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IMF steps in to bail out Bangladesh's struggling economy

AILSA CHANG, HOST:

Bangladesh has been called an economic miracle. The South Asian country has seen some of the world's fastest economic growth. Millions of people have emerged from poverty in recent decades. But that success story could now be sabotaged by a global economic slowdown. This week the International Monetary Fund has a team in Bangladesh negotiating a rescue package. Let's turn now to NPR's Lauren Frayer, who covers South Asia, including Bangladesh, but happens to be in our studios here in Washington, D.C., this week - same with me. It's nice to see you, Lauren.

LAUREN FRAYER, BYLINE: Good to see you in person. Thanks for having me.

CHANG: Well, what happened here? Like, why has Bangladesh's success evaporated?

FRAYER: So when the West spends less this holiday season, Bangladesh feels it. It manufactures clothing for Western brands. And when they order less, Bangladesh doesn't get that revenue. Bangladesh also relies on remittances from its diaspora abroad. When Bangladeshis in the U.S. and Europe can't afford to send as much home, you know, the Bangladeshi government suffers. And fuel prices have skyrocketed on top of that.

CHANG: Right. Well, can you just take us back? Like, how far had Bangladesh come?

FRAYER: It's an amazing economic success story according to every economist I've ever interviewed. At its birth in 1971, Bangladesh was one of the poorest countries in the world. And in 50 years, it built an economy that became the world's second largest exporter of apparel behind China. And people's lives improved. Life expectancy rose by more than 50%. Infant mortality dropped by 90%.

CHANG: Wow.

FRAYER: Last year the IMF said Bangladesh's GDP would exceed those of Denmark or Singapore, countries we think of as wealthier. And now the IMF is preparing loans to rescue its former prodigy.

CHANG: Well, what about the role of Russia's invasion of Ukraine? - because that has led to higher fuel prices. Is that also contributing to what's happening right now?

FRAYER: Yeah. So in the U.S., the price of filling up your gas tank depends on the global fuel price, but it also depends on how much the U.S. federal government and your local state government levies tax on that. Well, in Bangladesh and in many other developing countries, the government actually subsidizes fuel so people can afford it. And now, as global fuel prices are rising on international markets, the Bangladeshi government needs to subsidize more and more, and that's draining government coffers. And in August, Bangladeshi government just said, look. We can't afford to do this anymore. And so it stopped subsidizing those, keeping those prices artificially low. And within days, the price of gas, diesel, kerosene, cooking gas went up by 50%. And that's reverberated through the economy. And thousands of people took to the streets to protest that.

CHANG: Well, as you say, Bangladesh is a big clothing exporter. Its garment factories have fueled growth. It's helped pull millions out of poverty. How are those factories faring now?

FRAYER: So they're hurting because Bangladeshi garment factories are processing less orders from the West. Those factories make up 80-plus percent of Bangladesh's exports. So that reverberates through the economy again.

CHANG: Sure.

FRAYER: And by the way, workers take a hit, too. A lot of them are first-time female workers on minimum wage. I spoke to Taslima Akhter. She's a union rep for garment workers in Bangladesh.

TASLIMA AKHTER: They are suffering a lot because rice, egg, vegetable - everything's price is so high now. There's another crisis of gas and electricity supply also.

FRAYER: She talks about a crisis of electricity supply. Bangladesh's power grid also runs on imported fuel, which is getting more expensive, and so the government is rationing electricity. There are rolling blackouts. There was a day last month where the lights went out in practically the entire country for 10 hours.

CHANG: Oh, my goodness.

FRAYER: So that, of course, hurts productivity as well.

CHANG: Absolutely. Well, as we mentioned, the IMF is now in Bangladesh. What exactly are they doing to help the country get out of this crisis?

FRAYER: Negotiating loans. So the Bangladeshi government is asking for up to $4.5 billion. And Bangladesh is the third country in South Asia behind Pakistan and Sri Lanka to ask for IMF help this year. We're seeing worrying pressures. And look; even an economic miracle like Bangladesh is not immune.

CHANG: Not immune. That is NPR's South Asia correspondent Lauren Frayer. Thank you so much, Lauren.

FRAYER: Thank you.

(SOUNDBITE OF THE PHARCYDE SONG, "SHE SAID") Transcript provided by NPR, Copyright NPR.

Lauren Frayer covers India for NPR News. In June 2018, she opened a new NPR bureau in India's biggest city, its financial center, and the heart of Bollywood—Mumbai.