Bangladesh is not Sri Lanka yet, but price hikes, protests are worrisome

The recent wave of agitations over an unprecedented fuel price hike in Bangladesh is raising concerns in Delhi, adding to worries over a troubled neighbourhood after unprecedented economic crises hit Sri Lanka and Pakistan.

The India-friendly Awami League government on August 5 suddenly raised the prices of diesel and kerosene by 42.5% and petrol and octane by 51.1% and 51.7%, respectively. The fuel price increase led to a hike in public transport fares with an immediate cascading effect on food prices and those of other essential commodities.

Also read: Violence against minorities in Bangladesh is a headache for India

Dhaka’s Daily Star described the energy price hike as “the highest ever in Bangladesh history”. Coming as it does after huge power cuts to conserve costly fuel and handle a sharp drop in domestic natural gas output, which is adversely impacting on industrial production especially in the export-driven readymade garments sector, the fuel price hike is causing much public angst.

Loan conditionalities

Many feel the huge fuel price hike follows conditionalities possibly imposed by the IMF, from which Dhaka now admits to seeking a $4.5 billion support package. It is also seeking similar support from the World Bank and Asian Development Bank (ADB) to the tune of another $1.5 billion. 

Bangladesh Finance Minister AHM Mostafa Kamal initially denied seeking bailout packages from multilateral lenders but now says they come without any conditions. He insists the fuel price hike was necessary to stop bleeding losses of nearly $8 billion due to fuel subsidies in the last few months, since the Ukraine war led to a huge spurt in global energy prices.

Bangladesh may not yet be in the same boat as Sri Lanka or Pakistan as it still has enough forex reserves to pay for four to five months of imports, but rising fuel import costs and possible drop in export earnings due to power rationing and global recession may have prompted Dhaka to seek a safe cushion before it is too late.

Regardless of why the government had to impose the drastic fuel price hike and seek support packages from IMF, World Bank or ADB within a month of high voltage publicity of having successfully built the 6.15 km railroad bridge on River Padma without World Bank funding and with the country’s own resources, there is no doubt that these developments are raising uncomfortable questions over Bangladesh’s much-touted turnaround success story and exposing chinks in its armour.

Why India should be worried

India has much cause for worry over the sudden turn of events in Bangladesh.

In the first place, the wave of public agitation over an unpopular government decision is attracting many including apparently unaffiliated student and labour groups to join street agitations. Even transport operators are threatening shutdowns unless they are allowed to raise fares to manage high fuel prices impacting their cost of operations. This gives the Islamist opposition a huge opportunity to step up their agitation to bring down the Hasina government.

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The leading Opposition party, the BNP, and its ally pro-Pakistan Jamaat-e-Islami are clearly buoyed by this Godsend of an opportunity. No longer are they seeking parliament polls, due at end of 2023, under a caretaker government, as was the case a month ago. BNP leaders are now threatening a massive agitation to bring down the Hasina government. Any threat of forcible regime change in Dhaka should worry Delhi.

Secondly, the gains on connectivity made by India like recent agreements to use Bangladesh ports to access the North-East can be negated by a sustained spell of street violence that seems inevitable if the Opposition seeks to bring down the government by force.

Also read: With Padma Bridge, Bangladesh’s Iron Lady Sheikh Hasina makes a statement to the world

Thirdly, any long spell of violent agitation by the Islamist Opposition, using mass anger of price rise, may lead to attacks on religious minorities. Bangladesh intelligence says planned attacks on Hindus may aim to drive a wedge in Delhi-Dhaka relations ahead or after Hasina’s scheduled visit to India in early September.

Fourthly, the US sanctions against seven top security officials including police chief Benazir Ahmed has impacted on morale of the security forces. That may impact adversely on the government’s capacity to curb agitations spearheaded by the Opposition but joined by ordinary citizens.

Hasina in a bind

The sharp hike in fuel and food prices may dent the government’s pro-people image, negating many of its popular measures like housing for the poor. With the West pushing for inclusive elections in Bangladesh and the Opposition determined not to join polls but try bring down the government through a violent agitation, Hasina is obviously in a bind. 

Any tough policing to control the agitation will invite much criticism on the human rights front which her government can ill afford as it negotiates with the US to withdraw the sanctions. But if the Opposition is on a confrontation course, there is no other option left for Hasina but to crackdown.

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Hasina also needs to tighten the belts and crack down on bank loan defaulters and big sharks responsible for large scale money laundering. Without such measures, she will stand accused of taxing the poor and letting off the corrupt rich, including some cronies of the regime. These sharks have brought down some Awami League politicians in the past who took them on but Hasina can only afford to look the other way on bigtime economic offenders at the cost of her regime stability. 

She also urgently needs to revitalise her party and purge it of corrupt and ideologically incompatible elements like some from fundamentalist groups who joined the Awami League in recent years.

Her mounting challenges will worry India, which cannot afford to lose a friendly government in a sensitive part of the region and bargain for an Islamist takeover in Bangladesh.

(Subir Bhaumik is a former BBC correspondent and author)

(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal)