Home ›› 12 Aug 2022 ›› Front
Dr Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue (CPD), recommends a “Transitional Policy Understanding” to bring stability into Bangladesh’s macro-economy, sustain industrial production, safeguard jobs, and protect vulnerable groups.
He however added that the “understanding” should not be a political one, and must be achieved through discussions among all stakeholders, professionals, lawmakers in parliament, and political parties.
Dr Debapriya presented this policy at a press brief titled “Overcoming the Current Economic Challenges – Towards a Transitional Policy Understanding” on Thursday.
Speaking at the event, he said, “We need a Transitional Policy Understanding to overcome the ongoing economic challenges. Right now, Bangladesh is providing two types of incentives
such as good and bad. Incentives, which did not bring benefits, should be scrapped.
“I recommend a floating exchange rate. The government should also withdraw cash incentives against remittance and export earnings. Leaving the exchange rate on market conditions will be an incentive for exporters and expatriates.”
Mentioning that he does not support the unfrequented hike in fuel prices, Dr Debapriya proposed that the subsidy on fuel, fertiliser and electricity generation be increased.
He recommended removing subsidies for electricity capacity charges, adding that the government gave Tk 16,785 crore to power plants for this purpose in the first nine months of FY22, for 22,118MW daily power generation capacity.
Dr Debapriya added, “On 18 July this year, the government shut down all diesel-fired power plants due to depleting fuel stocks, meaning 1,000MW – 1,500MW remains unutilised daily, but payment for the capacity continues.
“If the government had increased fuel prices to record high on IMF prescription, it means that the government has lost policy sovereignty. Or if they had done it to collect funds, it would mean we have a poor government with high growth, and they did not improve fiscal capacity.”
He further said, “Most of us think that energy issues are matters of the relevant ministry, but this is not correct. It is a national issue, and it is influenced by political decisions. The main problem of the government is a crisis of trust. The economy must be protected.
“The ongoing economic crisis will continue till the end of 2024.”
Dr Debapriya believes that the government is reacting slowly in the matters of saving the economy. “Though the government has taken some measures, those need priority and transparency. It is not possible to recover the economy by reducing our purchasing capacity.
“The depreciation of taka against USD has benefitted the exporters, but harmed the workers. The employers should pay dearness allowance to the workers, especially those working in the readymade garment sector.”
Transitional policy understanding
Suggesting transitional policies, Dr Debapriya said budgetary assumptions for FY23 and medium-term framework numbers are gradually becoming irrelevant.
Given various uncertainties (national and global), there is a need for a policy package for stabilisation and consolidation of the economy with short-term outlook (2-3 years).
This transitional policy package has to be developed through a participatory and consultative process. The obtained transitional policy consensus has to be protected from possible political distractions in the future.
This package has to be implemented nimbly and efficiently, demonstrating inclusive leadership. Data-driven accountability framework has to be attached to the transitional policy consensus.
To stabilise macro-economy, he recommended liberalisation of the interest rate with a band to protect real value of savings and moderate credit growth, make exchange rate more market based and do away with multiple premium rates for different types of foreign exchange earners, higher revenue uptake by reaching out to unregistered potential taxpayers.
He also suggested making effective use of budget support received from the World Bank and ADB to ensure additional contractual disbursement, and negotiate with IMF substantive balance of payment support in this regard.
Recommending focusing on Aman production, Dr Debapriya said, “Reducing costs of agricultural inputs, including diesel and fertilisers will be essential for safeguarding the farmers.
“Sectorial growth rates of animal farming and fisheries are declining, and these sectors should receive more support. The smooth outflow of migrant workers to new, not so new and traditional markets should get effective attention,” Dr Debapriya said.
To protect vulnerable groups, he recommended an accelerated and transparent implementation of the Family Card programme targeting 10 million families.
The CPD fellow also suggested that TCB network be expanded up to the district level, rice to be included for sale, and all safety net allowances to be increased to Tk 1,000 per month.
