History teaches us good economics is not always good politics. In practice there is a strong relationship between economics and politics because the performance of the economy is one of the key political battlegrounds. Many economic issues are inherently political because they lend themselves to different opinions. The main concern of political economy is to determine the relationship between governments and individuals, and how public policy affects society.
Bangladesh has an impressive track record of growth and development. It has been among the fastest growing economies in the world over the past decade, supported by a demographic dividend, strong readymade garment exports, remittances, and stable macroeconomic conditions.
In 2022, the country's most immediate challenge remains the economic, social and public health impacts of the COVID-19 pandemic. The official unemployment rate according to the latest survey by IMF was 4.2% in 2019, 4.1% in 2020 and 6% in 2021 (Trading Economics, 2022) but this more than doubles to over 10% for the youth unemployment rate. More importantly, 29.8% of young people in Bangladesh, including over 47% for young women, were not involved in education, employment or training in 2020. Fiscal risks include limited domestic revenue growth and higher health expenditure triggered by the pandemic.
In the financial sector, contingent liabilities from non-performing loans combined with weak capital buffers could necessitate re-capitalizations of state owned banks and depress credit growth. External risks remain elevated. While demand for ready mate garments appears to be stabilizing, the recovery is fragile. The Bangladeshi economy relies on its enormous human resources, rich agricultural soils and abundant water resources. The major dark side of globalization is the double standards it causes in developing countries such as Bangladesh. Double Standards is a phrase to portray that globalization puts on a mask to show how positive and beneficial it is for everyone including developing countries. However, behind the scenes, that's not the case.
Let's take the fire incidents as a case in point. These incidents are a recurring phenomenon in Dhaka and other cities, for many reasons ranging from violation of guidelines and usage of residential areas for commercial purposes, to lack of basic fire safety measures in the buildings. Managing fire hazards has been made even more difficult in many localities because of the narrow roads that are inaccessible for large vehicles carrying heavy equipment.
Moreover, the desperation of people who migrate to Dhaka from other parts of the country is often exploited by some vested interest groups, leading to criminal activities and increased pressure on law and order management. And with unemployment increasing many employers had to lay off workers to mitigate the pandemic-induced losses - the migrants remain prone to the lures of income opportunities by unscrupulous individuals. And people still keep migrating to Dhaka in the hopes of building a better life.
Dhaka city, along with the greater Dhaka region, account for 48 per cent of all the jobs in Bangladesh. All the major infrastructures of governance, including the secretariat, are based in Dhaka. The best educational institutions and medical facilities are concentrated in Dhaka.
For Bangladesh, there is no alternative to developing secondary cities. We have big aspirations, we want to achieve all the Sustainable Development Goals by 2030, and we want to become a developed nation by 2041. But without developing sustainable, economically efficient, climate resilient cities, achieving these goals would be impossible.
The world is changing. The IMF is changing with it. However, is not only how it needs to change if it is to remain relevant. It is also whether the political environment will allow it to remain relevant. The IMF is built on a commitment to cooperation among member countries. That commitment is on the wane. But the countries of the world might rediscover its importance. If so, they will find the Fund an invaluable instrument. The IMF cannot ensure that outcome. But it can, and must, prepare for it. To its credit, it is doing so.
IMF research shows that countries with lower levels of perceived corruption have significantly less waste in public projects. And among low-income countries, the share of the budget dedicated to education and health is one-third lower in more corrupt countries. That reduces the effectiveness of social spending.
The major problem is corruption in political economy. Though Bangladesh has developed from history's 'basket case' to a rapidly developing and emerging economy, with aspirations of becoming a middle-income country. The necessary reforms are clear; what is less clear is how to overcome the political constraints in order to implement them.
Anika Fatima, Editorial Assistant, The Daily Observer
