Against the backdrop of thinning forex reserves, the government has taken up a number of steps. According to a news report on Sunday, among the host of measures that have been taken up so far are ordering banks to slap a 75 per cent margin on the opening of letters of credit for non-essential consumer products, restriction on the unimportant foreign tours of the officials, devaluing taka against the dollar, raising import duty on 135 products and withdrawal of the VAT on the import of edible oil. These efforts would indeed cut inflation and may help the poor people to withstand the rising cost of living.
As part of this plan, 1,800 projects of various sectors would be reconsidered for implementation. The planning minister rightly underscored that all projects are not of equal importance and if the implementation deadline of some projects are deferred, that will not affect the country much in terms of economy. The idea behind this step is to stop import of materials needed for these projects thus minimizing pressure on the dollar reserves. Currently, with the amount of reserves the central bank has, the country can support only five months import cost. The country may face an economic disaster, if reserves fall even further.
The current economic instability is part of a global crisis. Economic volatility has gripped the world and even the richest economy such as the US has seen unprecedented inflation at present. There are two obvious reasons for this: one is the fallout of the Covid-19 pandemic and the other is the Ukraine-Russia war. The war seems to be with us for a longer time than expected. One hundred days have passed since the war began, but intense battle is still going on with no peace in sight soon. As long as war is there, the world will continue to face the food crisis as the two warring nations supply 30 per cent wheat to the world.
Besides the Ukraine war, the rainy season is on the doorstep but indications are clear that floods will hit Bangladesh hard this season that may further push the country into crisis. Therefore, for stopping an economic disaster policymakers need to maintain both macro and micro economic stability. The economy of the country has not yet come to the brink of disaster as the four economic growth drivers such as export, non-exporting manufacturing sectors, agriculture and remittance have been performing acceptably until now. But pressure on the dollars must be minimized.
