Some major economic-financial indicators performed well below par in the outgoing calendar year, casting their adverse impacts on Bangladesh's economic health, experts said.
The underperformances are: a negative overall balance of payments (BoP), negative growth in reserve money as a result of low net foreign asset and net domestic asset with the central bank, and inadequate broad-money growth as a result of poor demand deposits.
The net sales of national savings certificates continued to rise over expectation, leading to low growth in the banking sector and leaving huge liabilities for the government.
And imports expanded substantially, driven mainly by import of food and machinery mostly meant for Padma Bridge and capital machinery, affecting the balance of trade.
Economists are of the view that financial sectors, especially the banking sector, passed a bad year as the non-performing loans (NPLs) kept swelling. The call-money rate started rising on account of slow deposits and higher outstanding loans.
They said savers opt for saving certificates instead of depositing their money with banks for high yields on the government borrowing tools and low interest rates on bank deposits.
As such, they fear the lower lending rates as of now could go on an upturn following slow deposit and high unpaid loans.
The deposit growth is now around 12 per cent against around 18 per cent previously. On the other hand, the percentage share of classified loans in the total outstanding credits rose to 10.67 per cent as of September last.
Dr Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, thinks there is little possibility of surplus in the current account in future as Bangladesh is now importing much for its different infrastructure projects.
"This is hardly possible seeing a surplus in current account in future," the PRI executive director told the FE about the outlook on the country's financial front.
For such negative current-account balance, the net foreign asset with the central bank shrinks, impacting reserve money.
Reserve money or high-powered money is important as its increase will typically result in a much larger increase in the supply of demand deposits through banks' loan-making, a ratio called money multiplier.
The policy analyst says any dramatic rise in the exports and remittances only can change the landscape of the current-account balance which stood at US$3.3 billion negative.
In his view the poor performance in both the areas also dimmed the prospect of lowering lending rates.
"You will see rising trend in interest in lending soon as the weighted average call-money rate is now nearly 4.0 per cent."
However, Dr Zahid Hussain, the lead economist at the Dhaka office of the World Bank, noted that the central bank had taken some steps to continue a flexible exchange regime.
"This is good step in my view as it is helping rise in remittance in formal channel and expand volume of exports," he told the FE.
Remittances grew by nearly 28 per cent in November against a negative growth over 26 per cent in the same period a year before.
He said for this reason the central bank is losing out on its reserves but the economy getting some strength in terms of remittances and exports. The foreign-exchange reserves remained static at $32 billion. On the other hand, inter-bank taka-dollar exchange rates depreciated to Tk 82.7 against Tk 78.78 a year back.
Dr Hussain said one of the key reasons for rise in imports is a sharp surge in food import. It rose by over 240 per cent in four months to October. The petroleum sector also saw a rise following its rise in the international market.
"This (food import) is a temporary matter as it grew following low rice production as a result of floods," the WB economist said about Bangladesh's economic-financial situation in the year the world is going to ring out in barely two days.
