Home ›› 09 Sep 2022 ›› Opinion
Bangladesh is a densely populated country. As a result, the demand for oil or energy is increasing. As the Ukraine-Russia war began, the market price of crude oil exceeded $130 per barrel. The cost of several goods, including food and fuel oil, has increased globally. Even though a slight decrease scenario can be seen in recent days but which is not sufficient enough yet, however, Bangladesh increased the price of fuel oil by up to 52% due to rising import costs, which sharply increased citizens’ daily expenses.
In contrast to that, export revenue has not grown. Remittance income has decreased in size as well. The US dollar price is rising in the domestic market due to the rise in imports and the slow inflow of remittances. So, the Reserve of Bangladesh is decreasing drastically. To stable it, Our Government took several prudent short-term strategies.
A few days back, Bangladesh Bank restricted gold import and luxurious items. The initiative to stop the import rush began in May last year to lessen the pressure on the foreign exchange market. On July 4, however, strictness was implemented in this area. 100 per cent LC margin for imports of 27 items, including automobiles, gold, televisions, refrigerators, etc., $ 5.47 billion worth of goods were imported into the nation in July, which is 31.32 per cent less than in June. A $7.96 billion import credit line was opened in June. In August, imports had decreased by around 20 per cent compared to July. Yet our reserve is struggling. What else can government do to stabilize the economy and the reserve?
Mega Projects get costlier
Bangladesh Awami League Government has been trying to improve the infrastructure of the country for proper communication since day one when they won the election in 2009. They took several megaprojects. And they are doing their best to finish those projects. Even though the work of those projects started within the time frame but didn’t finish within the given time, Because the administration didn’t get proper funding, or those projects had some flaws regarding the design or some other issues. For example, at the National Economic Council’s Executive Committee (ECNEC) meeting in August 2007, the cost of the Padma Bridge project was projected at Tk10,161.75 crore. The project’s cost has increased to Tk 30,193.39 crore because it could not be finished on schedule. The cost was revised three times.
Another example is Dhaka Mass Rapid Transit Development. The Dhaka Mass Rapid Transit Development (Line-6) project’s second revision, which added Tk11,486.92 crore in costs, was approved by the ECNEC. As the government is trying to improve the infrastructure and energy sector, the bureaucracy should also be more cautious. If they do not complete their task meticulously, then public funds will not get their fair value. They have to be more efficient and cautious while using public money. Only then, Bangladesh Bank may overcome these crises. Because the continuous increase of mega project costs adversely impacts Bangladesh Bank reserve directly or indirectly. If the project finishes within the given time, the government can pay the interest rate properly without any issues, and our reserve won’t be affected.
Bureaucracy using public funds unnecessarily
Government employees in Bangladesh always get superior facilities compared to others. Yet some higher officials’ integrities are questionable. While Bangladesh has an economic crisis because of the low reserve in Bangladesh Bank, some higher officials are wasting money. All international travel for all government officials under the operating and development budgets, including exposure visits, study tours, APA and innovation tours, and participation in workshops or seminars, has been suspended until further notice, according to the finance ministry. But no one followed it. That’s why it pressured the bank’s reserve. So, they have to use public funds wisely so that Bangladesh Bank’s reserve remains stable. They have to respect public funds.
Is the bank giving enough interest to the remitters?
According to Bangladesh Bank data, Bangladeshis living abroad sent more than $21.03 billion home in the recently ended fiscal year compared to more than $24.77 billion in the FY 2020–21. Even though this July, we saw a completely different scenario. As Bangladeshi expatriates sent $2.1 billion in remittances in the first month of the fiscal year, a 12.3 per cent increase year over year—the upward trend in remittance inflow persisted throughout July. Even in the first ten days of august Bangladesh Bank received around $813 million in remittances. But this amount is not all. According to the Ministry of Expatriates’ Welfare and Overseas Employment, 13 million Bangladeshis reside outside their country.
And mostly prefer Hundi rather than formal Banking as a medium for transferring money from abroad to Bangladesh. Even though Banks recently started giving a 2.5 per cent interest rate if someone transfers money from abroad. But Hundi is more lucrative than formal banking.
That’s why those who are living abroad mostly prefer to send money through Hundi. If Bangladesh Bank increases the interest rate even further, people may only send more money to Bangladesh through formal banking channels. Then our reserve will be much higher than our expectation. So, by providing more incentives, the government should make sure people are using legal banking channels to transfer money. Bangladesh is an enormous economy. If the government takes the necessary steps, this economy may get its position back. Because of the current exchange rate volatility, neither businesses nor individuals can benefit. So, if the government can ensure those mentioned things, only our reserve and monetary value will be increased.
The writer is a freelance contributor. He can be contacted at [email protected]
