Leading economists have said a sound foreign currency reserve and debt ratio to GDP alongside debt repayment capability to largely help Bangladesh offset COVID-19 impacts on its economy.
But they feared a protracted pandemic would require the country enhanced development partners’ supports, reports BSS.
“The higher amount of foreign currency reserve facilitates a country in creating more liquidity and we are now in such a position,” former Bangladesh Bank governor Dr Atiur Rahman said.
He said Bangladesh’s debt ratio to GDP was only hovering around 30 per cent compared to nearly 200 in the United States, a situation which would enable the government t borrow more foreign loans that what the United States could do.
“This means that we are able to create fiscal space in the economy. More foreign currency reserves can facilitate creating more liquidity and we now have that position,” Rahman said.
Fellow economists and financial analysts Dr Qazi Kholiquzzaman Ahmad and Dr Mustafizur Rahman largely agreed with the former central bank chief saying the national economy garnered some strength in the past several years which was likely to help overcome the COVID-19 debacle to a large extent.
Their observations came as approached for comments as The Economist, a leading weekly on economy and global affairs, in its current issue described Bangladesh as the 9th strongest economy out of 66 emerging ones owing to the COVID-19 fallout.
Ahmed, who is the former chair of Bangladesh Economic Association and now heads the Palli Karma Sahayak Foundation (PKSF), said the government steps by now put Bangladesh in a better position than many other countries in tackling the impacts of COVID-19.
But, he said, the situation now demands the next national budget o lay highest priority on public health, followed by agriculture and social safety sectors to face the coronavirus impacts.
He particularly called “very rationale” the food assistance campaign for marginal people alongside the cash assistance and also described as “appropriate” The Economist analysis of Bangladesh’s economic strength.
“But, we will have to wait and see for how long the pandemic lasts. If it prolongs, then we’ll have to keep operational the domestic economy and need to draw more assistance from our development partners,” Ahmed said.
Leading think tank Centre for Policy Dialogue’s (CPD) distinguished fellow Dr Mustafizur Rahman said strength of Bangladesh in some areas like foreign currency reserves, sound debt to GDP ratio would help the country facing the impacts of COVID-19.
But, he said, the government would have to mobilise additional funding through stimulus packages and increased allocation for the social safety net sector and simultaneously put in its efforts to enhance capacity to mobilise more domestic resources.
Bangladesh’s foreign currency reserves now stands at US$33 billion while the figure was US$ 6 billion in 2009.
Atiur Rahman said this scenario created a basis for The Economist to come up with its analysis on Bangladesh economy as the government policies and strategies over the last one decade ensured macroeconomic stability and reached benefits to the peoples’ doorsteps simultaneously.
“I was not at all surprised at its (Economist) assessment,” he said.
The central bank’s ex-chief, however, suggested the government to take steps to create more liquidity in market through measures like selling treasury bonds, wage earners bonds and investment premium bonds and “the government could create more bonds where the non-resident Bangladeshis can invest”.
Under the current Coronavirus situation, he said the government can act on both on the monetary and fiscal policies.
Atiur said Bangladesh need not to worry over the inflation situation as the global inflation situation is on the downtrend. “The situation is also same in our country. The fuel oil price has reduced so as the goods transportation cost.
He said the government could opt to go beyond the usual 5 per cent budget deficit and even can raise it by another 3 to 4 per cent to enable it to take credit from the Bangladesh Bank.
Atiur also suggested Bangladesh Bank to take steps so banks and other corporate houses stand beside jobless marginal people with their CSR activities and come up with steps to support the large industries and SMEs to overcome the COVID-19 shock.
He said such refinancing schemes could be further expanded while micro credit institutions could be engaged in this regard alongside the commercial banks.
Mustafizur Rhman suggested Bangladesh must avail the external assistance and supports for its benefit to combat the crisis.
The G-20 countries, he said, recently said they would extend support to COVID-19 affected countries like Bangladesh and “in some cases, they will exempt repayment of loans and we’ll have to avail those opportunities”.
The CPD fellow, however, cautioned that although country’s debt repayment services’ was good, but Bangladesh by now became a lower mid income country, that unqualified Bangladesh for getting soft term loans.
“The government should negotiate with the development partners so we could avail soft-term loans under the current circumstances,” he said.