Government should focus on macroeconomic stability by addressing inflationary pressure, power and energy crisis, and strengthening external sector

Download Presentation

Global economy is currently facing a number of challenges​ such as rising inflation, Russia-Ukraine war and the already existing impacts induced by COVID-19 pandemic. In view of the global crisis, the emerging and continuing challenges in Bangladesh on both domestic and external fronts are being aggravated. At present, Bangladesh is facing crises at least in terms of seven issues—climate change, COVID-19, Russia-Ukraine war, dollar, energy, inflation, and food.

In the above context, the Centre for Policy Dialogue (CPD) under its flagship programme Independent Review of Bangladesh Development (IRBD) organised a media briefing titled “Slowdown in Global Economy and Challenges for Bangladesh: How to Tackle?” on Thursday 20 October 2022. Dr Fahmida Khatun, Executive Director of CPD, delivered the keynote presentation on behalf of the IRBD team. While presenting its analyses, CPD offered a number of policy suggestions to address the challenges, particularly manifested in: (i) inflationary pressure, (ii) power and energy crisis, and (iii) external sector.

In light of the unrelenting inflation, Dr Fahmida Khatun underscored that an updated consumption basket should be formulated for calculating CPI inflation. While the government has no other option but to opt for loans from IMF and World Bank, the associated conditionalities should be publicly available for review and discussion before the signing agreement—sequencing the implementation of the envisaged reforms will also be critical​. The Bangladesh Competition Commission should adopt a strong stance against cartels and a zero-tolerance policy towards collusive practices. The Minimum Wage Board should consider increasing the minimum wages in all industries so that workers can afford basic food.

Currently, Bangladesh is facing inflationary pressure from two aspects, that is, a rise in prices for food items as well as interferences in the supply chain owing to the Ukraine crisis​. This is increasing the risk of food crisis. To curb this emerging food crisis, the National Board of Revenue (NBR) should immediately consider removing the advanced income tax (AIT), advance tax (AT) and regulatory duty (RD) on all imported essential food items. The government should prepare for maintaining adequate food stock not only through better agricultural production, but also through importing food. ​Food storage facilities and buffer stocks should be developed to increase resilience to crisis​.

In the external sector, growth of export earnings is above the strategic annual target with underlying disquieting trends such as the decrease in the overall export earnings. The growth of import payments is also being tempered down. While outward migration registered impressive growth, remittance inflow growth slowed down. Balance of payments (BOP) is sliding into further uncomfortable position​. Forex reserve continues to be a grave concern due to deficit in overall balance of payments. Market based floating exchange rate remains the only policy option. To deal with the turbulences in the external sector, the infrastructural need and announced policy support for export-oriented industries must be ensured. The import-related recent restrictive measures should be continued, and the utilisation of foreign-aided projects should be prioritised. The central bank should refrain from further depletion of forex reserve, particularly in view of the recent debate regarding the estimation methodology and pursue a floating exchange rate policy.

In her presentation, Dr Fahmida recommended that macroeconomic stability should be the primary focus of Bangladesh’s economic policy. She mentioned, inflationary pressure should be suppressed for the disadvantaged groups, the demands of energy and power sector should be met, and the exchange rate volatility should be tamed. The government should form a committee comprising the representatives of the Prime Minister’s Office, Ministry of Finance (MoF), Ministry of Planning, Ministry of Commerce, Ministry of Power, Energy and Mineral Resources (MoPEMR), Ministry of Food, Ministry of Agriculture, Bangladesh Bank and NBR, and they should work in a coordinated manner.

“Energy and power sector confronts multiple challenges, both short- and medium-term in nature,​” said Dr Khondaker Golam Moazzem, Research Director, CPD. He said that the power generation and supply crisis is likely to continue unless sufficient fuel is supplied. Even though the power crisis may be eased in the medium term, the long-term tension will continue as the added generation capacity is mainly import based, putting a huge burden of capacity payment on the shoulder of BPDB​. Moreover, CPD opined that BPC should consider downward revision of diesel, octane, and petroleum prices given the global oil prices are declining over time. Dr Fahmida mentioned, the government should put more emphasis on exploration of gas in order to reduce the over-dependence on imported fossil-fuel. ​Renewable energy needs to be more emphasised and prioritised ​to reduce the dependency on imported fuels.

Mr Towfiqul Islam Khan, Senior Research Fellow, Mr Muntaseer Kamal, Research Fellow, CPD, and Mr Syed Yusuf Saadat, Research Fellow, CPD were also present in the discussion. The briefing was followed by an open-floor Q&A session with journalists from both print and electronic media.

PRESS REPORTS

English (25)

  1. The Daily 1 Star
  2. The Daily Star 2
  3. The Daily Star 3
  4. The Daily Star 4
  5. The Daily Star 5
  6. The Business Standard 1
  7. The Business Standard 2
  8. The Financial Express
  9. Daily Sun
  10. New Age
  11. Dhaka Tribune
  12. UNB
  13. Business Post 1
  14. Business Post 2
  15. Business Post 3
  16. Business Post 4
  17. New Nation
  18. Observer 1
  19. Observer 2
  20. Asian Age 1
  21. Asian Age 2
  22. Bangladesh Post
  23. Tribunal
  24. People’s Time
  25. Business Insider

Bangla (47) 

  1. Prothom Alo
  2. KalerKantho
  3. Samakal 1
  4. Samakal 2
  5. Manabzamin
  6. Janakantha
  7. Inqilab
  8. Ittefaq 1
  9. Ittefaq 2
  10. Jugantor
  11. Nayadiganta
  12. BonikBarta
  13. DeshRupantor 1
  14. DeshRupantor 2
  15. BSS
  16. BhorerKagoj 1
  17. BhorerKagoj 2
  18. Sharebiz
  19. Bangladesh Pratidin
  20. AmaderShomoy 1
  21. AmaderShomoy 2
  22. Bhorer Dak
  23. Jaijaidin
  24. Alokito Bangladesh
  25. Swadesh Pratidin
  26. Shomoyer Alo
  27. Protidiner Sangbad
  28. Ajker Patrika
  29. Bhorer Darpan
  30. Amader Orthoneeti
  31. Daily Sangram 1
  32. Daily Sangram 2
  33. Amar Sangbad
  34. Dinkal
  35. VorerPata
  36. Daily Karatoa
  37. Daily Nabochatona
  38. Bangladesh Bulletin 1
  39. Bangladesh Bulletin 2
  40. Dhaka Times
  41. Manob Kantha
  42. Protidiner Katha 1
  43. Protidiner Katha 2
  44. Sarabangla 1
  45. Sarabangla 2
  46. DeshDarpon
  47. Sunam Kantha

Online (34) 

  1. The Daily Star (Bangla)
  2. Prothom Alo (English)
  3. Financial Express (Bangla)
  4. The Business Standard (Bangla)
  5. Observer (Bangla)
  6. Samakal 1 (English)
  7. Samakal 2 (English)
  8. Country Today
  9. Our Time
  10. Finance Today
  11. The Report
  12. Outlook Bangla
  13. Business Outlook
  14. Arthosuchak
  15. Bangla News 24
  16. BD News 24
  17. Bangla Tribune
  18. Jago News 24
  19. News Now 24
  20. Chittagong Tribune
  21. Daily Ganomukti
  22. Torrongo News
  23. Sonali News
  24. Matopath
  25. The Barta
  26. Bangla 71 News
  27. BD Type
  28. Dhaka Today
  29. AB News24
  30. Business Journal
  31. Ekushey Sangbad
  32. Amader Rajshahi BD
  33. Brittanto 24
  34. Red Times