Participative, Integrated, Transparent, midterm policy framework needed to overcome ‘crises’ : economist
Dhaka August 11 2022 :
Dr. Debapriya Bhattacharya, Distinguished Fellow, Centre for Policy Dialogue (CPD) on Thursday in a media conversation titled ‘Overcoming the Current Economic Challenges Towards a Transitional Policy Understanding’ suggested measures for the government to overcome ongoing socio-economic crises of the country.
The dialogue was organized by Citizen’s Platform for SDGs, Bangladesh where the think tank suggested the following measures :
Three Domains of a Transitional Package needed to be undertaken by the government.
Firstly for stabilisation of Macro-economic situation the government needs realigning of supply and demand side factors.
It is time to liberalise interest rate with a band to protect real value of savings and moderate credit growth.
Make exchange rate more market based and do away with multiple premium rates for different types of foreign exchange earners.
Higher revenue uptake by reaching out to unregistered potential taxpayers is needed.
Review the subsidy package to protect ‘good subsidies’ for agriculture (i.e. fertilizer and electricity) and liquid fuel (i.e. diesel and petrol); remove all ‘bad subsidies’ (capacity charges).
Augment public expenditure austerity measures and ensure impactful implementation of the ‘A’ and ‘B’ category Annual Development Programme (ADP) projects.
Further streamline import control measures with an eye on price situation of certain consumer goods.
Expand fiscal space by accelerating utilisation of the high level foreign development finance received in FY21 and FY22.
Make effective use of Budget Support received from the World Bank and ADB to ensure additional contractual disbursement and negotiate with International Monetary Fund (IMF) for substantive balance of payment support.
Secondly, to sustain production and employment in a subdued growth situation, the government must focus on Aman. Production of Aman rice is anticipated to be affected this year due to drought and floods. This can affect food security as Aman is country’s second-largest staple crop. Reducing costs of agricultural inputs, including diesel and fertilisers will be essential to safeguard the farmers.
Sectoral growth rates of animal farming and fisheries are declining, these sectors should receive more support.
Smooth outflow of migrant workers to new, not so new and traditional markets should get effective attention.
Industry workers, particularly Ready Made Garments (RMG) workers will need dearness allowances, if not wage adjustment (unchanged since January 2019).
Monitor layoff in the informal sector and consider one-time targeted cash incentive.
In order to protect the interests of informal sector workers an environment conducive to immigration needs to be created and sustained.
And the third measure suggested by Dr. Debapriya was Protect Vulnerable Groups Who are is proportionately Affected. To do so, he suggested for accelerated and transparent implementation of the Family Card programme targeting 10 million families.
TCB network needs to be expanded up to district level and rice to be included for sale.
All safety net allowances to be increased to 1000tk per month.
Coverage of social safety net programmes needs to be expanded and monitored with proper data support.
A one time cash transfer may be considered for self-registered unemployed youth. Alternatively a reimbursable youth credit card scheme may be considered.
In concluding remarks, Dr. Debapriya pointed out that it is obvious all the six challenges mentioned in the Finance Minister’s budget speech have aggravated during the last two months.
There is growing acceptance by the policy makers that the economy is on the downslide.
Some disparate measures needed to contain the situation by the government.
While the citizens remain apprehensive, the policymakers give confusing (if not contradictory) statements about the economic outlook.
It is however evident that the country will have to live with a turbulent economic period in the near future (at least till the end of FY24).
Thus, a proactive (instead of reactive) approach leading to shaping of a new transitional policy package may moderate the emerging hardship in the lives of the citizens and pressure on the economy.
Based on such a broadly owned policy package, the government will be able to negotiate better terms and conditions with the IMF, World Bank and other institutional conditions.
Bangladesh economy is yet to go back to pre-COVID benchmark and experiencing fragmented recovery.
Macroeconomic stability is under high stress, particularly due to inflationary pressure and pressure on exchange rate.
Global economy’s prospect for FY23 (commodity price rise, supply chain disruption and logistic, increase in transportation cost etc.) augur bad for Bangladesh.
There is a broad consensus among the country’s economists about the measures suggested under each domain.