Shirin Sharmin :
Every war is a human tragedy, and the recent conflict between Russia and Ukraine is no different. The knock-on effect of the war is expanding beyond its borders causing aggrandised human suffering. In all its manifestations, the Russia-Ukraine war has made the globe’s cost of living issue worse, endangering people’s lives, means of subsistence, and our hopes for a better future by 2030 are at stake. The entire economy of the world is now unstable after two years of combating Covid-19 and Bangladesh is also a victim of this conflict.
As the conflict broke out, the global average development expectations have been lowered down and the ability of the people to overcome hardship has therefore been deteriorating. The war in Ukraine and the pandemic’s ongoing consequences are anticipated to cause a further rise in the number of poor people. According to estimates, approximately 20 million individuals in Bangladesh are now in need of immediate financial aid.
The war in Russia and Ukraine has three direct effects: spiraling food prices, accelerating energy prices, and tighter financial conditions. Sadly, these three impacts are already beginning to trigger vicious loops that could lead to increased economic stress. For instance, high fuel and fertilizer costs push up farmers’ production expenses, which may drive up food prices, reducing household disposable incomeand exacerbate social unrest. These dynamics have significant effects on financial systems, international peace and security, and social cohesiveness.
Food is the most basic requirement of a human being, and it should never be viewed as a luxury. But the Russia-Ukraine war has already launched a catastrophe in the agricultural business and food price is sky-rocketing and the key factors behind this include exchange rate devaluation and inflationary pressure. In addition to this, rising fertilizer prices as a result of trade restrictions and greater energy costs have ultimately reduced the food supply. The executive director of the UN World Food Programme, David Beasley, has already voiced his alarm about the increased cost of food this year and food security may get much worst in the coming months.
A crisis in producing power is now developing in Bangladesh as global energy prices remain high. Bangladesh produces power mostly from coal, gas, and oil. Oil and gas prices have climbed remarkably from $25 to $38 on the global market since the epidemic and the Ukraine crisis, and as a result, the import of gas has significantly dropped. The government is only left with two choices as the fuel price soars. Reduced output to allow for power outages, or maintain a consistent supply by raising consumer electricity prices. To save energy and fuel consumption, the government has already taken several measures including area-wise load shedding, closure of markets and shopping malls by 8 pm, and a weekly day off of fuel stations. But disruption in energy supply may backfire if the production process is hampered as displayed in the case of fertilizer import in Sri Lanka.
The effect of the conflict between Russia and Ukraine will be more severe if the war lasts longer. The cost of imported goods has increased terribly in the last few months and the cost of production has accelerated manifold, raising consumer prices. High price and trade bans will put strain on the balance of payment balance as well. The current account deficit for FY2021-22 reached USD 10 billion at the end of January and the exchange rate is severely under pressure and reached a record high.
Strong political will and cautious macro-economic management are now crucial to create fiscal space. A well-thought-out programme may produce better results in the long run than a piecemeal one. To distribute the daily necessities at lower rates, the government should procure them from the international market at competitive prices. It is important to allocate sufficient funds for social safety net programs for low-income and impoverished families for at least a few more months. It should be strictly forbidden to start new projects with high-interest loans and expenditure in mega-projects should be carefully monitored.
Finally, until things return to normal, austerity measures like budget cuts should be encouraged in the country. These steps will help households to survive during the crisis and restrain lavish consumption.
(The writer is a researcher and serving as Assistant Professor at Bangladesh Institute of Governance and Management).
