The biggest challenge in the New Year will be controlling the rising cost of living, which has put people in trouble as they struggled to balance their income and expenditure in 2023.
Soaring inflation and appreciation of the US dollar against the local currency acted as driving forces behind the commodity price volatility throughout the outgoing year. Even the price of one or two essential items suddenly jumped in the market almost every month which was a big headache for the government.
Besides, syndication played a crucial role in pushing up the prices of most essential commodities, but the government could not completely break the syndicate. However, the government tried to rein in price hikes of certain essential commodities by taking different measures, including import, market monitoring and legal action against hoarding.
After analysing the data on the prices of daily commodities revealed by the Trading Corporation of Bangladesh (TCB), the country’s economists sometimes commented that the inflation rate was 20 per cent higher compared to the same period last year.
The Bangladesh Bureau of Statistics (BBS) data showed that the inflation rate was between 8.57 per cent and 9.94 per cent point, keeping the inflation rate at single digits.
Policy mismatch between fiscal and monetary measures, including printing of money to ease fiscal pressure, keeping the interest rate low and taka’s value artificially high against the dollar, fluctuation in global oil and energy prices due to the Russia-Ukraine war and forex crunch had fuelled overall inflation.
On the other hand, the year 2023 was eventful for infrastructure development as a handful of large-scale projects, taken up in the past, were opened to the public completely or partially throughout the year. These projects have started contributing to the economy and communication, opening the new door for prosperity.
Meanwhile, loan defaulters bled the banks dry. Loan write-offs stood at Tk 68,023 crore in the third quarter of this year, a year-on-year increase of Tk 10,048 crore, according to sources in Bangladesh Bank.
NPL in the banking sector stood at Tk 1,55,397 crore at the end of the July-September period (Q3) of last year, occupying 9.93 per cent of the banking sector’s outstanding loans of Tk 1,565,195 crore. Bad loans amounted to Tk 1,36,317 crore, which was 87.72 per cent of outstanding classified loans.
On the other hand, the interbank exchange rate hit Tk 107 per USD in December, the highest in 2022 and just after one year, it was Tk 110 in November 2023. In the open market, people needed to spend more than Tk 124 to purchase per dollar.
The foreign exchange crisis had put the government in trouble, especially in terms of meeting import bills in 2023 as well like 2022.
In the power and energy sector alone, cumulative outstanding bills jumped to about $5 billion of which the backlog amount in the power sector was about $4 billion (about Tk 43,093 crore) and the remaining $1 billion was in the energy sector.
Bangladesh Bank said the country's reserves, according to the IMF calculation method, stood at $19.52 billion on November 28. It said that gross reserves were $25.16 billion.
Economists say uncertainty can be in every corner, but there is hope in exports, mostly in the readymade garment (RMG) sector, because of low production costs despite facts like GDP contraction.
However, increasing unemployment rates would put Bangladesh’s economy under pressure but better management and effective initiatives may boost remittance as the number of migrants recorded a pleasant growth.
Now, the question is about what to expect and how to prepare for 2024. There will be challenges, and the government has to be more strategic and pragmatic to overcome these hurdles.
What is ahead?
Economists said that for the country’s economy, the beginning of 2024 will be weaker than that of 2023. The outgoing year, however, became worse gradually as sectors like import, exports, revenue collection, remittance flow, credit growth and reserves did not perform well.
But there is a relief as the global economy has started to bounce back from the crisis. “If the global interest rate falls that would be a blessing for us as we have some short-term loans to repay,” said Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office.
He said that the dollar price in the world market has shown a downtrend now as a result, the prices of wheat, oil, gas, and fertiliser, which Bangladesh imports, will not increase.
The global economy started to be stabilised in 2023 and many countries took the opportunity to cool down their inflation rate which Bangladesh almost failed. “We need to grab the opportunity in 2024 by taking some economic reforms,” he added.
There are three factors which are behind Bangladesh’s current economic condition--inflation, the dollar crisis and instability in the financial sector. “We need to overcome these by taking measures,” he said.
