Economy under threat of external sector’s poor performance

ACCORDING to a recent report released by the Finance Ministry, the external sector of the economy performed badly in the first quarter of the current fiscal year, which has had a negative impact on the country’s already-struggling economy. Local dailies disclosed that the report was prepared by the Ministry ahead of a meeting of the coordination council on fiscal and monetary issues where a number of decisions on both domestic and external fronts of the economy were to be taken.
The news reports also added that Bangladesh Bank has been asked by the Finance Ministry to make an analysis of the domestic financial situation, including investment stagnation, for the July-September period of the current fiscal. The external front of the economy largely commands in shaping the internal financial dynamics and the current situation raises worries about many other internal sectors, including the manufacturing and investment sectors, the report added. The report made suggestions to improve the situation, which included taking remedial measures after analysing reasons behind the drastic fall of exports to North America, providing emphasis on solving the wages and safety issues of the RMG sector to assuage concerns of the buyers and consumers abroad and taking initiatives to fully utilise the export potentials in large economies such as India and China. The report also said export earnings during the period registered only 0.88 percent growth over the same period of last year, while imports in the first month of the current fiscal recorded a negative growth. The manpower sector also showed signs of decrease, whereas only leather sector showed potential.
If the current situation prevails, the economic growth of the country will slow down due to the weak external sector and lead to massive economic and financial complications for the people. The GDP has been expanding gradually and domestic demand for a more effective external sector has been increasing, but due to the sluggish performances of export, import, remittances, and foreign aids, the external sector’s contribution to overall growth will gradually keep falling. The nature of our adversarial politics has again made an unfortunate impact as instability, corruption as well as production problems due to labour strikes will finally wreak havoc with the economy. The government must do its utmost to support import and export businesses with subsidies without administrative laggings so that the economy can thrive without harming the external and internal sectors of the economy.
The threatening factor is that apart from the external sector’s poor performance, the internal sector of the economy is more at danger point, because the government current account is already in red, still government borrowing from internal sources is going up disproportionately narrowing the already squeezed domestic production level.
We can only advise the government to be prudent and now is the time.