Widening financial account deficit is frustrating for economy

Editorial Desk :
There is no good news for the country’s foreign exchange reserves. In the first eight months of the current fiscal year, the deficit in Bangladesh’s financial account has continued to widen showing the bleak prospect of more stress on the reserves. The Bangladesh Bank data shows that even a year ago, the country had a surplus of $11.9 billion, from the period between July and February of 2022-23, the financial account of the balance of payments (BoP) registered a deficit of $1.53 billion.

This deficit is in contrast to past years when the financial account has experienced a surplus almost every year. The World Bank data shows that the surplus was $944 million in FY16, $4.25 billion in FY17, $9.01 billion in FY18, $5.13 billion in FY19, $7.54 billion in FY20, $14.07 billion in FY21, and $13.67 billion in FY22.

While experts put blame on the policymakers who have failed to manage the macro economy efficiently, and they are right to an extent in this regard, but what they have failed to do is pointing at the nature of this unaccountable government that has for more than a decade flouted people’s democratic aspirations all the while indulging in corruption as a means to remain in power. Its evil consequences are now showing up.
However, to address the current account deficit, the central bank has given emphasis on reducing import payments to tackle the shortage of the US dollar. As a result, though the deficit could be minimised somewhat, the prices of almost everything, even the commodities that are not imported, have shot up resulting in financial hardships for most people.

Against the backdrop, the planning minister a few days ago indicated that the country’s headline inflation would increase even further. As a redress to the problems, economists point out that the central bank needs to withdraw the lending rate cap of 9 per cent so that both local and foreign businesses keep funds in the banks of Bangladesh.

Since the taka has lost its value by about 30 per cent against the dollar in the past one year owing to the fast-depletion of the reserves amid escalated import bills, the experts have also called for a withdrawal of multiple exchange rates which have created a negative impact on the remittance inflow as well.

Perhaps these suggestions can work, albeit minimally. The government that has lost public trust because of long periods of corruption and bad governance can hardly be expected to bring vitality to the present acutely depressed economy.