and multilateral development financiers of Bangladesh.

Bangladesh’s economy is severely under stress due to the additional burden of pandemic management, while the country has a budget deficit of $17.65 billion in the current financial year.

The CSOs in Bangladesh are trying to urgently bring to global attention that the government of Bangladesh for the current financial year is being forced to allocate $6.20bn for servicing external debts to international financial institutions.

They are urging the multilateral, regional, and bilateral financial institutions to strictly follow the suggestions made by the World Bank and IMF and suspend the servicing of the public debts for 2020, so that the government can use its resources to fund initiatives to help the people in overcoming the Covid-19 challenge.

On the other hand, the G-20 governments announced the Debt Service Suspension Initiative (DSSI) -- not a cancelation but merely an eight-month delay of up to $12bn worth of payments for public debts.

Much of this debt is illegitimate, the CSO network argues. The international creditors lend irresponsibly and unfairly, driven by predatory lending. The money is used to finance harmful projects and policies, failing to comply with legal and democratic requirements, is saddled with onerous and unjust terms, and incurred by private corporations but assumed by governments or incurred through public guarantees of private profits.

The conditional loans, including cuts in public services and social protection, and severe austerity programs, have also caused as great if not greater harm than debt servicing, especially on women and girls, indigenous people, and the most impoverished and vulnerable people and communities.

CSOs argue that the demand is much more than “debt relief,” but also for “debt justice.”

First published in the Dhaka Tribune on 24 November 2020

Saleem Samad is an independent journalist, media rights defender, and recipient of Ashoka Fellowship and Hellman-Hammett Award. He can be reached at saleemsamad@hotmail.com; Twitter @saleemsamad

Bangladesh: Troubled waters

A foreign-funded bridge is hostage to murky local politics

THE BIGGEST infrastructure project in South Asia to be paid for by foreign donors is a $3 billion bridge in Bangladesh intended to span the Padma river, which is what the main branch of the Ganges is called as it flows through its delta to the Bay of Bengal, receiving the flow from the vast Brahmaputra river for good measure.

The bridge is the stuff of donors’ dreams. Its point is to end the isolation of Bangladesh’s poor south-west, home to 30m people who are cut off by these vast waters from the capital, Dhaka, and the rest of the country. The region’s isolation is compounded, to the south-west, by a high-security fence along the border with the Indian state of West Bengal; and, to the south, by the tidal Sundarbans, where dense mangrove forests are home to tigers. The proposed 6 km (3.8-mile) bridge could be a gateway to India, tying Dhaka to the great metropolis of Kolkata. It is also a crucial piece of an even more ambitious dream of connecting South Asia with South-East Asia, via Bangladesh and Myanmar. Official estimates say the bridge could raise Bangladesh’s annual growth rate by 1.2 percentage points.

The planned bridge, some 40km south-west of the capital, is designed to carry four lanes for traffic, as well as a freight railway and a gas pipeline. Complex works to channel the Padma’s flow are planned. Alas, it is easier to train the 5km-wide river than Bangladesh’s politicians to keep their hands out of the till. In June the World Bank cancelled a $1.2 billion loan, citing alleged corruption by Bangladeshi public servants. The World Bank has identified various officials as being unable to leave the money for the bridge alone. Sacking crooked-seeming officials has, for the World Bank, become a precondition for resuming lending. Bangladeshi newspapers have said that the prime minister’s chief economic adviser, Mashiur Rahman, is in the Bank’s sights. He says he has done nothing wrong and will only resign if the prime minister, Sheikh Hasina, tells him to. Regardless of Mr Rahman’s case, Bangladesh has a culture of impunity. Only one senior politician has ever gone to jail under an elected government for corruption, and that was a former dictator.

The Asian Development Bank is more ready than the World Bank to be a cheerleader for the Bangladeshi government and is keen to resuscitate the project. Like the Japan International Co-operation Agency, another backer, it has kept the door open. However, more Bangladeshi officials will have to step down before the World Bank is prepared to return. Probably the government will come back to the table, but not without hectoring its perceived enemies first. Sheikh Hasina has accused Mohammad Yunus, a pioneer of microfinance and a Nobel peace laureate, of putting the World Bank up to walking off.

The Padma bridge project has been in the works for over a decade. Western governments do not want to see it snapped up by a state-backed Chinese company (in return, perhaps, for an equity stake and for economic influence, as has happened with ports in Sri Lanka and Pakistan). India, with which Bangladesh has usually had good relations, would do its best to block a high-profile Chinese involvement in its neighbour’s economy.

Sheikh Hasina says Bangladesh will “not beg” from the World Bank. A sense of injured national pride has given rise to the unworkable notion that the bridge must now be built with Bangladesh’s “own resources”. The government is mulling a levy to help finance the bridge.

The only politician openly to reject Sheikh Hasina’s obsession with self-reliance is A.M.A. Muhith, the finance minister and a former World Bank official himself. Mr Muhith is too venerable to be required to call the prime minister “elder sister”. He knows that Bangladesh needs the multilateral agencies: only earlier this year the IMF helped out with a $1 billion loan. Bangladesh relies heavily on Western aid for a vast array of projects that otherwise would not exist. Without the Bank, there can be no bridge.

Sheikh Hasina’s Awami League is livid enough that it will be unable to keep its election promise of building the bridge before the end of 2013. Yet it would be even more appalled if the Bangladesh Nationalist Party, led by Sheikh Hasina’s arch-rival, Khaleda Zia, took office at the next election, bagging credit for the bridge. (That prospect is real: no elected government has won a second term.) And so, in the end, Sheikh Hasina has no strong incentive, other than the country’s best interests, to mollify the World Bank.

First published in The Economist, Sep 8th 2012