Mohd Yunus Govt gets big support from Capitol Hill
By Nitya Chakraborty
The interim Government in Bangladesh led by Dr. Muhammad Yunus has achieved big success in the last few days in persuading the Biden administration to help in bailing out the country's ailing economy to meet the immediate challenges of the post-Hasina administration.
Interim Government head Dr. Md. Yunus who has good friends across both the Democratic and Republican parties in the US congress, has been successful in getting quick assistance from the Biden administration to deal with the immediate problems of the Bangladesh economy. Former US foreign secretary Hillary Clinton leads the Bangladesh lobby presently in the US congress as an old friend of the Nobel laureate.
To start with, the International Monetary Fund will be extending an additional US$ 3 billion loan to Bangladesh to meet the present crisis. A team of IMF officials will be visiting Dhaka later this month and finalise the loan programme which will include some conditions for improving the tax-GDP ratio. A new governor of Bangladesh Bank Ahsan H Mansur has taken up the issue with the IMF at the instance of Dr. Yunus and IMF has taken a favourable view of the Bangladesh request. This loan will be used to repay foreign liabilities and boost foreign exchange reserves.
At political level, Washington is sending a high level delegation led by Assistant secretary of state in charge of South Asia Donald Lu in the middle of this month to discuss the transition plan of the interim government. The delegation will have meetings with the interim government head Dr. Md. Yunus also. Dr. Yunus will be in USA in the third week of this month to attend the UN general assembly. He will follow up discussions with the American officials there. Indian Prime Minister Narendra Modi will also be addressing UN general assembly. It is quite possible both of them will meet for some time in New York, though officially, nothing has been stated..
The IMF has so far released US$2.3 billion loan to Bangladesh under the US$ 4.7 billion loan programme approved in January last year. Sheikh Hasina was the Prime Minister then and the economy was not that bad as it is now as a result of the latest developments as also the impact of the Ukraine war on Bangladesh exports. The inflationary pressures and high employment started from 2023 itself
Inflation in Bangladesh remained high in July, with the consumer price index rising by 1.94 basis points to 11.66 percent while food inflation crossed 14 percent in July for the first time in 13 years. Further, Bangladesh's foreign exchange reserves which stood at more than $ 40 billion in July 2022 almost halved to $ 20.5 billion in August this year. Dr Yunus is an economist with high level banking experience. Under his direction, the interim government hiked policy rate and took some other measures to contain inflation.
Interestingly, there is a rush among the other powers like China and Russia to help the interim government of Bangladesh at this hour. Russia is considering extension of loan repayment period for the Rooppur Nuclear Power Plant Project.
The total loan for the project is $12.65 billion, according to an agreement signed with Russia in 2016. At present, Bangladesh is paying $110 million yearly in two instalments with interest. The 10 year grace period for the loan will end in March 2027.After that, Bangladesh will pay $390 million in two instalments every six months against the principal amount. Russia has indicated that some concessions in repayments will be considered once the plant starts operation.
Russia is now a small player in Bangladesh.US and China are the two major players and there is a competition between the two to keep the new government in good humour to get maximum political mileage out of the decisions of the interim government. As of now, China has far more edge in the present Bangladesh politics as against the US though the interim head Dr. Yunus is more friendly to US as against China. India, despite all the developmental projects in its neighbouring country has a perception problem. The common view is that India has concluded these agreements getting benefits at the cost of Bangladesh.
This perception has become stronger after the Adani group's agreement to export power to Bangladesh created the controversy that Adanis are charging too high a rate for selling power. There is a talk of review of the agreement though as of now, there has been no official move for review.
Interim Government of Bangladesh is taking a wait and watch policy regarding their demand for extradition of Sheikh Hasina from India. As of now, More than 80 cases have been filed in different courts in Bangladesh implicating Sheikh Hasina for serious offences including murder. Interim Government knows that India will not extradite Hasina under such circumstances even if an official request is made by Bangladesh. This extradition issue has major international consequences involving big powers like US, China and Russia. Interim Government strategy now is to put India under constant pressure underlining that no normalisation will take place without extradition of Hasina.
Indian foreign ministry has a tough task on its hand. It will require innovative out of the box strategy to handle the process of normal relationship with the interim govt.
