Russia’s war in Ukraine might be taking place 5,800 kilometres away from Bangladesh and the country is not involved militarily in the dragging conflict in any way, but its economy and people have been paying heavy prices.

Eight banks in Bangladesh faced a collective provisioning shortfall of Tk 19,048 crore in 2022, creating a risk for their depositors. 

The International Monetary Fund would be watching the Bangladesh economy like a hawk, stipulating an extensive list of data reporting regularly as part of the conditions agreed upon for the $4.7 billion loan programme.

More than two and a half years ago, the government took a Tk 1,500 crore safety net programme for the workers who lost their jobs owing to the devastating impact of Covid-19.

The government has kept borrowing from the Bangladesh Bank as commercial banks can’t come up with much-needed funds owing to the liquidity crunch. 

 Bangladesh is at a crossroads where the past meets the present and the future is forged.    

The private sector’s foreign debt decreased by 4.3 per cent, or more than $1 billion, in the second quarter of the current fiscal year following Bangladesh Bank’s strict measures to control imports.

Bangladesh is going through a period of economic slowdown and this weakening of the economy will be looming large for the entire period of 2023. The biggest problem for the common people now is inflation. It has increased the living cost and decreased the actual income.

Bangladesh has averted a potential major crisis by reaching out to the International Monetary Fund (IMF) in a timely manner, said Kaushik Basu, a former chief economist of the World Bank.

The record subsidy allocation of Tk 82,745 crore is set to be topped up with another Tk 27,360 crore in the revised budget in the face of demands from ministries even after the notable price hike of gas, electricity and fuel.

By removing the floor price for nearly half of the companies listed in the country in December while retaining the regulatory measure for the rest, the Bangladesh Securities and Exchange Commission (BSEC) has effectively moved to a dual system. 

Bangladesh’s stock market had a lackluster year in 2022 after posting double-digit returns for the previous two years. Dhaka Stock Exchange (DSEX), the broad market index of the country, fell 8.1 per cent in 2022, while daily average turnover fell by 35 per cent.

IMF loan cannot be the only factor behind much-needed structural changes

The ongoing dollar shortage in the banking sector is posing a threat to local textile millers and spinners as they are in trouble in opening letters of credit (LCs) to import raw materials and cotton to feed the country’s readymade garment industry. 

The government is expecting the shrinking foreign currency reserves will buck the trend and hit $37.7 billion by June thanks to lower imports and budget support from development partners.

It seems the government is doing an about-turn from the austerity stance taken at the start of the fiscal year.

Bangladesh should be careful about falling into the middle-income trap, said Axel van Trotsenburg, the World Bank’s managing director of operations.

Bangladesh’s balance of payments (BoP) deficit would widen massively in the current fiscal year than the central bank had earlier projected owing to escalated imports, lower remittances and export receipts, and higher accumulation of debts.

The Bangladesh Bank is yet to take any visible measure in line with a commerce ministry directive aimed at asking banks to earmark a portion of their foreign currency holdings to open letters of credit to import essentials ahead of Ramadan. 

We are told that taka is available, and then it’s not there anymore.