Staff Reporter :
Low remittance inflow, widened trade deficit and eroded export orders have hit hard Bangladesh’s macroeconomic and upholding stability in it has become a big challenge for the country, economists said.
Hinting the indirect impact of the war between Russia and Ukraine would be high for Bangladesh, they said the next six months will be very crucial in economic management in the country.
European countries are the largest and important export destinations for Bangladesh. If the war lingers on, the global economy, especially the Eastern European economy, will be hit hard, and Bangladesh will be affected as a result of that, they said.
Dr Zahid Hussain, former lead economist of the
World Bank Bangladesh, told The New Nation, “Maintaining macroeconomic stability has become a big challenge for the country at the moment.”
“If more cracks develop, there will be little to do other than taking harsh actions,” he said.
“The government will have to think seriously about how it can reduce expenditure. It has to tighten its belts in the areas when it comes to spending from the state coffer,” he suggested.
Due to the slowdown in remittance inflow and blistering in import payment, the country’s foreign exchange reserves are likely to slip below $40 billion for the first time in nearly two years.
Bangladesh will have to settle import payments worth $1.96 billion with the Asian Clearing Union (ACU) next week. The reserve may fall down below $40 billion once the Bangladesh Bank adjusts the import payments.
The country’s forex reserve is now $41.98 billion at the moment, which was $46.15 billion in December last year as exports and remittance flow failed to keep pace with blistering import bills.
Imports show no sign of abating, while remittances may decrease next week as usually seen after Eid festivals. These may bring an adverse impact on the reserves, which have already eroded in recent months for unusual hike in commodity prices globally.
The decline in the reserves will create additional pressure on the macro-economy, said Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh.
He said, “Consumption of petroleum oil and electricity will have to be reduced to tackle the ongoing situation. We have still time to address the issue.”
Suggesting the government to take up foreign loans aggressively from multilateral lenders to implement mega projects, he said, “There is no other scope but to stop the implementation of mega projects by using the own funds of the government.”
The government has already begun the process to secure foreign finances.
“We have got the opportunity to receive $8 billion. But the government is primarily considering to take up $4 billion to $4.5 billion,” said a finance ministry official.
On the other hand, unofficial figures collected from the central bank show import expenditures of 11 months (July-May) of the just-concluded fiscal year would reach $81.49 billion, exceeding exports by $34.32 billion.
The deficit amount crossed the Bangladesh Bank’s projection of $33 billion, which will intensify pressure on foreign exchange market and worsen the current account balance position, aggravate the dollar crisis in the local market, the economists said.
