Home ›› 27 May 2022 ›› Front
Tightening foreign currency spending and taming rocketing inflation are two major challenges for the economy as the Ukraine war fallout demands cautionary measures by the government, said MCCI in its quarterly economic review.
At a time when the country’s foreign exchange reserve is under pressures due to higher imports, the Metropolitan Chamber of Commerce and Industry (MCCI) came up with a call to avert further decline in reserve and for the sake of economic sustainability.
The review for Jan-March quarter of 2022 was published on Thursday.
The trade organization also underscored the need for carefulness in opening letters of credit (LC) and skilful management of high subsidies on electricity, gas and fertilizer prices. Otherwise, the review said, spending as subsidy would shoot up significantly.
“Bangladesh economy is now rebounding from the Covid-19 shocks. Before the onset of the coronavirus, the economy was growing rapidly by 7.88% in FY19. Then the growth became slower before the economy recovered fast in the following years - 6.94% in FY21 and 7.25% in FY22 - which is high compared to developing economies. Bangladesh is one of the fastest growing economies in the world,” said MCCI in the review.
For the stabilization of the macroeconomic situation, the country needs cautionary measures in spending foreign currencies in view of higher import trend and the cascading Russia-Ukraine war fallout.
The necessity of carefulness is needed in opening letters of credit (LC) so as to avoid unnecessary imports to save foreign currency reserves as one of the potential thrift measures, the review added.
With the rising imports, trade deficit widened and stood at nearly $25 billion in July-March period of the current fiscal year, which was $15.21 billion in the same period of the last year.
Foreign exchange reserve came down to $41.92 billion on May 10 but it returned to $42.29 billion on May 25. It was $48.06 billion in August 2021, Bangladesh Bank data showed
The MCCI warned that containing inflation is a big challenge in the coming months for Bangladesh.
According to Bangladesh Bureau of Statistics (BBS) data, point-to-point inflation rose to 6.29 per cent in April.
The fiscal framework continues to be weak in view of poor achievements, more specifically, both in terms of revenue mobilization and public expenditure. Unemployment situation and low investment remain as challenges, according to the report.
During the quarter under review, the major macroeconomic indicators are in a satisfactory position. Exports and imports are two important drivers of the economy and amid the Covid-19 pandemic both the areas have done well.
Robust export earnings have facilitated economic recovery in the recent time. The export-oriented garment, leather and domestic market-oriented steel, food-processing and transport sectors are running in full scale.
The inward remittances also increased, which has multiplier effects on other economic sectors. On the other side, some of the economic indicators appear to be less promising than projected earlier.
