Sunday, November 3, 2024

Economy in tangles

People start to feel the pinch as govt rides on a high fuel import to feed fuel-guzzling power plants 
The letter shocked Rahman. A few lines typed in an official language across a white page with the bank’s insignia at the top. It says your monthly mortgage payment has been raised by Tk 3,000 in response to the central bank’s tighter monetary policy to fight inflation.
Rahman had already cut back on his transport cost by cycling to most places including office. He had held back purchase of a pair of shoes and a decent jacket for the last two months. Now what else he has to cut back on? He sighed. A bad time is coming, he concludes.
The portent that something is going wrong was in the air for the last six months or so. Suddenly both food and non-food items were becoming pricier. Dollar was becoming expensive. Roads were falling apart. And the government was on a borrowing spree.
And now, it seems, the danger has really come true and the government management of the economy seems to be in a shambles, not for one count but for many.
The government’s budget deficit is proving too underestimated mainly on account of high fuel import. When the Awami League came to power, it rightly set supply of power as a top priority. But the path it chose proved perilous after two and a half years. It went for quick power fixing, not that it had any choice, by allowing quick rental power plants that run on diesel and furnace oil. But that action opened a fissure in the economy — as when these plants would start rolling, the need for fuel import would go up drastically. When the fuel sales price is lower than the import price, that would leave deep budget deficit.
And that is what has happened now. In the first two months alone, the government has borrowed over Tk 7,000 crore, almost half the annual target of Tk 18,500 crore, to meet its ballooning deficit. And this has happened despite a very high revenue collection growth. It is unlikely that such a high revenue growth will prevail till the end of the year because even last year was a high growth year. In such a case, one can only imagine that borrowing will shoot further.
Such high borrowing and corresponding spending have led to the current inflationary situation of which Rahman is today a victim. Even more worrying is the fact that of the Tk 7,000 crore borrowing by the government, 54 percent of it is from the central bank. This means this amount is highly inflationary unlike money mopped out from the commercial banks. In other words, the central bank’s loan actually acts as newly printed money (although money printing for expenditure is no longer in vogue).
To make things worse, taka has been gradually losing ground against dollar (it has already lost value by about 7 percent), making imports costlier.
One way of mitigating both these malaise could be to speed up foreign aid disbursement. But the torpor in the aided projects also serves a blow to that hope. Alternately, the government could spend from its own funds and then ask for disbursement from donors. With the current high borrowing, that has little prospect now.
When the situation was going this way, the government had no way but to increase fuel price. This will certainly have inflationary impact as transport and irrigation cost will go up. But one may ask if the government had any alternative and what could have been the ultimate outcome of not increasing fuel price. Ultimately, the government would have gone bust unable to bear the subsidy in fuel. This could have led to unbridled inflation, more than what it is causing today after fuel price increase.
However, there is still a faint silver lining in the horizon. Import demand is slowly easing and a bumper world agriculture production is also pulling down commodity prices. Oil price is also expected to fall because of the weak US economy. That would help stymie the worsening balance of trade situation. But with a falling remittance from workers abroad and stagnant foreign aid, the ultimate current account balance would deteriorate putting further pressure on the exchange rate.
And in the middle of all this, investment is suffering. In the last two and a half years, very little investment has taken place in sectors other than power. This again is mainly because of power and gas shortage. A large dyeing factory owner told me he cannot increase capacity despite demand because once electricity goes off, the whole dyeing process stops, spoiling the cloths in dyeing process. The government could have earmarked a part of the extra power generation from quick rental plants for export-oriented industries. This could have generated extra foreign currency to pay off fuel import and created employment. But the government did not have that foresight, leaving the industry still in the dark. Now the other danger has emerged in the government’s rampant borrowing which can choke investment.
So in short the story is this. If you have to check inflation, you have to stop borrowing. If you have to stop borrowing you have to cut subsidy. For subsidy to be cut, you have to raise fuel prices. You have to increase aid disbursement and cut unnecessary ADP projects. (Scope for such ADP trimming is plenty. For example, this year, Roads and Highways Department has 143 projects, up from last year’s less than 100, although the sector’s allocation has decreased. This means thinly funded projects with low impact which can easily be chopped off.)
For growth to be retained, one has to spur manufacturing. But the dilapidated roads, a result of years of neglect, are posing a serious threat to growth today as it is taking longer time to transport products. And growth is related with employment.
As it seems today, all these crucial issues have got entangled in a messy way. Some say things are in such a state that it might not be able to come out of it for quite some time. And if that happens, people like Rahman and others will continue to get shocking bank notices.

-With The Daily Star input

Related News

Policymakers unaware of people’s struggles as they don’t rely on public transport, says Road Safety Foundation

News Desk : dhakamirror.com Those responsible for public transport policymaking in the country do not use public transport in the capital, so they do not understand the sufferings people endure, Road Safety Foundation (RSF) Chairman AI Mahbub Uddin Ahmed said today (2 November). The chairman of the Road Safety Foundation (RSF), AI Mahbub Uddin Ahmed, ... Read more

Job aspirants can now try 4 times for BCS exam

News Desk : dhakamirror.com From now a job seekers will be able to sit for Bangladesh Civil Service (BCS) examinations up to a maximum of four times. This decision was taken at a meeting of the advisory council chaired by chief adviser Dr Mohammad Yunus at his office on Thursday, said a press release from ... Read more

Load-shedding surpasses 1,500MW as Adani reduces generation

News Desk : dhakamirror.com Load shedding exceeded 1,500MW on Friday after yet another power producer, the Adani power limited, cut its production due to non-payment of bills. Grappling with a dollar crisis for more than two years, Bangladesh’s dues to power plants jumped to over Tk 43,000 crore in July. Adani’s outstanding bill stood at ... Read more

DU-affiliated 7-college students block Science Laboratory for 2nd consecutive day

News Desk : dhakamirror.com Students of seven colleges affiliated with Dhaka University (DU) have blocked the Science Lab intersection in the capital on Wednesday for the second consecutive day to press home their demand for a separate autonomous university. They blocked the crossing at about 11:00am halting vehicular movement. Students of the seven colleges — ... Read more

Madrasa student drowns in Cox’s Bazar

News Desk : dhakamirror.com A madrasa student drowned near the beach in Cox’s Bazar around 12:30pm today (26 October). The incident happened at Sugandha Point, confirmed Executive Magistrate of Tourism Division of Cox’s Bazar district administration Md Tanvir Hossain. The deceased has been identified as Mahmudur Rahman, son of Didarul Alam from Banglabazar area under ... Read more

Cyclone Dana turns into land depression

News Desk : dhakamirror.com Cyclone “Dana” over North Odisha and adjoining area moved and weakened North-Northwestwards and now lies over the same area as a land depression. It is likely to move West-Northwestwards further and weaken gradually and will become insignificant, said a Met office bulletin on Saturday, reports UNB. “Light to moderate rain or ... Read more

Maximum entry age for public jobs to be 32

News Desk : dhakamirror.com The government has approved raising the maximum age for applying for public service jobs to 32 years. This decision was made at a meeting of the interim government’s advisory council, said a press release issued by the Cabinet Division today. The current age threshold is 30, and 32 for children of ... Read more

Cyclone Dana heads towards India

News Desk : dhakamirror.com Skies remained overcast all over Bangladesh amidst light to heavy rains accompanied by gusts as the cyclonic storm Dana barreled down the Bay of Bengal towards the Indian coast between Odisha and West Bengal on Wednesday. Forecasters said that Bangladesh has little to worry about as the cyclone was moving away ... Read more

Gold price crosses Tk 1.4 lakh per bhori

News Desk : dhakamirror.com The Bangladesh Jewellers Association (Bajus) today (19 October) increased the price of gold by Tk2,613 per bhori, followed by a price hike in the local bullion market. According to a Bajus statement, 22-carat gold will now cost Tk1,40,061 per bhori (11.664 grams). The new rate will be effective from tomorrow (20 ... Read more

Low pressure likely to form in Bay on Tuesday: BMD

News Desk : dhakamirror.com A low pressure is likely to form over the central Bay of Bengal around Tuesday, Bangladesh Meteorological Department (BMD) said today. In its latest weather bulletin, BMD said rain or thundershowers accompanied by temporary gusty wind is likely to occur at a few places over Khulna, Barishal and Sylhet divisions and ... Read more

Interim govt approves 11-day Eid-ul-Fitr, Eid-ul-Azha holidays, 2-day for Durga Puja

News Desk : dhakamirror.com The interim government today extended the Eid-ul-Fitr holidays to five days, Eid-ul-Azha holidays to six days and Sharadiya Durga Puja holidays to two days for 2025, according to the Chief Adviser’s Office. Currently, there are three-day public holidays for each Eid and one day for Durga Puja. The list of public ... Read more

Two entire families lost to a road accident in Pirojpur

News Desk : dhakamirror.com At least eight people from two families, including four children, died after a private car plunged into a roadside canal in Pirojpur early today. The deceased are Shawon, 32, his wife Amina, 25, their two children Sahadat, 7, and Abdullah, 3, from Bhaijhora village of Pirojpur’s Nazirpur upazila and Motaleb Sheikh, ... Read more

Italian embassy to resolve 20,000 visa applications by December: Foreign adviser

News Desk : dhakamirror.com Foreign Affairs Adviser Md Touhid Hossain on Tuesday said that the Italian Embassy in Dhaka will clear 20,000 visa applications by December as many visa applications had been pending for a long time. “Twenty thousand visa cases have been cleared from Rome. [However] Progress in issuing those visas is very slow. ... Read more

Prof Mobasser Monem appointed as new PSC Chairman

News Desk : dhakamirror.com The government has appointed Dr Mobasser Monem, a Professor of Governance and Public Management at the University of Dhaka, as the new Chairman of the Bangladesh Public Service Commission (BPSC). Along with Professor Monem, four others have been appointed as members of the BPSC. The four members are– Md Suzayet Ullah, ... Read more

Govt urges IOM to evacuate Bangladeshis

News Desk : dhakamirror.com Dhaka has requested the International Organisation for Migration to arrange chartered flights to bring back Bangladeshis willing to leave Lebanon amid airstrikes by Israel on the West Asian country. ‘We have requested the IOM to arrange flights to evacuate Bangladeshis willing to leave Lebanon. But Beirut’s airport is currently unsafe for ... Read more

Flood puts hundreds at risk of starvation

Emran Hossain The ongoing flash flooding puts hundreds of farmer families at immediate risk of starvation in Sherpur district, washing away the rice they stored from the previous harvest and also destroying the standing paddy fields. The divisional office of the Department of Agricultural Extension estimated that the flood affected 97,000 hectares of standing aman ... Read more

Price hikes strain people

Moinul Haque The soaring prices of essential commodities, including rice, vegetables, eggs and broiler chicken, put increasing pressure on the low-income people, pushing them further to the wall. Market analysts have expressed concerns over the unusual spiralling of prices of the essentials, criticising the interim government for its failure to take timely action to protect ... Read more

Four days Durga Puja holiday starting from Thursday

News Desk : dhakamirror.com Bangladesh’s interim government has announced an additional public holiday on Thursday, October 10, for Durga Puja, the largest religious celebration of the Hindu community in Bangladesh, says a press release. During a press conference held on Wednesday at the Dhakeshwari Temple in Dhaka, Mahfuj Alam, special assistant to chief adviser, made ... Read more

Tiger population in Sundarbans rises to 125

News Desk : dhakamirror.com The number of Royal Bengal tigers in Bangladesh’s Sundarbans has increased to 125. The Ministry of Forests has published the results of the third phase of the tiger census. The survey was conducted between June 2023 and March 2024 to observe the population of the national animal of Bangladesh. Environment, forest ... Read more

Environment ministry asks BRTA to remove unfit vehicles from streets

News Desk : dhakamirror.com The environment, forest and climate change ministry on Sunday sent a letter to the Bangladesh Road Transport Authority requesting removal of buses, minibuses, trucks and covered vans exceeded their economic life from roads in an effort to reduce air pollution. The ministry, in a press release, also urged the authority to ... Read more