Bangladesh far behind from economic target

Farhad Chowdhury : The global and domestic economic recession and the dollar crisis have had a negative impact on the monetary policy announced by the central bank. The central bank has not been able to achieve success in monetary policy measures for economic recovery, control of inflation rate, keeping the exchange rate bearable, increasing recovery of defaulted loans.
Dollar inflows, public and private sector credit flow targets not achieved. To say that the monetary policy target announced for the period of July-December of the current financial year has not been achieved in any sector.
According to sources, in March 2020, there was an economic slowdown in the country and abroad on the day of the continuous lockdown to prevent the spread of Corona. Gradually it becomes evident. Before the economy could recover from this recession, the Russia-Ukraine war broke out in February 2022. This increases the prices of all types of goods globally. Due to this, the cost of imports also increased.
Meanwhile, since August 2021, the inflow of dollars in the country has decreased and the reserves are decreasing. In 2022, as the global recession deepened due to the Russia-Ukraine war, the country’s exports and remittances on the one hand decreased, while import costs increased on the other. Reserves continue to decrease.
As a result, the central bank began to take multifaceted measures to control imports to save reserves. At the same time, the dollar crisis became evident from July 2022. It reduces imports in the country.
Entrepreneurs are unable to open LCs due to dollar shortage. which still exists. Inflation rate also increases unbridled. Due to these reasons, the objectives of the economic recovery program are not being achieved. Along with this, economists have blamed the central bank’s frequent decision changes, indecision in some cases, lack of strict supervision.
In this context, the former governor of the central bank Salehuddin Ahmed said, if the crisis is recognized at the beginning, the way to solve the problem can be created. But if you don’t admit the problem, there will be no way to solve it. The central bank did not acknowledge the problems in the banking sector for a long time. Targets are determined by political considerations.
As a result, it has not been achieved in any sector. Now admit the problems. Some steps have been taken to remedy. But it remains to be seen how strong a decision can be made.
According to the information obtained from the report of the central bank, the target to increase the flow of money in the market from July to December of the current financial year was 9 and a half percent. In contrast, 1.16 percent has been achieved during that time. In this regard, the central bank is far from the target.
Inflow of money increased slightly due to increase in deposits in the bank sector. However, the central bank is following a contractionary monetary policy to control the rise in inflation. Because of this, the flow of money has been reduced. Apart from this, due to the increase in the price of goods in the market and the decrease in people’s income, there is no surplus money in the hands of the consumer. As a result, they have reduced their propensity to save. The flow of money is not increasing as expected.
The target to increase the domestic credit flow till December of the current financial year was 15.9 percent. On the contrary, it has increased by 2.31 percent. The central bank is far from the target in this sector as well. Due to lack of investment, the demand for credit in the private sector has decreased.
The government has also cut spending due to liquidity crunch and austerity policies. As a result, the government also took less debt. Along with this, there is the effect of contractionary monetary policy. As a result, the credit flow in the public and private sectors did not even come close to the target. The target for increasing credit flow to the public sector was 37.9 percent.
But the government debt did not increase till December. On the contrary, it has decreased by 9.21 percent. At the same time, the target for increasing credit flow to the private sector was 10.9 percent. Against this, 5.11 percent has been achieved. Imports of raw materials for the export sector have also decreased due to the global recession.
This has a negative impact on export earnings. For the same reason remittance flow did not increase as per the target. As a result, the flow of dollars did not increase. Dollar inflows were targeted at 16.8 percent. But decreased by 12 and a half percent. This sector fell short of the target. The installment repayment period of some foreign loans has been extended, while at the same time an opportunity has been given to import goods on loan on the occasion of fasting. The flow of credit increased slightly. Besides, export earnings and remittances have increased and the rate of decline in this sector has decreased. Later the pressure on the reserves will increase again during the repayment of foreign debt.
Meanwhile, the pressure on foreign exchange reserves is increasing. It is not possible to increase the reserve. Even if the reserve increases temporarily by getting a large amount of loan, it is not possible to retain it later. Due to which the gross reserve has reduced to $2 billion.
Meanwhile, it is not possible to maintain the value of money against the dollar. Due to the dollar crisis, its price is increasing. The gap between market conditions and policymakers’ decision-making has become so wide that, in most cases, dollars are now not available at fixed rates. Although the fixed price of dollar is Tk 110, it is being sold in the market at the rate of Tk117 to Tk116.
Meanwhile, due to rising prices of daily commodities, increase in money supply from the central bank in the last financial year, increase in the price of dollar, the inflation rate increased to about 10 percent. Now it has come down slightly to 9 percent. However, the food inflation rate is still above 9.5 percent. Earlier it had gone up to 12.5 percent. Although the rate of inflation has come down a bit now, the basis of rising commodity prices has remained at a high level. As a result, consumers have to buy it at a higher price.