Economy at stake

Zarif Mahmud: The economic crisis is deepening in the country. Not a single indicator of the economy is doing well. Foreign exchange reserves are rapidly depleting. The government has $15 billion in expendable reserves, which can cover only three months of export spending. Remittances have been relatively low in the country for the past few months, further reduced due to the unstable situation following the student agitation. past
The tumultuous state of the dollar market for more than two years has now become chaotic again. Export earnings are also decreasing consistently. And high inflation has been going on for a long time. Economists say that these five aspects have created a big risk in the country’s economy.
Apart from this, payment of the foreign debt of $100 billion with interest, reduction of domestic and foreign investment, lack of job creation and gas and electricity crisis in industry are also big problems for the economy. Economists say that if the crisis in the country centered on the student movement continues, the country’s economy will go into a coma.
The movement has made the condition of the five main indicators in the economy more vulnerable. This is because remittances have decreased due to this movement and subsequent instability. The remittances of $191 million in the recently departed July were the lowest in the last 10 months. As a result of this,
the foreign exchange reserves decreased by $1.3 billion or $1.3 billion in a month. At the same time, instability has started again in the dollar price in the country. The price per US dollar rose to Tk 124-125 in Dhaka’s open market. Two weeks ago, the price of the dollar was between Tk118-119. Export earnings in the just-concluded 2023-24 fiscal year are $6.61 billion short of the target. There is inflation in the country now like 10 percent. The former governor of Bangladesh Bank Salehuddin Ahmed said in the light of time, the country’s economy has been going downhill for the past two to three years. We have been saying many times that the country’s economy is not good, it is getting worse day by day – the government should take necessary initiatives. But the government did not take any action in time. Due to which the economic situation has worsened rather than improving. Amidst this critical situation, the student movement that started last month and the unstable situation has brought disaster to the country’s economy. The negative impact of this instability has already begun to take its toll on the economy. It can be said that the country’s economy is slowly going into a coma. It remains to be seen where the country’s economy will stand if the situation becomes more turbulent. I think worse is waiting for the country’s economy.
Major concern over reserves: Rapid depletion of reserves is a major concern for the economy now. Because in the last one month, the foreign currency reserve has decreased by $1.3 billion or $1.3 billion in one month. According to the calculation method of International Monetary Fund or IMF, the reserve amount of Bangladesh Bank at the end of last June was $2,179 million. At the end of July, it decreased to $2,049 million. This picture was found in the latest data released by Bangladesh Bank Reserve. On the other hand, according to the latest report of the reserves, the total reserves decreased by $3.81 billion in the span of one year. At the end of July last year, the total reserves were $2,973 billion. According to BPM6, at the end of July it fell below $26 billion. Currently, Bangladesh Bank calculates reserves in several ways. Among them is a total reserve. The other is the amount of reserves according to the IMF’s accounting system BPM6. Apart from this, there is also a calculation of usable reserves, which is now $15 billion. With which only three months of export expenses can be met.
Remittances are decreasing at an alarming rate: The income of expatriates in the country has decreased at an alarming rate. The income that has come in the recently concluded July is the lowest in the last 10 months. In July, the expatriate income came to about $191 million. Prior to this, the lowest expatriate income came in September last year at $133.43 million. This information is available from the Central Bank’s updated report on expatriate income.
Banks were closed from July 19 to 23 due to the government and public holidays due to the student quota reform movement. Apart from this, broadband internet was off for 5 consecutive days and mobile internet was off for 10 days. Because of this, foreign transactions with the country’s banks are almost stopped. It is known that in the first 3 weeks of last month, an average of $40 to $50 million of expatriate income came. From July 1 to 20, $142.93 million came. And from 21st to 31st July the income came to $479.7 million. Of this, $12 million came in one day on July 31. But last June, $254 crores of income was sent to the country by expatriate Bangladeshis living in different countries of the world.
The dollar market is in turmoil again: Suddenly, there is a turmoil in the dollar market in the country. The price per US dollar rose to Tk 124-125 in Dhaka’s open market. Two weeks ago, the price of the dollar was between Tk 118-119. Sector-related persons, however, feel that the impact on the open market is mainly due to the reduction in the flow of remittances or expatriate income through the banking channel. The traders of curb market say that the dollars that expatriates bring with them while returning home are sold in curb market. But in the current situation, the supply of dollars has also decreased due to the decrease in the number of people coming from abroad. This created the dollar crisis. As a result, the price has increased. If the price of the dollar increases like this, the cost of importing all kinds of products including food products will increase. Inflation will also increase.
In this situation, the central bank has instructed the banks to submit the dollar transaction information within 8 hours. Banks have rules to send foreign currency transaction information to Bangladesh Bank on a regular basis. This information has to be submitted to the foreign exchange dashboard of the central bank. But the central bank has complained that many banks are not complying with it. In such a situation, Bangladesh Bank has instructed the banks to submit the correct transaction information of foreign currency to the dashboard within eight working hours. However, the market stakeholders think that there will be no action on this demand of the central bank.
Consistently decreasing export income: Export income is another major means of strengthening the country’s economy. However, this sector is also in continuous recession. In the recently concluded fiscal year 2023-24, Bangladesh earned $5,528.81 crore by exporting goods, which is 0.49 percent less than last year. In the fiscal year 2022-23, the export income was $5,555.87 million. Compared to FY 2021-22, the growth in FY 2022-23 was 6.67 percent. However, the target of $6,000 billion set by the government for the fiscal year 2023-24 has not been achieved. Revenue for FY 2023-24 is $6.61 billion short of target. Global political unrest, high inflation and economic crisis in export destinations and increase in cost of production are expected to result in negative growth in export earnings for the current fiscal year.
Apart from this, commodity prices in the country have increased at an abnormal rate for the last three years. For this reason, the rate of inflation has increased and is now stuck in the double-digit quota. Because of which the common people of the country have to pay an extreme price. Due to this instability, the commodity prices are increasing gradually. As a result, it can be said for sure that the rate of inflation will increase.
Apart from this, domestic and foreign investment has decreased. New employment in the country has also come to a standstill due to reduced investment. Economists believe that the unemployment rate will rise due to less investment and lack of job creation, along with the poverty rate.
Foreign debt and interest of 100 billion dollars must be paid: Currently, the foreign debt of Bangladesh has exceeded $100 billion. The balance of loans taken from various foreign sources was $100.64 billion. The loan amount in Bangladeshi currency (110 taka per dollar) is Tk 11 lakh 7 thousand 40 crore. The government has taken 79 percent of the country’s total foreign debt. The remaining 21 percent of the loan was taken by the private sector. Most of those foreign loans will have to be repaid from this year. So, this will also be a big challenge for the economy.
The former caretaker government advisor and economist Dr. AB Mirzza Azizul Islam said in the light of time, there are many challenges in the country’s economy from the beginning. These include high inflation, low foreign exchange reserves, decline in remittances, decline in export earnings. These challenges are compounded by the current situation.
Already there is inflation in the country as high as 10 percent. Meanwhile, the situation has become more confused with the students’ movement. However, this economic crisis did not occur suddenly in one day. Now the economic crisis is deepening but the policy makers are not taking it into account. The government doesn’t seem to care about the economy. Because the government is now focusing on how to solve the country’s crisis. But no attention is paid to the fact that the economy is collapsing from within.