The liquidity crisis has been a pressing issue in South Asian countries, posing significant challenges to their economies—deep-seated roots, exacerbated by a combination of domestic and international factors. Domestically, mismanagement of financial resources and an overreliance on the banking sector have led to liquidity shortfalls.
In this article, we'll delve into the impacts of the liquidity crisis on these nations, specifically focusing on Bangladesh (as a fellow citizen and as a witness of the situation). We'll also explore potential strategies to overcome this crisis and stabilize the financial landscape.
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Before jumping into topic let's see the bookish definition.
A liquidity crisis refers to a situation where businesses, banks, or even entire economies face a shortage of liquid assets such as cash or assets that can be quickly converted to currency. This crisis can be triggered by a variety of factors, including sudden economic downturns, unforeseen emergencies, or disruptions in financial markets. During such crises, businesses may struggle to meet their short-term obligations, banks may experience runs as depositors seek to withdraw their funds, and financial markets can become highly volatile.
Let's see the far-reaching impacts of the liquidity crisis, and explore potential strategies to overcome this economic challenge.
Bangladesh, a dynamic and populous South Asian nation, is currently grappling with a severe liquidity crisis. In recent times because of different governmental malpractice and other political and economic reasons, we are facing a huge liquidity crisis. The impost is hampered directly as a result of it. We couldn't find the desired products anymore in the market or pay as high as double for the same goods.
Not only in Bangladesh but in these neighboring South Asian countries, it has emerged as a multifaceted issue, deeply affecting various sectors of the economy. What we are currently facing may seem like a global problem but the effect is adverse in these areas much more. My personal experience is, it's a messed up situation. Although it seems like we can get out of it. But it's a long run.
For example -
Small and Medium-sized Enterprises (SMEs), which are considered the lifeblood of the South Asian economy have been disproportionately impacted. Many of these businesses face difficulties in securing working capital, which has led to operational disruptions and, in some cases, closures.
Liquidity shortages have contributed to inflationary pressures, eroding the purchasing power of citizens. The rising cost of living has placed a heavy burden on households, particularly those with limited income. We have money but the money can't buy us what we need. The cost of living became as high as 30-40%!
Depleting foreign exchange reserves has left the nations vulnerable to exchange rate volatility. Ensuring stability in local currencies has become increasingly challenging. And no need to say, that all the local currencies in this area are losing their value, especially Pakistan's currency.
The economic strain has resulted in job losses across various sectors, leading to a rise in unemployment rates and socioeconomic distress. People are more into unofficial jobs like rickshaw pulling or physical labor because of the job loss. Even in our corporate sector, many lose their job because there's a scarcity of opportunities, like the event management sector.
Stenngthring financial institutes and executing digital financial services can bring a positive environment in this polluted situation. And that can also attract foreign investments. But first, these countries need to readjust their monetary policies like the Sri Lankan government did.
You see, we can write/talk about a few solutions but these will not help by any means unless and until the people in power don't want it and we fail to create any pressure to do so.
That's why before the solutions we need to understand the situation, its impact, and what we can do from our position to create pressure first.
We can point out different causes and their impact but these will not make any solution until the government and the powerful people doesn't take any action. The interesting thing is, that the rich are not affected as much as the poor. For example, they have loaned millions of dollars from the banks and made the banks go bankrupt while they are profiting in their business. The government also has a role play on this.
Creating advocacy groups with the help of civil society and SME Foundation, through social media campaigns and engaging with the media can create pressure. Moreover, seeking global attention through different means can bring positive change. Collaborating with businesses on a global level or in these Asia areas, doing community meetings can be another solution.
The problem is, that South Asian countries have a long history of Vote manipulation. If we had fair voting power the picture would be different. That's the reason we need to take other actions until it is too late. Remember, this is a long run! If we do not make any path for solution our next-gen will be in a much more unfavorable situation.
