Tighten belts of the economy before it is too late

Editorials

The economy of Bangladesh is passing through a crisis created by unbalanced increase of import expenses against export earnings leaving a record nearly $19 billion ($18.70b) deficit in the last financial year. The increase in import expenses was exacerbated by the rise in the price of fuel oil and food in the international market. The highest deficit in balance of payments has also created pressure in the foreign currency market. The exchange rate of the dollar has risen to as high as Taka 112 in kerb market at the cost of the Bangladesh Taka.

The depreciation of the Taka has again led to rise in inflation and the cost of living of the people and put people in the fixed income bracket in a tight situation. 

The Ukraine war has definitely contributed significantly to this. Economists however say that such a situation was bound to develop at a point not in the distant future, the war has only accelerated the process. They point to the weak management of the energy sector allowing quick rental power plants to continue to operate at the huge cost of the exchequer with hard currency. Set up under emergency emergency measures they have been allowed to continue for more than 13 years. The LNG which adds to the national gas grid has again been left to the mercy of the private sector and now imports are made from the spot market where prices are the highest.

Load shedding of electricity is getting worse but should not be allowed to hamper production in mills and factories. While imports are draining foreign currency, garment export earnings look stalled as European buyers are spending less on clothes to save money for spending on necessities which are costlier than before the war. Garment export and remittance earnings of migrant Bangladeshi workers have been the two main pillars of the economy for the last two decades. The government has sought loan from the International Monetary Fund (IMF) making economists to raise eyebrows. Although the finance minister has said that the loan will be taken only if the IMF terms are acceptable, economists see it as a frantic bid to meet the demand for foreign exchange.

Against this context there is no alternative but to make readjustment of expenditure against income to strike a balance not in a distant future. Nobody knows when the Ukraine-Russia war will end and its fallouts. That factor remaining constant for the time being, we need to correct the anomalies specially in the energy sector that see that agricultural and industrial production are not harmed in any way.