Economics
Second half-yearly monetary policy faces challenges
Five months have passed since the interim government took office, but there has been little sign of success in the economic sphere during this period. The interim government has been focusing more on addressing political crises rather than economic issues. The formulation of the new monetary policy is nearing completion. The Bangladesh Bank has started discussions on the proposed monetary policy with stakeholders. If everything goes as planned, this policy will be approved in the Bangladesh Bank board meeting on January 22, and then it will be published. This will be the second monetary policy of the current fiscal year and the first of the interim government. This will also be the first monetary policy under the new governor of Bangladesh Bank, Dr. Ahsan H Monsur. Since taking office, the new governor has taken several practical steps, including initiatives to make the foreign exchange rate and bank lending interest rates market-based. However, these steps should have been taken earlier. The previous governor failed to take effective actions in these areas, which led to a sluggish and downward-moving economy. Among all the recent monetary policies issued by Bangladesh Bank, none has been as challenging as the proposed policy.
Excessive foreign debt erodes financial independence
In the 1970s, an American development economist visited Bangladesh. At one point, he gave a speech to the faculty members of Dhaka University. The economics department’s professors were notably present at this event. During his address, the American economist presented his views on why Bangladesh’s economic development was not progressing to the desired level. The professors in attendance listened intently to his words. At that moment, a young economics professor from Dhaka University stood up and said to the American economist, "The reason we are unable to achieve the desired level of development is because you are intervening in our economy in various ways." After a brief pause, the American economist replied to the young professor, saying, "If 80 percent of the funds for your country's development activities come from us, whose economy is it? If you were able to finance your development from domestic sources, we would not need to offer any advice." Hearing this, the young professor remained silent and sat down.
Economic tensions to intensify worldwide
It is natural for people to be curious about what may happen in the world economy and trade in the coming year. Particularly, with Donald Trump being re-elected as the President of the United States, there is speculation about whether the situation will worsen. The question being raised is whether Trump will launch a full-scale trade war. According to a report by the Financial Times, there is a possibility of a full-scale trade war, but it is not guaranteed. The FT refers to a full-scale trade war as a scenario where, by the end of the year, the United States will impose at least a 10 per cent tariff on all imported goods. Trump has threatened to impose up to a 25 per cent tariff on goods from Canada and Mexico, excluding China. These two countries account for 30 per cent of US imports. They, too, will continue to exert pressure on Trump in various ways. However, FT suggests that due to the additional tariffs, Trump is likely to continue the tariff battle. Hence, they do not believe that these tariffs will be withdrawn by the end of the year.
'Six Kas' of reform and the looming economic crisis
What you understand by reform depends on who you are, what your profession is, what your political beliefs and views are, which party you support, and above all, how you think about the country.
Professor Anisur Rahman was my teacher and guide
Any death is painful, but when it is the death of someone like Professor Anisur Rahman, it becomes incredibly hard to bear. Professor Anisur Rahman was my direct teacher. He had been suffering from various age-related complications for a long time. While he was ill, Professor Anisur Rahman was admitted to the United Hospital in the capital, where he passed away on January 5. Professor Anisur Rahman was born in 1933 in Brahmanbaria, although his ancestral home was in Kendua, Netrokona. He was one of the key organizers of the Bangladesh Liberation War. In the 1960s, he assisted in the formulation of the Six-Point Movement led by Sheikh Mujibur Rahman. After independence, he became one of the members of the first Planning Commission of Bangladesh formed under the leadership of Sheikh Mujib. His death is an irreparable loss to the nation. Every person must taste death, but it is very difficult to accept the passing of someone like Professor Anisur Rahman.
Adopt market-driven US dollar exchange rate
Following the advice of the International Monetary Fund (IMF), the Bangladesh Bank has taken the initiative to set the exchange rate of the US dollar based on market principles. However, the Bangladesh Bank is not yet fully leaving the determination of the exchange rate of the US dollar to the market. It is still retaining some control over the exchange rate. Through a notification issued by the Bangladesh Bank, the new system for determining the exchange rate of the US dollar is being implemented starting this January. This new method for setting the exchange rate of the US dollar can be described as a advanced step towards the currently prevalent 'crawling peg' system. Under the crawling peg system, a reference rate would be set for the exchange rates of the US dollar and other foreign currencies. Scheduled banks and authorized institutions engaged in foreign exchange transactions would then set the exchange rate by adding or subtracting one taka from the rate set by the Bangladesh Bank. For example, if the exchange rate for one US dollar is set at 117 taka, the market would follow that base rate with minor adjustments.
Limited progress on people's economic hopes
After assuming office, the interim government formed a committee to prepare a white paper to understand the real state of the country's economy. The committee has already officially handed over its report to the chief advisor. The information about corruption and irregularities revealed in the white paper will alarm any conscientious person. It is undeniable that the country's economic condition is far from good. On August 5, following the student movement, former Prime Minister Sheikh Hasina resigned and left the country, and on August 8, the interim government assumed power.
Why the White Paper failed to make an impact
The interim government has set up several reform committees. One such committee, formed to review the economy left behind by the ‘autocrat’, recently published a white paper. During a press conference, the committee provided an explanation of the data and findings in the white paper. From the statements of the committee’s head, Debapriya Bhattacharya, it becomes clear that during the previous government's tenure, "crony capitalism" led to the creation of "corrupt systems", involving politicians, military and civilian bureaucrats, and the judiciary. The white paper claims that in the last 15 years, $234 billion was illegally siphoned out of Bangladesh through 28 different methods of corruption. However, the white paper did not attempt to identify the corrupt individuals, as it states its job is not to catch the thieves but to describe the methods of theft. Thus, the white paper only attempted to investigate the process of theft. According to Debapriya Bhattacharya, identifying the individuals or institutions involved in corruption would require appealing to the Anti-Corruption Commission (ACC) or the Intelligence Unit of the central bank.
How was 2024, and how will 2025 be?
As the cycle of the year turns, we step into a new calendar year. The eventful year of 2024 has now bid us farewell. Among the most significant years in the political history of Bangladesh, 2024 stands out as unique in every way. The events of this year serve as a vivid example of how attempts to cling to state power in disregard of public opinion never succeed in the long term. The student movement, which was supported by various local and foreign groups, eventually evolved into a government-toppling movement, something no one could foresee. The government did not take this seriously. They may have thought they could suppress the student movement with force, just like previous protests. However, the government failed to realize that this student struggle was not a scattered event like past movements. It was a long-planned movement, and the government lacked the power to suppress it.
Trending Views
