Bangladesh, along with the rest of the world, has been battling with the COVID-19 pandemic since 2020. The economic fallouts of the pandemic have been as critical as the health risks. As the world was navigating through the COVID-19 crisis, new challenges at the global level emerged in 2022. In this context, the Centre for Policy Dialogue (CPD) organised a media briefing titled, “Bangladesh economy in the context of changing global scenario”, held on 20 March 2022.
Dr Fahmida Khatun, Executive Director, CPD made an opening presentation at the session. The presentation stated that curbing inflation should be the centre of policy attentions of the government at present. The value of Bangladeshi Taka against major currencies should be stabilised in view of its inflationary implications. An independent banking commission should be formed on an immediate basis to mitigate the disarrays within the sector. Subsidy on fuel, power and agriculture should be continued for the next few months. Priority for public expenditure should be set clearly.
Dr Fahmida Khatun also shared that the volume of sale of essential commodities through the open market system (OMS) should be increased. Distribution of these commodities must be managed effectively and without any corruption, so that the eligible people have access to these items at low prices. The government should provide direct cash support to the poor, enhance social protection for low-income families, and extend stimulus to the small businesses for their survival during difficult times, said Dr Fahmida Khatun. She further mentioned that inflationary pressure will hamper a sustainable and inclusive pandemic recovery, since the real purchasing power of many people will decline, causing further inequality.
Professor Mustafizur Rahman, Distinguished Fellow, CPD spoke on the state of the external sector. The current account deficit is growing at a very alarming degree, said Professor Rahman. The remittance growth is also downwards. Buying price is not sufficient in terms of export as it is more volume driven and price of import is increasing as per world price. Exchange rate of taka has been depleting by 1.5% and trying to stabilise through selling of dollar. Therefore, he suggested for higher monitoring of transfer pricing sale as more money is moving out of the country. Good governance needs to come to play to avoid further laundering of money and stabilise the reserve situation. Long term contract needs be done for oil market in particular as the volatile oil market is creating a bad impact in the reserve situation, he recommended.
Oil prices are severely affecting the commodities market, said Dr M Tamim, Former Special Assistant to the Chief Advisor and Professor, Department of Petroleum and Mineral Resources Engineering, Bangladesh University of Engineering and Technology (BUET). He added, many Bangladeshi fuel companies are making profits significantly and still proposing for price hike. Dr Tamim recommended for slow increase of price and keeping in balance with the market price.
Speaking of the state of banking sector, Dr Shah Md. Ahsan Habib, Professor Selection Grade, Bangladesh Institute of Bank Management (BIBM) mentioned that inflation is pushing the interest rate on deposits below zero. Therefore, the value of savings is going down for the savers. He also added that, the rich and the large businesses are least affected by the pandemic but they get the stimulus packages first. Dr Habib opined that the non-performing loans (NPL) crisis will arise after overcoming the COVID-19 crisis. Capital adequacy is not sufficient, thus, he recommended to strengthen capital base of banks. He also suggested that free services provided by the state-owned banks should be brought under pricing.
Dr Zahid Hussain, Former Lead Economist, The World Bank mentioned that inflation has already occurred but the new risk is stagflation – simultaneously high inflation with low economic growth. The budget may need to subsidise the price of energy imports to prevent price pass-through to control inflation and protect the low-income groups. He opined that around Tk. 28,500 crore to Tk. 94,900 crore of fiscal space may be available to the government, it may be possible to subsidise energy imports at least in the current fiscal year. Therefore, increase of energy prices is not necessary in this fiscal year.
CPD’s Senior Research Fellow, Mr Towfiqul Islam Khan stated that tax evasion has been a major problem recently that is taking away revenue from the budget. There needs to be a cut in unnecessary expenses for project implementation, said Mr Khan. He also stressed on the need to timely access to data for effective analysis.
Mr Muntaseer Kamal, Research Fellow, CPD and Mr Syed Yusuf Saadat, Research Fellow, CPD were also present at the session. The briefing was followed by a Q&A session with journalists from print and electronic media.