Al Amin :
The government should be very cautious about loan for development projects in order to avoid Sri Lanka-like crisis, economists say.
Bangladesh’s economy still have a strong base and there is a little chance to face the crisis like Sri Lanka if there is no big blow to inward remittances and exports.
The government will have to give priority to the financial benefit instead of political consideration in taking development projects and implementation, they added.
It will also be careful about the monetary use of the foreign exchange reserves to finance domestic investments and to support the exchange rate, they said.
Bangladesh’s overall trade deficit has already crossed $18 billion in the first seven months of the current fiscal year and it could be increased in the day to come for rising trend in prices of commodities, including petroleum products, in the international markets, they said.
Bangladesh however, feel the impacts of the Russia-Ukraine war as the conflict is causing a food crisis around the world and has sent inflation to a higher level and it is a matter of concern, they said.
On the other hand, Bangladesh will lose $6.38 billion in export after the LDC graduation in 2026, according to a study prepared with the data from the World Trade Organisation (WTO). It also reason to become worry for Bangladesh.
“The balance of payment crisis that we are facing in Sri Lanka is not the main risk for Bangladesh at the moment, even in the near future. But, it can learn from this experience,” Dr Zahid Hussain, former lead economist of the World Bank, Dhaka office, told The New Nation on Saturday.
He also said, the foreign debts of Bangladesh account for only 17 per cent of the country’s gross domestic product, which is low in international comparison.
“Most of the external debts are with bilateral or multilateral institutions such as the WB and are concessional or low-interest rates,” Dr Zahid said.
And the foreign currency reserve (currently $44 billion) can cover more than six months of imports, which is very solid, the economist said.
However, he said, the government should be cautious about loans for mega development projects so that the loans do not become a burden. Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), said “Geopolitical tensions along with rising prices of commodities, including fuel oils, in the global market may push up pressure on the external sector. This is a matter of concern for Bangladesh.”
Bangladesh should take lesson from the Sri Lankan crisis, he added.
Sri Lanka has descended into its worst financial crisis since independence for fast-depleting foreign currency reserves, caused by the dragging pandemic and the Russia-Ukraine war.
As a result, the country can’t afford imports of staple foods and fuel, leading to acute shortages and very high prices. And Sri Lanka has already exposed that would temporarily default on its foreign debts.
Keeping the situation in mind, Bangladesh should be careful of the price subsidies to avid crisis, economist said.
