Bangladesh: 'Global South' Debt Crisis Deepens

The recent ousting of the Sheikh Hasina government in Bangladesh marked a dramatic turn in the country's economic saga reflective of broader turbulence faced by many developing economies. This upheaval underlines a deeply disturbing pattern wherein stagnant trade, soaring debt interest costs, and brutal austerity—enforced as conditionalities for financial aid by the IMF and private capital—have been visited on one country after another.

Weeks ago, Bangladesh was being heralded as the economic success story. The Western media and many mainstream economists were touting impressive growth—forecasting that, according to the IMF, Bangladesh's GDP would soon surpass that of Denmark or Singapore. The country's per capita GDP was already higher than its neighbor, India's. With an average GDP growth rate of about 6.6 percent over the past decade, it seemed like Bangladesh was on its way to continued success. It was only in April this year that the World Bank forecast the economy would grow by 5.6 percent, driven by its booming garment sector, which capitalizes on low-cost labor and makes up more than 80 percent of the country's exports. The government even said its factories would account for 10 percent of global apparel production by 2025.

However, these glittering statistics conceal a more troublesome reality beneath the surface. The economic rise of Bangladesh was based on unstable grounds marked by falling profitability for local capital. The recovery of profitability from the global Great Recession of 2008-2009 started to fade from around 2013 and set the stage for the downturn that got accentuated with the pandemic slump of 2020.

The present crisis in Bangladesh reflects the general picture of so many nations in the Global South, where development processes and economic growth have generally been accompanied by growing debt and structural adjustment. The IMF conditions for financial aid are almost always enmeshed in harsh austerity measures that stunt growth in economies and sharpen the blade of social inequality further. With escalating debts and spiraling downward under ever-greater economic pressure, the sustainability issue can only become more formidable.

The case of Bangladesh acts as a potent reminder of the vulnerabilities that many developing economies face. It has brought to the fore the need for a review of global financial policies and support mechanisms that ensure more sustainable and fair growth. Now that things have settled following the recent upheaval, the path ahead that Bangladesh chooses to take will be closely watched as an indicator of how countries in similar predicaments negotiate their challenges.