After the July uprising, the interim government took office when export growth hit rock bottom, remittance inflows fell by half, and dollar reserves hit rock bottom. Domestic and foreign investment collapsed, irregularities and corruption caused looting in the banking sector, buyers were crushed by inflation, and partner countries withdrew their support.
However, the country's economy has largely recovered from that situation. Exports have grown by more than 10 percent in seven months, remittances created record, and reserves have increased to 21 billion.
Looting has stopped in the banking sector, and people’s confidence has returned. Inflation has come down significantly, and partner countries have also stood by. However, there is still a lot of work to be done, and the public's expectations for this government are very high.
Many changes have occurred in the economy after the change of government. We have seen one effect of this in the high growth of exports and remittances, due to which the balance of imports and exports (BOP) is in a comfortable state.
After a long time, we have become positive in the current account. This has created an opportunity to gradually lift the various restrictions that were placed on imports. These are positive for the macroeconomic situation.
Again, the expectations that people had about bringing down high inflation have not been fully met.
Although it has decreased somewhat, inflation is still at a high level. This is a cause for concern for the common people. An attempt is being made to control inflation through contractionary monetary policy. In this process, the interest rate on bank loans has been increased several times, as a result of which no new investment is being made.
Boosting investment is a challenge. But it remains in the economy. If new employment does not increase in the domestic market, there may be concerns in the long term. This is also a cause for concern.
There is no positive improvement in the investment situation. There is a stagnation in the import of capital equipment and industrial plants. Investment is being negatively affected by high interest rates of banks. Due to the inability to launch one-stop services, the BIDA plan is also not being fully implemented. They wanted to launch a few special economic zones, but gas connections and electricity supply are not being provided. Due to the low overall capacity of the government, it has not been possible to make our economy fully investment-friendly.
The work of bank reform has started. Bangladesh Bank is trying. For example, by forming various task forces, activating the BFIU and working with the ACC, they are trying to bring bank robbers under the law, but so far, deliberate defaulters have not been identified through banking sector reforms. Despite taking positive steps, they are still not visible, because it takes some time for the benefits of any step to be seen in the economy.
Attention must be paid to increasing institutional capacity. In addition, if organizations are proactive and the National Board of Revenue can be activated, revenue collection and budget deficit can be reduced. It is hoped that initiatives will be taken to increase digitization and tax net in view of the budget. Direct taxes in particular will have to be increased. At the same time, tax evasion that exists will have to be prevented.
Since our purchasing power has deteriorated, the inflation rate is almost double the increase in deposits, so the social security rate will have to be increased. The sale of goods in the open market will increase, allowances and various cards will have to be increased. The money that will be required for this will come from direct taxes. Therefore, the overall revenue will have to be increased by increasing direct taxes.
The pressure of debt service is gradually increasing. Therefore, if we cannot increase revenue collection, we will have to borrow and repay the debt. That is not good for any economy. The government has to handle the overall pressure. Therefore, good governance and accountability will have to be ensured going forward. The interim government may not be able to do everything. There is hope that the next government will follow the path shown by them and implement the remaining tasks.
Writer: Honorable Fellow, Center for Policy Dialogue (CPD)
