Will the government be able to meet the challenges?

After extensive discussions and debates at home and abroad, the Awami League government, led by Sheikh Hasina, has once again formed a government on January 11 following the twelfth parliamentary election. Despite being in power for the fourth consecutive term, the government will face various multifaceted challenges. Although the government has acknowledged the gradual pressure and conspiracies from opposition parties, it is concurrently facing diverse international pressures. However, overcoming economic crises looms as a significant challenge for them, overshadowing everything else.

According to a recent survey by the World Economic Forum, Bangladesh faces six major risks in its economy. The survey, conducted over 71 institutions, was carried out in collaboration with the country's partner non-governmental research organization, the Center for Policy Dialogue (CPD). The survey indicates that in the coming two years, Bangladesh may face high inflation, economic downturn, energy crisis, inequality, an increase in the amount of government debt, and a rise in the unemployment rate. However, according to analysts, in addition to the mentioned crises, there are various economic challenges in the country, such as illegal money laundering, non-performing loans, a decline in foreign currency reserves and remittances, a shortage of dollars, and a decrease in domestic and foreign investments. Swift efforts need to be taken to address these issues.

CPD states that due to various irregularities and corruption in bank accounts in the past 15 years, an amount of Tk 92,261 crore has been embezzled. A significant portion of this has been smuggled abroad. Apart from this, the amount of defaulted loans in the country is 1 lakh 55 thousand 397 crores. According to the report of the Bangladesh Bureau of Statistics (BBS), inflation was 9.94 percent in May of the past year, which decreased to 9.49 percent in November. In January of the current year, inflation stands at 9.42 percent. As a result, people's lives have become more challenging. That is, the price of a product that was 100 Taka last year is now standing at 109 Taka 42 poisha, but people's income has not increased proportionally.

The government has set a target of bringing inflation down to 6 percent by June. Another crisis is dwindling foreign exchange reserves. A country should have foreign currency reserves equal to at least three months of import expenditure. On December 13 of the previous year, foreign reserves alarmingly dropped to $19.17 billion. However, as of mid-January this year, it has somewhat increased and stood at $20.38 billion. The exchange rate of the dollar should be kept stable while preventing the decline of foreign exchange reserves. By doing so, a conducive environment for investments will be created.

What analysts suggest?
According to Dr. Jahangir Alam, an agricultural economist and recipient of the Ekushey Padak, the new government faces various economic challenges. Among them, the most challenging issue is the significant inflation in commodity prices, accompanied by a reduced growth rate. The prices of daily essentials have risen so much that people are finding it difficult to afford them in the market.

The government is hopeful of achieving an economic growth of 7.5 percent by overcoming the inflation crisis, although it is expected to be challenging. According to Dr. Jahangir, the growth rate could be as high as 6.5 percent because the agricultural field is still active. Growth is increasing in the textile and garment sectors, and the export market is also showing promising signs. The flow of remittances is gradually increasing. If this trend continues, the growth rate is expected to reach 6.5 percent.

On the other hand, the former director general of the Livestock Research Institute believes that commodity prices will come under some control. According to him, the Corona pandemic and the war in Ukraine have increased the value of the dollar globally and this has also affected Bangladesh.

The increase in the price of raw materials is leading to a rise in production costs. Additionally, the energy crisis has exacerbated the situation. Consequently, over the past one and a half years, inflation has reached almost 10 percent, with food price inflation rising by around 12 percent.

However, if the exchange rate of the dollar stabilizes and there is an increase in exports, including garments and other sectors and remittances from Expatriates increase, the prices of commodities may decrease slightly. Jahangir Alam has mentioned that the production of vegetables and food is better than before. However, the anticipated food crisis in March-April may not occur. This is because the government has taken measures to ensure an adequate supply of food grains, and the production of crops in the Boro season is expected to be secure. If the government remains proactive, it may be possible to keep inflation within the range of 8.5% in the coming year. Achieving this can contribute to economic stability.

According to Dr. Jahangir Alam, former Vice-Chancellor of the University of Global Village, our progress depends on political stability. Therefore, the government needs to make the utmost effort to maintain a peaceful situation. To keep the market stable, it is essential to identify and address the middlemen and excessively profit-oriented individuals. Taking effective measures to break the syndicates of influential businesspeople who control the price of commodities will bring stability to the market. To maintain a stable political environment, there should be efforts to engage in discussions with opposing political parties. If this becomes possible, the economy will naturally return to a normal state. However, this economist emphasizes the need for a strong hand in establishing good governance.

On the other hand, Dr. Shah Mohammad Ahsan Habib, a professor at the Bangladesh Institute of Bank Management (BIBM), states that economic challenges are more significant than political ones for the government. He emphasizes that the foremost challenge is to increase the purchasing power of people with low income. This is the major challenge. Various initiatives should be taken to improve the quality of life of common people and increase their income. Jobs need to be created for them, and efforts should be made to establish their workplaces. Besides, the government should provide subsidies to sell essential commodities at the right price.

Dr. Ahsan Habib does not seem very concerned about increasing foreign currency reserves. However, he suggests that to alleviate the dollar crisis, imports of luxury and semi-luxury goods should be restricted. Importance should be given to the import of raw materials for essential and daily products. Dr. Ahsan Habib advises taking prompt measures to curb the smuggling of money abroad. He suggests that efforts should be made to increase investment within the country in order to prevent money laundering. Reducing the energy crisis, restoring political stability and a business and investment friendly environment will reduce money laundering abroad. Because corrupt individuals, looters, and owners of illicit money do not feel safe in the country, they engage in money laundering. Additionally, instilling confidence in expatriates to bring back remittances is crucial.

According to economic analyst Ahsan Habib, another challenge before the government is to establish good governance in the banking sector. Stringent penalties must be imposed on loan defaulters as a deterrent measure. However, first and foremost, there is a need for the prompt implementation of the amended Banking Companies Act (pertaining to Non-Performing Loans or NPLs, where the borrower defaults and does not repay the principal and interest within a specified period). There are no alternatives holding criminals accountable for looting and crime in the banking and financial sector.

What needs to be done?
Handling the economic crisis that has persisted for more than a decade cannot be achieved without overcoming political reluctance in the government. For this, a long-term plan must be implemented. Reform initiatives should be taken to curb corruption and looting in the banking sector. If necessary, a commission should be formed to bring back the smuggled money to the country and give exemplary punishment to the looters and defaulters. National benefits and facilities for wrongdoers should be discontinued. A law should be enacted that if any individual defaults on a loan for an extended period, their offspring will be ineligible to attend public universities. CIP and VIP status should be abolished. They will also not be entitled to the privileges of business class when traveling on national airlines.

The government must remember – in all areas, good governance is the only guaranteed alternative. No matter how much people, political parties, important state persons, organizations, law enforcement and administration are under the control of the government, if the rule of law is not ensured, if the business syndicates cannot be broken, if the prices of goods cannot be controlled, then the country will suffer from the consequences of failure. If the common people do not get enough food, structural development will not be a blessing, but a curse!

Author: Journalist and Researcher.