Economists emphasise efforts to regain foreign buyers’ trust and normalise public welfare services
Published : 25 Jul 2024, 12:17 AM
Bangladesh's economy was already under pressure because of global headwinds, runaway inflation, and high dollar exchange rate before it was struck by unprecedented violence during student protests for reforms to government job quotas last week.
As people wonder how the country will heal the wounds wreaked by the anarchy, it remains unclear how long it will take to assess the exact extent of damage to business and economy during the eight-day conflict and five-day curfew.
The daily financial loss to the country’s main exporting sector readymade garments has been worth Tk 1.6 billion, estimates the Bangladesh Garment Manufacturers and Exporters Association or BGMEA.
"The fear of losing international buyers’ trust is greater,” said the association’s President SM Mannan Kochi.
Zahid Hussain, former lead economist at World Bank's Dhaka office, also thinks regaining the buyers’ trust should be given utmost priority.
"Trust doesn't rise as fast as it falls,” he commented.
Economist Ahsan H Mansur suggested reviewing the Annual Development Plan to prioritise the work to repair damaged structures like Dhaka Metro Rail stations and Elevated Expressway toll plaza.
Economists are also emphasising the normalisation of public welfare services to bring the economy back from a standstill due to agitation and violence.
The protest was initially peaceful in the beginning of July, but the situation began to deteriorate in the second week of the month, when the agitators started a nationwide blockade, causing widespread disruptions to economic activities.
It turned violent in mid-July, bringing the entire country to a standstill with subsequent curfew and general holidays following scores of deaths.
According to Helal Uddin, president of Bangladesh Shop Owners Association, if the shops are closed for a day, the country suffers a loss of at least Tk 20 billion.
“This time the protest caused more damage, directly affecting 20 million small businesses,” he said.
Apart from the shutdown of industrial production for six days, goods supply came to a complete halt.
Government revenues were hit greatly.
During this entire period, the banking and financial sector was almost immobile while remittances stopped coming in.
Due to the shutdown of the internet, there has been a major impact on the life of the common people, starting from business, financial sector, taxation, internet-based businesses, and international trade communication.
The last financial year ended with an inflation of 9.73 percent. Economists believe that the volatility of the past week will create a new crisis in the efforts to tackle inflation.
The country is going through various economic crises for three years. Unbridled prices of essential commodities, crisis in foreign exchange reserves, increasing debt dependence on fiscal deficit, debt interest payment liability and decline in export earnings in global war situation are at the top of the list.
The government has been following a contractionary policy since last year to ease the crisis. The size of the budget for the financial year 2024-25 has not been increased accordingly. The government has reduced expenditure in various sectors, prioritised projects, and strengthened appraisal programmes to reduce project costs.
But all the crises have been exacerbated by the stalemate surrounding the quota movement and violence.
Economist Zahid Hussain told bdnews24.com: “We are passing unusual times. This is not a situation like an epidemic or a global recession. The peaceful solution must come from the political level. We have to think about how to prevent the recurrence of such a situation.”
“There has been a big shock in revenue collection due to the suspension of commercial activities. That is why normalcy should be restored first. Curfew should be lifted. Production and trade activities should be brought back to normal.”
REBUILDING TRUST
According to the National Board of Revenue, 6,000 consignments of goods were exported every day on an average through 43 customs stations across the country last year. Taking this calculation into account, about 18,000 shipments were intercepted at the ports in three days from last Thursday.
Products could not be exported as the internet was down. Imported goods were not taxed.
All in all, businessmen are expressing fear that Bangladesh will have to face an adverse situation in the international market.
In a meeting with Prime Minister Sheikh Hasina on Monday, Apex Footwear Managing Director Syed Nasim Manzur said: "Please make arrangements for the factories to reopen tomorrow [Tuesday]. We’ll stop if there is a problem.”
“Please provide security on the Dhaka-Chattogram Highway, make arrangements for the goods to be released manually, and make arrangements for sending emails. Otherwise, we will not have any order.”
At present all goods at the port are cleared through Asycuda World Automation. The NBR ordered manual release of some products on the request of traders during the turmoil.
Economist Zahid Hussain said: "The crisis of confidence in international trade has to be dealt with. Distrust in banking channels may also arise. Exports may decline. It will have to be addressed by the private sector. But the government must take responsibility first.
"Reformation of our banking sector has long been imperative. Now in this critical time, if the government takes the reforms seriously, the recovery of the economy is possible."
REVIEWING ADP
The government will have to spend funds to repair the damaged structures like the metro rail, elevated expressway, Department of Disaster Management office and Setu Bhaban.
Ahsan Mansur, executive director of private think-tank Policy Research Institute, said the repair work should be prioritised in the ADP.
“The funds should be used to restore these services even if the government has scrap projects that are not essential now,” he said.
He also suggested setting up temporary structures to resume the services for now.
Zahid Hussain agreed with Mansur. “The government has made huge investments in metro rail and elevated expressway. If these cannot be used now, the government will miss the full benefits of the investments.”
“The ADP can be cut and reprioritised for the restoration of these projects.”