We are getting overwhelmed by positive stories of Bangladesh economy from various international sources which indicate it has been rebounding from pandemic slowdown at an amazing pace. All these positive stories have been pouring in when many of its peers are struggling to stay afloat. We all know how the entire global economy came to a standstill. Although vaccine divide makes the recovery differentiated and uncertain, the global economy is fighting back. Fortunately, Bangladesh has been doing remarkably better than many of its peers in this difficult journey. One must give sufficient credit to the Bangladesh Premier Sheikh Hasina for showing her courage and prudence in declaring a massive stimulus package as early as in early April 2020 of BDT 1,30,000 crores. This is about five per cent of our GDP. The aim was to prevent the economy from falling into recession and to provide people with enough resources to survive and recover. She encouraged Bangladesh Bank to protect the economy from a liquidity crisis. This time too, the developmental central bank, in line with the government's fiscal policy, went beyond the conventional monetary policy and provided necessary liquidity support to the economy. I am happy to see Bangladesh Bank upholding the legacy of inclusive and sustainable finance that was introduced a decade ago in the wake of the global financial crisis. More importantly, it has been trying to keep the garment industry, our lifeblood, afloat by providing low-cost working capital support, including interest subsidies to entrepreneurs. In addition, wage support for the workers was given using mobile financial services during the early days of lockdowns to keep the factories opened. Despite the drop in export orders due to lockdowns in Western countries, Bangladeshi factories stayed active, with the hope that one day the crisis would be over. And this has been paying us well.
Most people in Europe and America have been vaccinated against coronavirus leading to opening of the businesses. Initially, we were under a lot of pressure as we could not access vaccines even after paying for the same. However, our Prime Minister was on the spot and demanded quick transformation of vaccines into a global public good. Simultaneously she started procuring the vaccines from different sources at any cost. Bangladesh has a fantastic heritage of vaccine culture. Thriving on that she has been an unprecedented vaccine campaigner, even reaching the school kids. As a result, it was possible for us to open our mills, factories, businesses, and trades sooner than many other countries. And we have already begun to reap the benefits. The economy is thus rebounding. The rate of export has been increasing. In September of this fiscal year, our total export trade was $ 4.16 billion, registering a 38 per cent growth from the same month last year. During the July-September quarter of this fiscal, Readymade Garments (RMGs) exports stood at USD 9.05 billion. A lot of new orders are pouring into Bangladesh for the upcoming Christmas and the next summer. It may be noted here that the United States has been cutting down its clothing imports from China. Western countries are also not buying products from Myanmar either. Vietnam also experienced a major lockdown. All these circumstances have helped increase our garment export demand. Apart from that, the size of our garment industry is also quite large. We are taking full advantage of the 'Economy of Scale'. Buyers prefer a single compliant sourcing country. After the Rana Plaza tragedy, the joint efforts of the government, entrepreneurs, and foreign buyers have greatly improved the environment and social compliance of our garment industry. Hundreds of factories are now green. Moreover, the coordinated fiscal and monetary policies have been very encouraging for the sector. All these factors have made it easier for our industry to turn things around so quickly. This industry deserved this support as it employs major portion of our formal labour force including overwhelming number of women.
This export-oriented industry is highly dependent on import of its raw materials, intermediate goods, and capital equipment for which there is no alternative to policy supports. In addition to back-to-back LC support, both government and Bangladesh Bank are also providing large support to the Export Development Fund (EDF) and various revenue concessions on imported materials and capital equipment for the industry. All these supports further increased during the Corona period. Therefore, import soared to $9.61 billion in the first two months of this fiscal, recording around 46 per cent growth over the same period of the previous fiscal year. We can see from the opening of the Letter of Credits (LCs) that the volume of imports of items related to RMGs will increase more in the coming days. A record number of LCs was opened in August of the current financial year as well. The related entrepreneurs opened LCs worth $7.18 billion this month. Never we have seen so many LCs opened in a month. The number of LCs opened in July and August was 48.60 per cent higher than that of the same period of the previous financial year. More than one-third of these LCs were for importing industrial raw materials. As of July-August of this year, LCs worth $4.47 billion have been opened. This is 50 per cent more than the previous fiscal. The rate of import of capital equipment is also increasing, but not by such a huge margin. In these two months, it has grown by 11.66 per cent compared to those two months of the previous financial year. Meanwhile, the pace of opening of LCs of intermediate goods increased to 54.5 per cent during this period.
Not only in the RMG industry, but the number of LC openings has also increased by 49 per cent in other industries during this period. LC opening for fuel oil imports and food products has increased by 62 per cent and 63 per cent respectively. In such a situation, the current account deficit is expected to increase. In fact, this has happened. As a result, the demand for US dollars has also increased. There has been a slight devaluation of Taka as well. However, Bangladesh has more than $46 billion in reserves. The central bank is trying to keep the money-dollar exchange rate stable by selling USDs. No doubt, Bangladesh Taka remains the strongest currency in emerging markets of Asia. Recently, the flow of remittances has declined significantly compared to this time last year. This may have been contributing to the increased pressure on the devaluation of Taka. I think this is a transitory phenomenon. As the stranded returnee migrants have started going back to their host countries that too are rebounding fast riding on the rising price of oil. I feel confident that remittances will come back to their rhythms in a period of two-three months. Besides, the policy makers may think of providing another one per cent cash incentives to the small remitters sending up to fifteen hundred USD a month or so to stabilise the inflows.
The domestic resource mobilisation also has been picking up in recent months. Whenever exports and imports increase, the pace of revenue collection also shoots up. This is becoming visible as Bangladesh's economy is getting back on track. It is heartening to see the growth of revenue collection between last August and this August was 24.58 per cent. The growth rate was only four per cent in July. In July-August, the revenue growth was 14.55 per cent. Income tax and VAT collections are also increasing. Although the revenue collection is a little behind the set target, the growth will further pace up as both the domestic and international economies have started recovering. The NBR has already getting digitised. The process of tax deduction at the source has already been automated. Hopefully, they will be successful in fully automating the filing of income tax submission using digital payment system very soon. I have a lot confidence in the professionalism of the National Board of Revenue (NBR) leadership, particularly its chairman. I hope that soon NBR will transform into a more vibrant organisation.
From the discussion so far, it is easy to assume that Bangladesh's economy is standing on a solid platform. Bangabandhu's capable daughter Prime Minister Sheikh Hasina has built this platform through her far-reaching policy initiatives. Mainly due to modernisation of agriculture, increase in expatriate income, and continuous increase in exports, the consumption power of the people of Bangladesh has soared, so has the country's economic strength abroad. In addition to exports and remittances, the thriving agriculture sector has been fueling this fast recovery of the economy. The food production including boro paddy was more than last year. All mother crop varieties have registered growth. Not only rise in growth in food production, but Bangladesh has also improved its global hunger index as well over the decade. This year, with a figure of 19.1 in global hunger index Bangladesh has surpassed both India and Pakistan with indices of 27.5 and 24.7 respectively. Bangladesh improved this index by 25 per cent during 2012-21 along with fourteen other countries. This has been made possible due to significant improvement in nutrition intake exhibited through reduced child mortality of under-five children.
Despite some rise in food prices, we need not be so alarmed about food inflation as our domestic production has been better than last year. Maybe this is a transitory phenomenon and prices will stabilise very soon. However, due to sudden rise of oil price and devaluation of Taka leading to rise in shipping cost, the imported food prices may have gone up. If we can remove the bottlenecks in the supply chains and provide some incentives to the shipping cost, the inflation will also be stabilised. I fully understand the impact of inflation which normally cuts the pockets of the poor. I hope the inflationary pressure will be contained without affecting the growth uptake. This is indeed a fine balancing act which the central bank ought to keep in mind. The macro-micro linkages have helped Bangladesh maintain robust consumption leading to a fantastic growth process. However, domestic demand is the main source of power for the economy of Bangladesh. This is evident in the continuous improvement in Bangladesh's overall economic and per capita growth despite the Corona Crisis. Bangladesh has been the fastest growing country in Asia in terms of per capita income growth for the past five years. Even in the last two years of the Covid pandemic, Bangladesh has maintained its number one position in this index. Very recently, IMF has put Bangladesh with $2,138.79 per capita income ahead of India for the second consecutive year with a projection of 6.5 per cent growth at the end of the current fiscal year.
Even during the Corona period, Bangladesh's per capita income increased by 7.8 per cent, higher than China's 6.9 per cent and India's 3.1 per cent. In addition to the public support for agriculture, a lot of money is going to the villages due to the continuous increase in exports and remittances. As a result, consumption has increased rapidly in the rural economy. Agricultural wages are also rising in the villages. About 60 per cent of the total income is generating from the agriculture-related non-agricultural sector. This non-agricultural income is playing a strategic role in making the rural economy modern and versatile. Therefore, the growing consumption of rural people is playing the biggest role in increasing the per capita income of Bangladesh. However, investment in the village would have soared even more had the Covid pandemic not interfered. The digital transformation of the financial sector, especially mobile-based financial services, has provided tremendous support to this momentum in the overall economy of Bangladesh. According to the World Bank, our growth will be 6.4 per cent this fiscal year. Even a few months ago, they predicted much less than that. The Asian Development Bank (ADB) estimates that our growth will be 6.8 per cent. I think the growth rate in the current fiscal will be more than seven per cent. Both IMF and Standard Chartered Bank projects Bangladesh economy will be more than five hundred billion USDs in fiscal year 2025-26. Adopting and implementing supportive policies for agriculture, MSMEs, and green entrepreneurs are essential to make this growth more inclusive. There is no alternative to strengthening the monitoring system so that the incentive facilities provided in these sectors can be properly implemented.
Bangladesh's stunning macro-economic stability, especially its nine-month equivalent import reserves of $ 46 billion, its currency being the strongest in Asia, stable food inflation (although both food and non-food inflation are now rising), very promising debt-to-GDP ratio (below forty percent), increasing exports, including RMG in the last three months ( above eleven per cent), surplus revenue (about fifteen per cent), visible large and other infrastructure projects, implementation of foreign aid, the young formal labour force (38 per cent of whom are fairly-educated young women), and the continuity and activism of the government's far-reaching policy have sustained the growth momentum. However, the flow of credit to the private sector is still slow which ought to be revamped for greater growth in private sector investment. Boosting the flow of money in the small economy is therefore very important. At the same time, the government needs to increase social security for people at the bottom of the social platform. To do so, adopting a new roadmap of stimulus intervention may be warranted. To conclude, I would like to say that increasing the efficiency of our manpower can be the biggest policy incentive of this time. At this moment, about 62 per cent of our expatriate workers are completely unskilled. Only two per cent can be considered skilled. Strong government support is required in this regard. We should definitely decide not to send unskilled people abroad without training them to be semi-skilled at least.
To make the semi-skilled workers of the export-oriented industry fully skilled and machine-learned, there could be new form of incentives to the entrepreneurs for re-skilling of their workers. Productivity, not cheap labour, will create comparative advantage for us. Equal emphasis on technical education and on-the-job skills acquisition to increase efficiency are what we need urgently. However, the way the government is emphasising the mega projects, connectivity, and construction of all kinds of structures, it seems that no one will be able to hinder the dynamics of Bangladesh's economy. To do so, there is no alternative to sustainable financing. If green finance can be ensured by mobilising the bond market by overhauling the financial system, it is possible to make our growing economy stable and sustainable. Happily, there have been some positive moves in this direction.
Dr. Atiur Rahman, Bangabandhu Chair Professor, Dhaka university and Chairman, Unnayan Shamannay.
