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Bangladesh - January 9, 2024

Measures against inflation corruption are essential

Economists’ expectations to govt

Farhad Chowdhury: The biggest problem in the country’s economy is high inflation at the moment. The prices of several products have already gone beyond the affordability of the common man.
Macroeconomic stability is a major challenge due to foreign exchange reserve crisis, money laundering and high defaulted loans. In addition, in the last few years, one of the factors affecting the country’s economy was the lack of private sector investment and employment. As a result, unemployment has increased. As a whole, the size of the country’s economy has increased, but inequality in people’s consumption, income and wealth has increased.
The leading economists of the country want the new government to take quick action to overcome this situation. According to them, the government should take effective measures to control inflation. Investment should be increased. They said that war against corruption should be declared only after the government takes over.
Besides, it is necessary to reform the banking sector along with the establishment of good governance in the financial sector.
Finance advisor of the former caretaker government AB Mirza Azizul Islam, former governor of Bangladesh Bank Atiur Rahman and private research institute Center for Policy Dialogue (CPD) special fellow Dr. Mostafizur Rahman made these comments separately.
If asked, the former caretaker government’s finance advisor AB Mirza Azizul Islam said that there are several challenges in the country’s economy. One of them is inflation. Foreign reserves are also falling. Traders are unable to open LC due to dollar crisis.
Necessary steps should be taken to solve these crises. He said that another problem in the economy is that the defaulted loans in banks and financial institutions are increasing. Day by day it is getting terrible shape. As a result, effective steps should be taken to recover defaulted loans and stop new loan defaults. According to him, the country’s private sector investment has been stuck between 22 and 23 percent of the gross domestic product (GDP) ratio in a decade. That is, private sector investment has stagnated. There are many obstacles in this regard. Bangladesh ranks very low on ease of doing business index. Traders have several problems, one of which is scarcity of land. In this regard, it has been said to make 100 economic zones. But there is not much progress in these areas. Besides, lack of good governance is one of the problems. The government must take the issues into consideration. Besides, effective initiatives should be taken to reform the bank.
CPD special fellow Dr. Mostafizur Rahman told that the economy of Bangladesh is going through many problems recently. In this regard, there are several challenges in the economy. Effective steps should be taken to deal with these challenges. The first of these is high inflation. The prices of goods have increased excessively. In this situation, the ongoing high inflation should be brought down. Initiatives should be taken to bring relief to people’s lives, especially to ensure that the standard of living of the common people remains intact and nutrition and food security are ensured. Second, there is currently a dollar crisis going on. Dollars are hard to come by. In this situation, availability of dollars, assurance of opening of LCs for investment and employment should be looked at. In this case Bangladeshi currency should be devalued a bit more. Besides, some changes should be made in the fiscal policy. In this case, the import of daily necessities should be taken by reducing the duty. Thirdly, implementation of the reform program is essential. In this regard, the government has made several laws. Among these are the ‘Direct Tax Act’ and the Prevention of Money Laundering Act. It is important to adopt the policy of zero tolerance against corruption by implementing these laws. The fourth issue is to overcome institutional weaknesses. In this case, the institutions should be allowed to work independently.
Money laundering from the country has been increasing for several years. It is heard about money laundering in various ways including foreign trade. In this case, the data of import-export is found to be average. As a result, effective measures are necessary to stop these. Dr. Mostafizur Rahman said, the last thing is to ensure good governance in all areas. It is important to ensure that various projects are implemented cost-effectively.
The former governor of Bangladesh Bank Atiur Rahman said, the biggest challenge in the economy of Bangladesh is to maintain the stability of the macro economy. One of its parts is inflation control. And a major cause of inflation is the devaluation of the currency due to the dollar crisis. For example, if the price of money falls by 30 percent than before, it has an impact on inflation. That is, the price of goods has increased by 30 percent. Due to the increased price, the import duty has also increased. As a result, we have to think about reducing the price of goods by waiving a part of this duty. He said that monetary policy has been tightened at present. It is in the process of further compression. In this case, it is important to shrink the fiscal policy. That is, we have to reduce unnecessary expenses. According to him, the overall quality of expenditure should be increased. There will be development expenditure. But it is important to note that the cost of Tk 1 should not be Tk 1.5. Dr. Atiur Rahman said, the exchange rate of foreign currency is unstable. There is a big difference between formal and informal rates. Initiatives should be taken to reduce it. In this case, the exchange rate of the currency should gradually move towards the market-based rate. Besides, it is important to increase export and expatriate income. However, I believe that if the exchange rate balances, exports and expatriate income will increase. He said, incentives should be increased for those who earn less among expatriates. Also, the financial account is currently negative. It must be positive. In this case, foreign direct investment (FDI) and foreign credit should be increased and balance should be brought between imports and exports. Dr. Atiur Rahman also said that the poor people are suffering due to the price of goods, there is no way to deny it. As a result, social security programs should be increased to provide food for low-income people.
Incidentally, according to the Bangladesh Bureau of Statistics report, inequality is increasing in Bangladesh. That is, despite the huge income in the country as a whole, the disparity between the rich and the poor has increased without limit. According to CPD data, prices of goods have increased wildly over the past 5 years. Among them, the prices of various products have increased from 9 percent to 400 percent. That is, the price of goods is out of affordability. In this situation, the biggest challenge in the economy is inflation. Also, there is an increase in money laundering, corruption, high defaulted loans and a crisis in foreign exchange reserves. In this situation, the current Awami League government is going to form the government again. Economists believe that it is necessary to control inflation and increase private investment.

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