MOON Desk: Two recent disturbing developments have triggered worries as we keep racing towards October.
First, our commercial banks have been experiencing a steady drop in foreign currencies holding since August throughout the preceding month due to a sharp fall from year-to-year inflow of remittance and a relatively small growth in export earnings.
According to Bangladesh Bank’s recent data, gross foreign currency balance with our banks stood at $5.80 billion in August, down from $5.90 billion in July. The total amount recorded in August was up 16 percent year-on-year.
In August, migrant workers remitted $1.59 billion back home – down by 21.5 percent year-on-year – in what has been the sharpest drop since April 2020. In addition, our exporters reportedly earned $4.7 billion, registering a 3.8 percent year-on-year growth.
As with the greenback, a fixed exchange rate still prevails. And then higher outflow of capital compared to inflow created a dollar crisis in banks, forcing them to come up with a ruse to delay foreign payments.
Second, food inflation in the country has reportedly surged to 12.54 percent since August; it was 9.76 percent until July of this year. Price hike in almost all essential commodities continues to be disproportionately higher than that in the global market.
As with inflation in general, all signs indicate Fiscal Years 23-24 is going to end with a substantially higher rate of inflation than budgeted, significantly lower GDP growth and continued pressure on the balance of payments.
However, against the backdrop of these pinching economic realities, the Bangladesh Bank has been reported to quick adopt a raft of policy measures to tackle inflationary pressure, volatility in the foreign exchange market and growing non-performing loans (NPLs) while give a much-needed boost to the depleting forex reserves. A draft policy has already been prepared in this regard.
As we welcome the new policy, but it comes at a critical time for the banking regulator for addressing a number of crisis looming large against the backdrop of a political uncertainty, and that too in the run-up to the election months. It is also positive that the BB policy makers have sought help from bankers, economists, experts prior finalising the new policy.
The point, however, if experts’ opinions and recommendations are not act upon there is no point in engaging. And the new monitory policy will have to be implemented independently coupled with being dynamic in nature otherwise – just formulating a policy is not enough. Moreover, BB has to ensure the policy to be accountable and sustainable.
To finish with, following whatever robust policy and its effective implementation, political stability is a must. We urge both our major political parties to address uncertainties, shun violence and engage in meaningful dialogues or else it will be more than difficult to cope and deal with the country’s persisting higher inflation and economic challenges.
