Economy not on the road to recovery: Experts

Al Amin :
Bangladesh’s economic rebound from the ongoing crisis is unlikely before the upcoming national election as the government would not be able undertake stringent measures considering the volatility in the country’s political landscape.

Experts said the local factors-acute dollar crisis and slow pace in government income-have forced the government to rely on borrowing. On the other hand, private sector credit growth has decreased.

As a result, the country’s overall economy is not on the path of recovery from the crisis and there is no excitement.

Besides, uncertainty centering the upcoming national election is also forcing the country’s businessmen taking decisions at the moment.

Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), told The New Nation, “The crisis, prevailing in the country’s economy, will not be removed before the national polls as the government would not be able to take any strong measures during the period.”

“In the interim period, the foreign currency reserves must be protected from erosion. All payments should not be settled,” he added.

Regarding the import restriction, he said, “Imports should not be reduced anymore to keep the supply chain normal.”

Many countries in the world including Sri Lanka and Pakistan have succeeded in reining in inflation and economic recovery is also happening in many countries by defying hurdles.

But, the country’s economy is still slow as all the economic indicators, except export earning, are in a down trend.

Expatriate income growth has declined and overall imports have decreased.

At the same time, the ratio of opening and settlement of letters of credit (LC) for import of capital equipment, intermediate goods and industrial raw materials has come down significantly.

It means slow pace is prevailing in the country’s manufacturing sector.

The common people are facing the biggest problem due to the ongoing inflation, which is still around 10 percentage points and the food inflation continues to rise.

In the last two fiscal years, the local currency has depreciated by 23 per cent against the dollar. The value of taka could not be maintained due mainly to the dollar crisis.

And as a result, foreign exchange reserves fell down alarmingly and a big deficit in the balance of payment has been seen.

After the shock of the Covid-19 pandemic, many entrepreneurs had taken various initiatives including business expansion, but since the political situation has become a bit heated, the businessmen are changing their plans.

Many of them either stopped setting up new factories or expanding their business entities. As a result, private sector credit growth is consistently declining.

In September, the private sector credit growth dropped to 13.93 per cent compared to the same time last year, while in August it was 14.07 per cent, according to the Bangladesh Bank data.

The government is taking high interest loans from the local sources as well as from external sources. Due to this, the ratio of borrowing compared to the gross domestic product (GDP) is also increasing.

According to the Bangladesh Bank data, the government took a loan of Tk 97.684 thousand crore from the central bank in the outgoing fiscal year, and the rest from commercial banks.

Experts said that printing money is one of the reasons behind the high inflation.

Dr Zahid Hussain, former lead economist of the World Bank Dhaka office, said, “There is likely to be a period of structurally higher inflation compared to the past two decades from global trade, demographics and politics.

All of these point to higher inflation for longer.

Nobody knows for how long. So, the government should take decisions judiciously to overcome the situation.