The pressure on Bangladesh’s economy, generated by rising imports against less-than-sufficient exports and falling remittances amid escalating inflation, has eased slightly as the indices have rebounded in July.
Experts, however, do not think the time has come to relax. They have urged the government to be cautious about loosening the austerity measures and the monitoring that were initiated to help the country deal with the global economic crisis created by the Russia-Ukraine war.
The monthly year-on-year rise in inflation crossed the 6 percent mark in February and continued to increase by 7.56 percent in June before falling slightly by 7.48 percent in July.
Bangladeshi importers opened letters of credit, or LCs, worth $5.5 billion in July, down by 31 percent from June, as the central bank continued to tighten its control over imports.
Bangladesh made a record in exporting goods and services in the last fiscal year, but it was not sufficient to pay the import bills as a low remittance inflow had affected the balance of payments, resulting in a shortfall of US dollar reserves.
Last month, exports grew by around 15 percent to $3.98 billion while expatriate Bangladeshis remitted $2.1 billion, a 12 percent year-on-year growth after posting a 15.12 percent fall in the fiscal year that ended on Jun 30.
“The rebound of key indices is of course a matter of comfort, but we should not think this positive trend will last forever. Rather, the government should continue with the cautionary measures,” said Selim Raihan, executive director at the South Asian Network on Economic Modelling or SANEM.
Inflation fell slightly as the prices of some goods fell globally, he said. “But it’s not significant. Inflation in the rural areas increased more than that in the urban areas, which means it affected the poor more.”
“Prices did not fall here as they did in the international market. It means import costs are not decreasing at the expected rate.”
Selim advised the government to strengthen monitoring of the disproportionate rise and fall in the prices of commodities.
“And it is feared that the tension around China and Taiwan will impact the international market amid the Russia-Ukraine war.”
Selim, an economics professor at Dhaka University, sees the rise in remittances will help Bangladesh’s economy the most.
“Because a significant portion of the exports is spent on raw materials and intermediate goods. But remittances are exclusively added to our foreign currency reserves,” he explained.
Exports will however continue to rise because the devaluation of the taka against the US dollar will work as an incentive, he said.
Agrani Bank Chairman Zaid Bakht, former researcher at the Bangladesh Institute of Development Studies, said the efforts to keep inflation down should be persisted with.
He also thinks the Bangladesh Bank should continue monitoring imports to stop attempts to smuggle money out of the country by paying more than the actual price of imported goods.
He welcomed the central bank’s efforts to control the US dollar price by keeping a tab on the money money changers.