Bangladesh is home to 130 million people and is one of the least developed and most densely populated countries in the world. Although the last two decades have seen some improvement in life expectancy and overall standard if living, poverty remains extremely deep and pervasive, and efforts to relieve it continue to be hampered by a number of factors, including political instability, corruption, environmental disaster and the burden of servicing the country’s external debt.

Poverty

• Reducing poverty is Bangladesh’s main policy challenge. In 200/01, 50% of Bangladesh’s population was poor (under the upper poverty line) and 34% very poor (below the lower poverty line). This is the highest incidence of poverty in South Asia, and the third highest absolute number of poor in the world.[1]

• The incidence of malnutrition is the highest in the world. Every day nearly 700 children die of malnutrition-related causes. Among those surviving, more than half are stunted.[2]

• The country’s per capita GDP ($366 in 2000) is one of the lowest in the world

• Bangladesh is preparing an Interim Poverty Reduction Strategy Paper (I-PRSP) with the World Bank and the IMF. This is to be aligned with the budget for FY02/03 and might possibly be completed by the end of 2002.

• The authorities consider that in order to bring per capita income to a level equivalent to the current IDA ceiling of $885 within the next 25 years, GDP growth would have to average around 6 – 7% per year.

•  However, growth in the decade ending FY00/01, which averaged around 5%, is currently estimated to slow to 3.75% in FY01/02. With world demand for Bangladesh’s exports falling rapidly, industrial production has declined, and exports have registered a sharp drop.

•  Although imports are down and worker remittances have risen, net aid flows have declined and substantial net private capital outflows are continuing, and this has put increased pressure on official international reserves, which have shown a marked decline. By the end of FY10/02, they are expected to be only slightly more than one month of a compressed level of imports.

• At the WB/IMF joint annual discussion with the government, the Finance Minister Saifur Rahman, who is the Bank’s and Fund’s Governor for Bangladesh, pointed out that the reforms recommended by the country’s creditors had already incurred high social costs. ‘The government from its meagre resources has so far mitigated some of these costs,’ he said, ‘but further reforms are not likely to be socially acceptable unless additional resources for a safety net, investment in physical infrastructure and human resources development can be mobilised.’ He called on the world community to help the country to attain the Millennium Development Goals.[3]

  Environment

• Disasters associated with global warming, such as flooding, cyclones, and rising sea levels have had a catastrophic effect on Bangladesh. In 1998, the country began to experience the worst floods in living memory. By September, two-thirds of the country and half the capital was under water, the harvest was destroyed and 21 million people (equal to one third of the UK population) were left homeless.[4]

• The link between climate change and carbon emissions is no longer disputed, and historically the rich countries of the industrialised world are almost entirely responsible for this form of pollution. Already the economic damage attributed to weather-related disasters caused by global warming has been estimated at over $300 billion a year, [5] a sum which dwarfs both real and postulated development aid.[6]  The industrialised countries accordingly owe an enormous  “ecological debt” to poor countries such as Bangladesh where carbon emissions are minimal, and where vulnerability to sea level rise and other extreme weather conditions is exceptionally high.

Politics, law and order

• Since independence, the political scene in Bangladesh had been marked by violence, corruption and strife between religious factions Although there were occasional nominal elections, coups and counter coups resulted in series of military governments until 1990 when democracy was eventually restored. Elections in 1991, were won by the Bangladesh Nationalist Party (BNP), led by Khaleda Zia, the widow of the military dictator General Zia ur Rahman who had been assassinated in 1981. In 1996 the BNP was ousted by the rival Awami League led by Sheikh Hasina, but recent elections in October 2001 have once again returned the BNP alliance, still under Zia’s leadership.

• Rivalry between the BNP and the Awami League and their leaders has been intense, and allegations of political thuggery, corruption and religious persecution abound. Bangladesh’s human rights record has been much criticised, and there is special concern regarding assaults on women, police brutality and political harassment.

• The World Bank estimates that corruption and inefficient government costs Bangladesh around $1.5bn a year.

• Prime Minister Zia has now pledged to reduce corruption and lawlessness, and the BNP’s large majority should enable her to act more effectively than her predecessor.

• Finance Minister Saifur Rahman stated that his government would try to restore good governance and law and order to reduce poverty in the country. In October 2002, Bangladesh launched a crackdown on crime deploying 40,000 troops with sweeping powers to arrest criminals. Officials from both government and opposition parties have been among the 2,000 persons so far detained.[7]

Debt

• Bangladesh joined the World Bank in 1972, soon after independence. Since then, the Bank’s concessional lending arm, the International Development Association (IDA) has financed more than 169 operations with loans amounting to more than $9.5 billion.[8]

• During the last four years, public and publicly guaranteed external debt increased by around 4 percentage points, to approximately 36% of GDP in 2001, or $16.5bn.[9]

• Much of this increase was accounted for by government-guaranteed nonconcessional foreign supplier credits to state owned enterprises (SOEs), which rose by 2 percentage points over the same period.[10]

• The fact that 90% of the country’s medium and long term debt is concessional keeps the net present value (NPV) of total external debt to levels at which servicing still remains possible.

• Fiscal revenues are low in Bangladesh (9.2% of GDP in 200/01) and external debt service accounts for 17% of these precious resources.

• Foreign financing for the budget has declined and despite efforts to cut expenditures, the rising central government deficit is expected to be 6% of GDP in FY01/02 [11]

• The country now pays approximately the same amount - $790m – in debt service to the rich countries as it spends on public health.[12]

• The Budget for 2001/2002 shows:

• In addition to repayments on its foreign debt, Bangladesh faces rising commitments on its domestic debt. These further restrict the resources available to the government for poverty reduction.

• Despite being one of the world’s poorest countries, with over three quarters of the population living on less than $2 a day, Bangladesh has not been considered eligible to enter the World Bank’s Highly Indebted Poor Countries (HIPC) initiative. Although creditors argue that relief cannot be given until government has a much stronger policy for poverty reduction, Bangladesh urgently needs debt cancellation.

• A number of countries, the UK among them, have reached bilateral agreements with Bangladesh to write off their outstanding aid loans. As a result of this process, Bangladesh’s UK debt, which amounted to £1,285,136 in April 1997, had been written off by the end of March 2001.[13]

Population and Human development Indicators[14]

Debt (figures for the year 2000 in US$ million, unless otherwise stated)[15]

Bangladesh’s EDT of $15,609 million now stands at almost four times its 1980 level of $3,918 million, and the country’s foreign debt stock is forecast to rise steadily. The Economist Intelligence Unit predicts that by the end of 2003, her EDT will have increased to $18.3 bn., and her debt service to exports ratio to 10.4% .

As shown by the figures above, over two thirds of Bangladesh’s current debt is owned to multilateral and slightly under a third to bilateral creditors, with almost all this assistance borrowed on concessional terms. The largest multilateral creditor is the World Bank’s IDA to whom Bangladesh at present owes nearly $6.5  billion, and the Asian Development Bank. The largest bilateral creditor is Japan.

Although Bangladesh’s debt service to export ratio (9.1%) is slightly lower than for most of the HIPCs, her debt to exports ratio (180.3%) is already well above the 150% considered by the World Bank to be an indicator of unsustainability, and it is clear that the country’s debt repayments are currently absorbing precious resources that are urgently needed to supply the most basic needs of her people. Bangladesh therefore clearly requires swift and substantial debt cancellation, and in view of the fact that the present HIPC initiative is failing, a failure now even admitted by the World Bank itself,[16] an alternative answer must be found.

Jubilee Research accordingly recommends that a consultative body under an independent mediator be appointed to take stock of the country’s debt burden, in order that a just and fair solution that protects the human rights of Bangladesh’s population can be reached with a minimum of delay.[17]