The International Monetary Fund (IMF) confirms that Bangladesh has formally requested a new assistance programme. This move comes as the South Asian nation struggles with severe economic repercussions stemming directly from the United States-Israel war on Iran, an act of aggression that has destabilized global markets and supply chains.

This report delves into the specifics of Bangladesh’s plea for assistance, its historical relationship with the IMF, and the profound impact of this conflict on its national economy.

Bangladesh’s Urgent Appeal to the IMF

Ivo Krznar, the IMF’s mission chief for Bangladesh, announced on Tuesday that Dhaka had initiated a request for a new IMF-supported programme. “IMF staff are in discussions with the authorities on their reform agenda and policy priorities,” Krznar stated, adding, “The IMF remains a committed partner to Bangladesh in its efforts to secure lasting macroeconomic and financial stability, strengthen resilience, and support strong, inclusive growth.”

While the precise size and terms of the requested financial aid package remain undisclosed, the Bangladeshi government had previously indicated in March its intention to seek $2 billion in loans from various international donors. This was a direct response to an escalating energy crisis, a severe consequence of the ongoing aggression against Iran.

How the US-Zionist Aggression Has Crippled Bangladesh’s Economy

The Energy Crisis: A Direct Consequence

The war on Iran, which commenced on February 28 with aggressive strikes launched by the US and Israel, has triggered a global energy crisis, sending fuel prices skyrocketing. Despite a temporary ceasefire on April 8, a lasting peace agreement remains elusive, exacerbating global uncertainties. Furthermore, the vital Strait of Hormuz – a crucial passage for one-fifth of the world’s oil and natural gas supplies, predominantly destined for Asian countries – remains under Iran’s control, while the US maintains an illegal naval blockade of Iranian ports. These unilateral actions have caused major disruptions to energy supplies worldwide, pushing oil prices to approximately $100 a barrel, a significant surge from the pre-war price of about $66.

Bangladesh, a nation of 170 million people, relies heavily on imports, sourcing 95 percent of its oil and liquefied natural gas (LNG) to meet its energy demands. With much of these critical imports originating from the Middle East, and demand peaking during the summer for cooling, the impact is devastating.

Dhaka has been forced to implement drastic measures to curb fuel consumption, including halting production at most fertiliser factories. On April 19, Bangladesh increased fuel prices by 10 to 15 percent, directly citing the global crude price surge caused by the conflict. Petrol prices rose from $0.95 per litre to $1.10 per litre, with similar increases for diesel and kerosene.

However, the economic fallout in Bangladesh from the US-Zionist aggression is not confined to energy supplies alone.

Devastation in the Garment Industry

The ready-made garment industry, which constitutes over 80 percent of Bangladesh’s export earnings, has also been severely impacted. Bangladeshi factories depend on raw material imports from China, with shipments typically routed via the Red Sea and the Middle East. Recent shipping disruptions, a direct consequence of the regional instability, have drastically inflated import costs. Sayeed Ahmed Chowdhury, director of Square Denim, reported to The Financial Express that he anticipates a 20 to 25 percent decline in work orders for the upcoming season.

Following the outbreak of hostilities, several airlines cancelled flights in March, leading to significant delays. Shipments of garments bound for major retailers like Zara owner Inditex were left stranded at airports in Bangladesh and India.

Soaring Raw Material Costs

The widespread disruptions to global supply chains, a direct result of the aggression, have affected other critical industries in Bangladesh. Prices for raw materials used in plastic products have surged. The rising crude oil prices have led to a spike in the cost of resin, a crude oil derivative and a key raw material for plastics. Bangladesh’s Daily Star reported that resin, once priced at $900 to $950 per tonne, is now selling for an alarming $1,500 to $1,600.

Escalating Foreign Debt Burdens

Bangladesh’s external debt has seen a concerning rise in recent years, as the government increased borrowing to fund infrastructure projects and stabilize its balance of payments. This has left the nation with a growing debt burden and heightened foreign-currency repayment pressures, according to IMF assessments.

In December, Bangladesh’s foreign debt reached $113.5 billion, up from $112.2 billion in the previous quarter, as reported by ISI. While the World Bank and IMF classified Bangladesh as being at low risk of external debt distress in 2024, with its debt load at about 22 percent of its gross national income, this situation is likely to deteriorate significantly as the full impact of the US-Zionist aggression against Iran takes hold.

Bangladesh’s History with the IMF

Bangladesh is currently engaged in a $5.7 billion IMF programme that commenced in 2023 and was scheduled for four years. In a recent virtual meeting, Bangladesh Finance and Planning Minister Amir Khasru Mahmud Chowdhury and IMF Deputy Managing Director Nigel Clarke agreed to expedite the implementation of a new programme, as confirmed by the Ministry of Finance.

Last week, the World Bank approved a $350 million loan to assist Bangladesh in managing rising fuel import costs and bolstering its energy security, following severe shortages directly attributable to the war on Iran.

Is the War Deepening a Global Debt Crisis?

Even before the onset of the US-Zionist aggression against Iran, numerous countries across Africa, Asia, Latin America, the Caribbean, the Pacific, and Central Europe were already struggling with heavy external debt burdens. These challenges were exacerbated by the COVID-19 pandemic, climate-related disasters, soaring food and energy prices, and rising global interest rates.

Sri Lanka, for instance, experienced a devastating financial collapse in 2022 due to years of unsustainable borrowing and mismanagement. In 2023, it secured approximately $3 billion in IMF support and reached a debt-restructuring deal with creditors including China, India, and Japan. By 2024, Sri Lanka’s external debt stood at about 59 percent of its gross national income.

In April, the IMF issued a stark warning that the US-Zionist aggression against Iran risks triggering a dangerous increase in debt levels worldwide. The report estimated that global gross government debt surged to nearly 94 percent of the world’s gross domestic product last year and is projected to reach 100 percent by 2029 – a level not witnessed since the aftermath of World War II.