The country's economic outlook for FY 2022-23 has been revised downward to 5.5 per cent by the International Monetary Fund (IMF). It is not that Bangladesh has received only a scaled down projection, the economy is also slated to rebound in 2024. According to the World Economic Outlook Update 2023 report, GDP originally forecasted to grow at 6.0 per cent is now slated to grow at 5.5 per cent. This should not be thought of as the end of the world by anyone. The fact that Bangladesh managed to tackle the global pandemic in a positive manner goes to its credit. Indeed the country has received praise from the United Nations for having acted promptly to contain the pandemic with the fast rollout of a nationwide vaccination programme.
Unfortunately for Bangladesh and many other nations, certain things have been beyond their control to influence. External factors such as the continuation of the war in Europe, the massive disruption of supply chain of essentials like edible oil and cereals, the volatility of the international oil and gas prices, to name but a few. With the reduction in inward remittance and dip in the RMG exports, while the import bill mushroomed to astronomical heights, the negative developments have taken a heavy toll on the economy. Things are not going to be rosy for the current fiscal.
As the Bangladesh Taka has continued to depreciate on the back of falling foreign exchange reserves, policymakers were forced to approach multilateral agencies like the IMF and the World Bank (WB) for budgetary support. In the midst of all this gloom came the news of fresh scandals in the financial sector, which have undermined public confidence somewhat, but not to the extent that the economy cannot recover from it. That the national exchequer can no longer afford to keep subsiding energy sources - a significant portion of which is being imported from foreign sources has brought about new uncertainties for the various productive sectors in the economy.
Some industries are hugely gas-intensive and major producers in the areas of steel, ceramic and RMG are going to find it increasingly impossible to foot the revised gas bill. Certain industrial processes are entirely dependent on machinery that can only run on natural gas. The government has no choice but to lift subsidies that have been holding back gas prices. On top of energy crisis, the dearth of foreign exchange has put a lid on imports of raw materials amongst other things. That has led to price increases of everything from edibles to finished products. All in all, time is hardly propitious.
When one takes into account the fact that the world economies will, according to the IMF, grow at 2.9 per cent rate in the current fiscal, the projection for Bangladesh's 5.5 per cent growth is actually very rosy. "Global inflation is expected to fall from 8.8 per cent in 2022 to 6.6 per cent in 2023 and 4.3 per cent in 2024, still above pre-pandemic (2017-19) levels of about 3.5 per cent." However, the IMF's projection for Bangladesh is at the other end of the spectrum. Inflation is expected to average around 8.9 per cent throughout the year, and only begin to ease off in 2024.
For Bangladesh, this year is one of make-or-break undertaking. The RMG sector is the single largest employer of people. Any hiccups in terms of energy supplies to this sector will mean large scale shutdown of factories and hundreds of thousands unemployed. When energy crisis is extended to other sectors, the domino effect will apply. Blaming Russia-Ukraine war and external factors will do little to help matters. As the country is facing a serious threat to the production side of things, why are policymakers talking about renewable energy now? An all-out drive to explore every inch of the country aimed at finding new gas reserves ought to be there. Why is 1.0 billion tons of coal allowed to stay idle under the soil? Where is the new coal policy that will attract serious foreign investment in the sector? Why is the proposed pipeline from India to Bangladesh not being explored? Why is there no effort to import cheap Russian oil (if necessary, via a third country)?
Bangladesh needs energy now. Its proven 8.0 tcf (trillion cubic feet) gas is a finite resource. Bangladesh can continue to keep draining its known gas fields, but there must be vigorous efforts to find new onshore gas reserve. The revised off-shore drilling PSC will take many years to operationalise. Energy experts state that from signing of contract to getting gas in the grid (from offshore) is around eight years in the making. Should Bangladesh sign contract for coal extraction today, the first commercially available coal is five years away. These are the ground realities. Bangladesh cannot be a "smart" country if it has no energy to power its industry or agriculture (if no diesel-run pumps, no irrigation, no solar-powered diesel pumps, no irrigation). It is good to know that some economists are hopeful that the global economy will start recovering from 2024. Bangladesh has to ride out the rough times of 2023.
