Bangladesh’s macroeconomy is presently under more pressure than at any time in the past 10 years, according to a report of the Centre for Policy Dialogue (CPD).
The independent think-tank made the observation in its report titled “State of Bangladesh Economy and the Budget Challenges” unveiled at the CIRDAP auditorium in Dhaka on Tuesday.
“Macroeconomic stability, which is the main strength of an economy, is weakening. It is under highest pressure compared to any time in the past 10 years,” said Debapriya Bhattacharya, a distinguish fellow of the CPD.
The report identified weak revenue collection, crisis in the banking sector caused by high number of non-performing loans, interference in interest rates, and intense pressure in the foreign exchange market as key factors that are putting the country’s macroeconomy under pressure.
Debapriya further said: “Revenue collection at present is at its slowest, and if it does not improve, Bangladesh’s journey as a lower middle income country will be interrupted. Development activities are also being hampered due to a huge shortfall in revenue collection.
“Half of the Annual Development Programme (ADP) being implemented in the last three months of this fiscal year is a reflection of the weakness of ongoing development activities,” Debapriya said, while questioning the quality of ADP implementation.
“The debt burden of national savings instrument is rising. On the other hand, the government could not avail foreign assistance,” he added.
CPD estimated that the revenue mobilization target for Fiscal Year 2019 (FY19) will not be achieved, and possible revenue shortfall will be around Tk85,000 crore in FY19, compared to Tk71,446 crore in FY18.
Debapriya pointed out: “Foreign exchange transaction never faced such pressure earlier. Despite good inflow of remittance and export earnings, trade deficit is continuously widening due to high import volume.
“The high trade deficit is eroding foreign exchange reserve faster. The foreign exchange reserve was equivalent to eight months import in FY17, which came down to five months in March.”
Trade deficit stood at $11.92 billion in July-March of FY19, when reserve was $31.7 billion.
Bangladesh Bank is trying to keep Taka stable by selling US dollars. As a result, Bangladesh is losing its competitiveness in the international market, said the CPD fellow.