Most economic indicators on the downtrend

Most of the economic indicators--inflation, dollar crisis, foreign exchange reserves have worsened, resulting in mounting pressure on the overall economy.

The cost of doing business has gone up as Bangladesh Bank has increased the interest rate.

The banking sector has become fragile as money is being taken from banks in names, real and false.

Panic has spread due to the initiative for the forceful bank mergers. At least three banks are struggling to return depositors' money, according to the central bank and officials in the sectors concerned.

Although the Covid pandemic hit the economy, the economic indicators were better at the time.

The economic indicators started to worsen mid-2022.

Bangladesh Bank at the time said the crisis would end by December. Later, the crisis intensified. Now the central bank assures businessmen that the crisis will go by December this year.

Speaking to Prothom Alo, research organisation Policy Research Institute (PRI) executive director Ahsan H Mansur said the economic crisis has not appeared overnight. The main structure of the economy has weakened due to looting from banks, capital flight and lack of accountability. This has an impact on the economy. As a result, the suffering of the people has intensified, he added.

Although global and local crises had an impact on the economy, it turned around in the past. Price of food, fuel and transport cost went up due to the Russia-Ukraine war in the beginning of 2022. As a result, the import costs doubled. The supply of foreign currency decreased as the dollar price was not allowed to increase. As a result, the crisis intensified.

The central bank experimented with the dollar price and it also tried to tackle the situation by selling dollars from the reserve. Various steps were taken to control imports. However, these steps did not yield any results. finally Bangladesh Bank left the dollar price and bank interest rate to the market this month. In the face of demand from businessmen, the central bank said the interest rate would not exceed 14 per cent. The price of a dollar will be around Tk 117.

The price of a dollar was Tk 87.90 on 21 May 2022, which increased to Tk 117.

Bangladesh Bank officials said many decisions have been executed to comply with the conditions of the International Monetary Fund. This may create trouble for a temporary period, but it would have a good impact in the long term.

Hike of dollar price has a direct impact on the inflation as the prices of all commodities increase. According to BBS, the overall inflation was 6.29 in April 2022, which increased to 9.74 in April this year.

Bangladesh Bank decided to control import in a bid to tackle the dollar crisis. Although import cost fell drastically, import of capital machineries, raw materials and intermediary goods also fell simultaneously. The import cost was Tk 7.72 billion in March 2022, which increased to Tk 6.08 billion in March this year.

This has an import on the export. According to Bangladesh Bank, goods worth Tk 4.73 billion were exported in April 2022, which decreased to Tk 3.95 billion in April This year.

Bangladesh is still grappling with the dollar crisis two years after it emerged in the country with the recent initiatives failing to bolster the country's reserves. According to the sources in the Bangladesh Bank, the reserve keeps dwindling as the dollar crisis prevails.

The total amount of reserve dwindled to USD 23.77 billion after clearing the due of the Asia Clearing Union (ACU) for the months of March and April. However, the reserve stands at USD 18.32 billion as per the International Monetary Fund (IMF) calculation method, BPM-6.

However, the actual reserve reportedly now stands at a little less than USD 13 billion. Actual reserve what doesn’t have any liability and can be utilised at any time.

Although there was a deficit of Tk 14.34 billion dollars in July-March of 2022-23 fiscal year, there was a surplus of USD 5.79 billion during the same period in the current fiscal year. However, there is a big deficit in the financial accounts.

The deficit rose to USD 9.25 billion in the July-March quarter of the 2023-24 fiscal, which was USD 2.92 billion at the same time in the last fiscal.
Bangladesh Bank officials said the amount of goods that are being exported, less amount of income is coming against it.

Economist Ahsan H Mansur said, "Dollar crisis has been created due to money laundering. The banking, power and health sectors are responsible for this. This crisis will not be solved unless good governance is restored."

Like the dollar crisis, banks are facing a taka crisis. The banking sector faces a crisis of trust due to various irregularities. The situation has worsened further as the central bank attempted to forcefully merge banks. As a result, BASIC Bank, Padma and ICB Islamic Bank are in trouble to return depositors' money.

Banks and loans of influential people remain out of monitoring due to the weakness of the central bank. The default loan stands at Tk 1456.33 billion in December 2023.

The share market of the country is also struggling. The index of DSE was 6211 points, it decreased to 5312 points in the last week.
Speaking to Prothom Alo, Federation of Bangladesh Chamber of Commerce and Industries (FBCCI) president Md Mahbubul Alam said, "If the interest rate increases in this way, there will be no investment and employment."

The hike of dollar price has an impact on the wage earners remittance. The country received USD 2.04 billion in April. However, bankers said the entire remittance will not come through legal channels if money laundering is not stopped.

According to the National Board of Revenue, revenue of Tk 2598.66 billion was collected in the July-March period of the current fiscal year, which is 15 per cent higher than the corresponding period of last fiscal. However, this revenue is less than the target set by the IMF.

*This report, has originally published in Prothom Alo print and online editions, has been rewritten in English by Rabiul Islam.