Dr Selim Raihan, the executive director of the South Asian Network on Economic Modeling, or SANEM, an economic think tank, has sought clear guidelines from the national budget to recover from the ongoing predicament of the economy, affected by the post-pandemic boom in demand and the inflation caused by supply inadequacy due to the Russia-Ukraine war in Europe, bdnews24.com reports.
The dual effect put Bangladesh’s economy into a spiral and the country, at this very moment, is facing a crisis, which, according to Dr Raihan, could very much push the economy into a recession, unless significant countermeasures are included in the national budget for the next fiscal.
In an interview with this news provider, highlighting inflation, volatility in the foreign exchange market, a surge in imports, and negative growth in remittances as the biggest challenges in Bangladesh’s economy now, he said: "Clear directions to recognise and address these issues must be included in the next fiscal’s national budget.”
Drawing examples from his own think tank’s calculations for the last 10/15 years, Dr Raihan said there is a difference of up to 25 per cent between the proposed budget and the implemented budget.
“The current monitoring or evaluation system to see how the national budget is being spent is very weak. As soon as the government will be able to set up a proper monitoring and analysis system, the issue of accountability and transparency will come forth.”
‘RETHINKING ABOUT MEGA PROJECTS NECESSARY’
Although at this very moment, Dr Raihan does not consider Bangladesh’s foreign debt as a “burning” matter, he is of the view that it is high time policymakers treaded cautiously moving forward.
"We need to reassess how much of this debt is being invested in the productive sectors and how much of it is bearing fruit."
As of last December’s data, Bangladesh’s foreign debt amounted to $91 billion.
Pointing toward the persisting problem of the difference between any mega project’s proposal and the reality, Dr Raihan said: “In Bangladesh, there is hardly any correlation between the feasibility study of a mega project and the reality on the ground during the implementation stage. The rise in overhead costs due to failure to meet deadlines has become a major cause for concern.”
He suggested that policymakers adapt to a new way of thinking about mega projects in the current context.
"We need to take stock of the ongoing foreign debt-based mega projects. It’s time to review what the feasibility studies say, the actual progress of the project to date, and how much things have changed.”
Admitting that the next budget cannot address all of these, he suggested the policymakers at least come up with a roadmap to undertake such reviews in future.
‘PLEASE ADMIT THERE IS A PROBLEM'
A SANEM survey before the last fiscal’s budget announcement revealed that in the wake of the COVID-19 pandemic, the percentage of people below the poverty level had increased from 20 per cent to nearly 40 per cent within a year.
The government categorically dismissed the data. Only recently, in some forums, Finance Minister Kamal has partially admitted the fact but insisted that the situation improved drastically since the lifting of pandemic-era restrictions.
The matter appears to be a sore subject for the University of Manchester-trained economist.
“The government first has to accept there is a crisis, otherwise there will be no solution,” Dr Raihan said.
The official position of the government and the analysts’ prognosis of the economy are identical at the moment as both sides have pointed out the threat of ongoing inflation and global recession, resulting in a surge in commodities prices which compounded sufferings of the middle-class.
“I highly doubt there will be any recognition of the new poor in this budget since the government did not even acknowledge them in the last one,” he said.
Dr Raihan wants a clear direction in the budget on how to bring the prices of essential commodities to a tolerable level.
He also said the budget should have guidelines on how to expand the social security programmes and allocations, which the finance minister already said that he will, and how to include those who are under new inflationary pressures.
‘REMOVE BARRIERS TO ATTRACT MORE FDIS’
His advice for the government includes reforming policies to create new jobs and incentives for small and medium enterprises.
"In the budget, the government must give special attention to micro and small enterprises and initiatives should be taken to increase investment and credit growth in the private sector,” he said.
He also said the government must find out why private sector investment is not growing.
Citing the successes of India in the last year regarding foreign direct investment, Dr Raihan suggested removing investment barriers and improving the business environment.
"Policy-wise, India in last one year has improved significantly to facilitate new investment and the cost of doing business there has dropped significantly.
“It’s time we reevaluate existing commerce, banking, monetary and tax regulations and bring those to a level attractive to the foreign investors,” he said.
'MONEY LAUNDERING NEEDS TO BE STOPPED, PERIOD’
Dr Raihan accused the government of turning a blind eye to the matter of money laundering in the past.
Only recently, in the wake of the highest trade deficit in history and a declining remittance inflow, which resulted in a depleted foreign exchange coffer, has the government acknowledged it.
“We need to plug the holes by enforcing the existing laws properly. There is not enough monitoring system to stop it as of now.”
The researcher believes launderers will be more encouraged if the investment situation in the country does not improve.
“A solid currency devaluation system needs to be in place.”
Regarding the recent devaluations of the taka, Selim Raihan said the decision must not be taken on an ad-hoc basis.
“The value of US dollar in the kerb market is not real. It is just a temporary rise due to supply shortages and excessive demand. It is possible to calculate the actual value from the market value,” he said.
"If necessary, I don’t oppose devaluating the currency. However, it must be done systematically.”
'MAJOR REFORMS NEEDED IN TAX SECTOR'
The executive director of SANEM believes the ongoing economic situation would put the government's revenue collection in a precarious position.
He stressed a major reform in the tax sector.
“The tax-to-GDP ratio has been static at 10 to 12 per cent year after year. This time, the government is under increasing pressure to make the necessary reforms in the tax sector to generate revenue for investment in the important sectors.”
