Govt braces for economic challenges
Staff Reporter :
Formidable economic challenges await the newly formed Awami League (AL) government as Bangladesh economy has been passing through a challenging time for the past two years with no signs immediate improvements .
The major macro-economic indicators signaled an significant stresslike the stubborn inflation rate eyeing to touch the double- digit mark, reserve facing deterioration in external buffer depleting by on an average $1 billion since 2021.
Likewise, a sluggish growth trend has persisted in the ongoing fiscal year as portrayed by at least another three key indicators: exports, remittances and imports.
Economists said that the initial task of the newly formed government will be to get the economy back on the growth track.
They identified that the main reason that Bangladesh could not get on the high growth track was the macro-economy which had been unstable for a couple of years.
They also mentioned the internal reports showing deterioration of the macro-indicators, prompting them to call for priority action by the new administration just setting sail against such headwinds.
Inflation is now 9.42 per cent in the country. This inflation has made things difficult for the common people.
In the first six months of the financial year (July-December), overseas remittance growth was only 2.91 per cent and export earnings was low too only by 0.84 per cent.
The rate of the dollar has gone up due to the deficit in foreign exchange earnings, imports have to be controlled, and Bangladesh Bank has to sell dollars from its reserve.
The Taka lost its value significantly against the US dollar over the past two years though the Bangladesh Bank took several steps, including measures to discourage non-essential imports. It even sold dollars from the reserves to banks to address the forex shortage and slow the currency depreciation.
Imports fell by around 21 per cent. The most restless element in the overall balance of payments is the deficit in fiscal accounts which now stands at USD 5.4 billion (USD 540 crore).
The revenue collection growthtick up but fall short of target in the July-November period of the current financial year of 2023-24 on the back of higher income and value-added taxes.
However, the balance of total domestic debt surged 12.2 per cent to Tk 19.6 trillion as of November. The October 2023 balance was recorded at Tk 19.4 trillion.
In banking sector, Non-performing loans (NPL) kept ballooned to Tk156, 039 crore from Tk131,620 crore in March, and Tk120,656
crore at the end of December 2022.
Apart from these, Bangladesh’s power and energy sector has also been passing a critical time as it has confronted several challenges due to the poor energy security, financial inability to import energy and fuel, unwillingness to explore and expedite domestic gas resources, tendency to opt for imported LNG and LNG infrastructure are the key factors for the sectored instability observed in recent times, CPD said in their recent Quarterly Brief on the Power and Energy Sector.
On restoring macroeconomic stability, Dr M Masrur Reaz, chairman and CEO of Policy Exchange of Bangladesh, said there were many measures undertaken over the last one or more years but that did not yield the expected level of outcome. “It should be urgently reviewed.”
“The new cabinet should work on the matters and, if necessary, take painful steps in the interest of the economy”, he suggested.
