Economists see long shadows on the economic front
Experts at CPD meeting warn of ‘mid-term crisis’
FE REPORT |
July 25, 2022 08:18:33
July 25, 2022 4:00:43 p.m.
Economists suggest the government should show “zero tolerance” on capital flight as one of the main remedies to tackle the ongoing macroeconomic imbalance in Bangladesh, as they see challenges looming.
They urged the government at a meeting on Sunday to inquire whether the unethical practice of over-invoicing and under-invoicing has taken place under the disguise of exports and imports.
They also suggest increasing export retention, exploring regional export markets and carrying out reforms, especially in the tax system.
The economists were speaking at a program titled “Recent Economic Challenges: How Risky It Is” hosted by the Center for Policy Dialogue (CPD) at its city office.
In her opening remarks, CPD Executive Director Dr Fahmida Khatoon said Bangladesh was going through a “medium-term crisis”. And the current measures taken by the government are insufficient.
“Thus, the measures should be both short-term and medium-term,” the CPD executive director said.
Ms. Khatoon said the current crisis is not short-term but medium-term. If this trend continues, the country will plunge into a “long-lasting crisis”.
Speaking on the show, former acting government adviser Dr. AB Mirza Azizul Islam said that many challenges have emerged recently on the country’s macroeconomic front.
Such an image, he says, is evident in the country’s financial sector. Private sector investment has tightened, leading to low employment rates and a low tax-to-GDP ratio.
He believes that Bangladesh would face a number of challenges in its shipments to Europe after graduating from least developed country status.
“To get the benefits of GSP-plus, labor rights and permission from EPZ unions are a must,” Dr. Islam says of the solution.
He notes that the 2.5% incentive on remittances is not working, so Bangladesh should now explore new markets to increase remittances.
The Economist asked about a surge in imports in recent months. “Are the imports genuine or are they overcharged?” »
Speaking at the reception, distinguished CPD colleague Dr Mustafizur Rahman said the depreciation of the local currency against the dollar was having a negative impact on the economy. “It should be done gradually.”
“We have been asking for a long time [the policymakers and the central bank] to gradually depreciate the local currency,” he adds.
“The 10% depreciation over a short period of time has many implications for the economy,” notes Dr. Rahman.
He said most of the capital flight takes place from Bangladesh due to under-invoicing and over-invoicing in foreign trade.
He mentioned that over the past decade, more than $60 billion in capital flight has taken place in the country.
The CPD Fellow pointed out that Bangladesh experienced a trade deficit equivalent to more than $33 billion and more than $20 billion in current account deficits in the fiscal year to June 30.
He describes Bangladesh’s foreign trade as unique in that here export is value driven while import is price driven. “It’s not healthy for an economy.”
Dr Rahman, however, said Bangladesh’s net exports in the last financial year were just $28 billion. “We should consider the net export instead of the gross 35 billion.”
Dr. Hussain Zillur Rahman, executive chairman of the Center for Research on Power and Participation, told the meeting that there is “economic injustice” that has surfaced in the economy.
“I see three aspects of injustices: the creation of new poor, the risk of inversion of the SDG targets and the inversion of housing. »
He said his latest survey found that around 30 million people have become new poor when they could return to nutrition and education, which are key SDG targets.
At least 10% of people migrated to urban areas, which he called a housing inversion.
CPD Research Director Dr. Khondaker Golam Moazzem was the moderator.