Home Bangladesh The economy is stressed
Bangladesh - July 16, 2023

The economy is stressed

Dr Enayet Karim: People of the country are suffering due to the inflation. No one knows how long this pain will go away. Because a stressed economy can gradually become more complex. Bangladesh Bank said that the economy of Bangladesh is under pressure due to the dollar crisis and high inflation. In a quarterly report on the economy, Bangladesh Bank noted that ‘Bangladesh is under the stress of geopolitical conflict for the first time. The report notes that the situation is related to geopolitical conflicts and will not be resolved overnight.
The report also said there are externalities, including rising commodity prices and supply disruptions due to the ongoing Russia-Ukraine war, global economic slowdown and financial sector instability. Due to these reasons, important indicators of the economy are under pressure. Economists say that foreign exchange reserves have reached the red zone. However, the central bank has reduced imports to save reserves.
This has had a negative impact on the market as imports have contracted. However, exports in the ready-made garment sector and remittances sent by expatriates are still promising.
Foreign exchange reserves
There is no relief in this important indicator of the economy for more than a year. According to the data of Bangladesh Bank, the amount of foreign exchange reserves on June 30, 2022 was more than $41 billion. Foreign exchange reserves fell to $31 billion on June 30, 2023. Now it is worth $29 billion. That is, in the last one-year, foreign exchange reserves have decreased by about $11 billion.
Meanwhile, according to the International Monetary Fund-IMF’s Balance of Payments and International Investment Position (BPM-6) manual, the gross foreign exchange reserve (GIR) of the country is now $23.56 billion. However, the amount of net reserves (NIR) has come down to $20 billion. However, Governor Abdur Rauf Talukder has already said that the central bank will not publish the net reserve data.
In this context, the former chief economist of the World Bank Dhaka office Zahid Hossain said, although the foreign exchange reserve is currently shown at $23 billion, the net or actual reserve will not be more than $19 or $20 billion, with which it may be possible to meet the import expenses of only three months. In such a situation, it is important to take initiative to increase the reserve now. An area of concern is the depletion of reserves. decreasing every day.
Khandaker Golam Moazzem, a researcher at the Center for Policy Dialogue (CPD), a private research organization, says that the foreign exchange reserve situation is now in a ‘red zone’. If it decreases further, it is of concern. If the government can gradually increase the reserves from here, then people will get a glimmer of hope, if not, it is a matter of deeper worry.
Price inflation
As this indicator of the economy is on the upswing, people with limited income are suffering enough. That is, the increase in the price of daily essential products throughout the year has put a fold on the forehead of the consumers. People with limited income were under pressure in the newly opened financial year 2022-23 due to increase in prices of almost all commodities. Of course, the working people still have to bear that pressure.
According to the data of Bangladesh Bureau of Statistics (BBS), people have not had to endure so much pressure of inflation in the last decade. Inflation was on the rise in the previous financial year, i.e. 2021-22 as well. But inflation in the outgoing fiscal year (2022-23) averaged 9.02 percent-annualized, the highest in an era.
Economists say that when imports of goods increase, economic activity generally increases. Especially if the import of industrial raw materials increases, industrial production increases. And based on production, employment and industrial growth increases. Besides, if the import of raw materials for export-oriented industries increases, there is a possibility that exports will also increase. But this indicator of the economy was downward. Not only that, Bangladesh has never seen such a shortage of dollars as in the recent financial year. As a result, imports are forced to be reduced. Traders did not get the required dollars for imports. On the one hand, the increase in the price of goods in the world market, on the other hand, the increase in the value of the dollar locally due to the crisis – these two have increased the price of goods in the country. Depreciation of the taka against the dollar led to a record deficit in government transactions, reduced foreign exchange reserves, and increased debt servicing costs. Due to the dollar-crisis fuel crisis also increases. As a result, the industry has suffered from that side as well.
In the outgoing financial year (2022-23), the import of goods was $79 billion, which is about 10 percent less than the previous financial year. And the amount of imported goods decreased by around 4 percent. However, the growth in imports in the previous financial year was 35.9 percent. Bangladesh Bank took various measures to control the import of goods during the dollar-crisis. Himshim Khan importers and traders to open credit for import of goods. It has also reduced the import of some goods like industrial raw materials and luxury goods.
According to the import data of custom houses and customs stations, the import of goods in the outgoing fiscal year 2022-23 was 13 crore 31 lakh tonnes. In the financial year 2021-22, the import was 13 crore 82 lakh tonnes. According to this, the amount of imported goods has decreased by 5.1 lakh tons or 3.71 percent in the space of one year. However, imports decreased by 10 percent in terms of consumption. In the fiscal year 2022-23, goods worth $7.9 billion have been imported. In the fiscal year 2021-22, the import was $8.764 million. This is calculated on the basis of customs value.
Imports of essential commodities-wheat, sugar, soybean oil and soybean seed, the raw material for making soybeans-have also declined in the last fiscal year. The import of machinery and parts for industry has also decreased. In the fiscal year 2022-23, machinery and parts were imported worth $1,198 million. In the fiscal year 2021-22, the import was $1,313 million. Accordingly, the import of machinery and parts has decreased by about 9 percent. In addition, the import of raw material cotton for the textile industry has also decreased in the last financial year.
Export income
This indicator of the economy was relatively good in the outgoing financial year. In the outgoing financial year, compared to the previous financial year, the export of manufactured goods of Bangladesh in the world market has increased.
According to the data of Export Development Bureau-EPB, from July 2022 to June 30, 2023, Bangladesh has exported products worth $5,555 crore 87 lakh 70 thousand in the world market. In the previous fiscal year 2021-22, the export earnings were $5,228,266,000. That is, compared to the previous financial year, the export income has increased by $347 crore 61 lakh 10 thousand. That is, export growth has increased by 6.67 percent. And garment exports increased by 10.27. Good earnings in the first six months led to higher average exports in the outgoing fiscal year. In the last financial year 2022-23, the export of readymade garments increased by 10.27 percent compared to the previous financial year. It is slightly more than the target. The entrepreneurs of this sector say that despite the increase compared to the financial year 2021-22, the figure of exports of the next five major sectors has become a cause for concern. However, the good news is that Bangladesh’s exports of garment products to non-traditional markets are increasing. In the recently concluded financial year, the country’s garment exports to non-traditional markets increased by 31.38 percent. Not only this, exports to major non-traditional markets such as Japan, Australia and India have crossed the one-billion-dollar milestone. The non-traditional market share in total apparel exports increased by 17.82 percent in FY 2022-23. In the financial year 2021-22, the growth rate was 14.96 percent.
Expatriate income
One of the good indicators of the economy is remittances sent by expatriates or expatriate income. At the end of the outgoing financial year, expatriate income or remittances through legal means came in at $2 thousand 161 million. Expatriate income increased by 3 percent compared to the previous fiscal year. In the last financial year 2021-22, expatriate income decreased by 15.2 percent. In June, the last month of the outgoing financial year, remittances of $2199 million came. Which is the highest expatriate income in the last 35 months. In the same month of last year, the expatriate income came to $183.72 million. Earlier, in July 2020, $259.82 million remittances came.
Credit flows to private sector
It is said that if credit flow increases in the private sector, investment increases. And if the investment increases, the country becomes industrialized. Besides, employment is created. But the credit flow to the private sector, one of the indicators of the economy, has not increased. The private credit growth target was set at 14.10 percent in the recent financial year. However, the banking sector could not achieve the target of private loan distribution in any month of the financial year 2022-23 due to various crises in the banking sector including liquidity. According to the data of the central bank, the growth rate of private sector credit has dropped to 11.10 percent in the last month of May.
Industry stakeholders say import restrictions imposed in the dollar crisis have reduced the import of capital equipment in the country in the current financial year, which is hampering the creation of new jobs and business expansion. Apart from this, credit growth in the private sector has decreased due to the overall lack of adequate investment environment.
Revenue income
The National Board of Revenue-NBR has recorded the lowest growth in revenue collection in the recent fiscal year 2022-23, among key economic indicators. Growth was only 8.12 percent, the lowest in a decade. According to NBR data, the growth in excise duty collection was more than 10 percent for the next five years from FY 2013-14. In the recent financial year 2022-23, NBR collected a total revenue of Tk 3 lakh 25 thousand 272 crores (this is a provisional estimate). In the last financial year, NBR was given a target of Tk 3 lakh 70 thousand crores. That is, the deficit is about Tk 45 thousand crore.
According to NBR, Tk 1 lakh 12 thousand 921 crores have been collected from income tax and travel. The growth in this sector is 9.62 percent. Tk 91 thousand 717 crore has been collected in the customs sector. The growth is only 2.56 percent. And the growth in the VAT sector has been 11.27 percent. Tk 1 lakh 20 thousand 633 crores of VAT has been collected.
Note that the IMF had set a target of Tk 345,600 crore for revenue collection; That too was not achieved. In the current financial year 2023-24, with regular growth, the IMF has imposed the condition of collecting additional duties and taxes equal to about half a percent of the GDP.

Check Also

Where is Nathan Bom now what is his source of power

Special Correspondent: Nathan Bom was born and brought up in the family of Anton. Then he …