IMF loan cannot be the only factor behind much-needed structural changes

The ongoing dollar shortage in the banking sector is posing a threat to local textile millers and spinners as they are in trouble in opening letters of credit (LCs) to import raw materials and cotton to feed the country’s readymade garment industry. 

The government is expecting the shrinking foreign currency reserves will buck the trend and hit $37.7 billion by June thanks to lower imports and budget support from development partners.

It seems the government is doing an about-turn from the austerity stance taken at the start of the fiscal year.

Bangladesh should be careful about falling into the middle-income trap, said Axel van Trotsenburg, the World Bank’s managing director of operations.

Bangladesh’s balance of payments (BoP) deficit would widen massively in the current fiscal year than the central bank had earlier projected owing to escalated imports, lower remittances and export receipts, and higher accumulation of debts.

The Bangladesh Bank is yet to take any visible measure in line with a commerce ministry directive aimed at asking banks to earmark a portion of their foreign currency holdings to open letters of credit to import essentials ahead of Ramadan. 

We are told that taka is available, and then it’s not there anymore.

Bangladesh’s $4.5 billion loan programme with the International Monetary Fund is expected to get the final approval on January 30, said the lender’s visiting top official yesterday.

Bangladesh Bank yesterday unveiled a wishy-washy monetary policy for the next six months that will prove to be ineffective in tackling the headwinds passing through the economy.

There would not be any further negotiations on the $4.5 billion loan programme during International Monetary Fund’s deputy managing director Antoinette Monsio Sayeh’s forthcoming visit to Bangladesh.

The World Bank yesterday delivered yet another bad news for the economy as the Washington-based multilateral lender pared back Bangladesh’s growth forecast for this fiscal year by 1.5 percent to 5.2 percent.

This year was always supposed to be a celebration of Bangladesh’s economic progress with the opening of Padma bridge and Dhaka metro rail and 100 percent electrification.

Outward remittances from Bangladesh through legal channels crossed the $100-million mark for the first time in 2021 as more foreigners are working in the fast-growing economy, data from a global organisation showed.

One could say the success story of Bangladesh’s economic development has been spectacular.

Bangladesh does not have too many policy options other than reducing consumption of goods and services and making the exchange rate flexible in order to ensure macroeconomic stability, said a central bank report.

Bangladesh's export sector showed its prowess in 2022 despite the devastating Russia-Ukraine war, unprecedented freight costs, energy crisis, record inflation and a risk of a recession that loomed throughout the outgoing year.

The government has trimmed its growth forecast for this fiscal year by a whole percentage point to 6.5 percent as the energy shortage and inflation dampened economic activities.

Though inflation continued to undergo a downward trend for a third consecutive month in November, non-food inflation in rural areas entered into double digits last month for the first time in recent times. 

The government managed to implement 85 per cent of the budget in the last fiscal year despite spending a huge amount as subsidies and incentives, raising questions about the trend of unveiling bigger budgets year after year.