The continuing blockade and hartal have hampered execution of economic programmes. These have resulted in negative economic indicators in most cases. Revenue collection is experiencing a shortfall. Growth in remittances has slowed. Export earnings have shown a declining trend. Imports have declined. There is a slow progress in credit flow. Imports of machinery and raw materials have slowed. Share market has continued to be sluggish. In 68 days of blockade and hartal, loss has been estimated at Tk 1,830,000 million.
It appears from a statement issued by the Federation of Bangladesh Chambers of Commerce and Industry to the diplomats that, per day loss due to blockade and hartal is Tk 27,000 million. Daily loss in the garment sector is Tk 9,090 million. In transport sector, daily loss is Tk 2,880 million. In the retail sector, the loss is Tk 4,540 million daily. In the real estate sector, daily loss is Tk 2,380 million. In agriculture and poultry sector the loss is Tk 2,880 million daily. Tourism is daily losing Tk 2,040 million. In the manufacturing sector loss is Tk 1,310 million taka per day. These losses are linked to bank loans.
Businessmen cannot sell their products. Therefore, they have shortage of cash flow. They have to pay instalments to banks and wages of workers. They are facing financial losses. Nobody knows when the stalemate will end but the economy is sustaining heavy losses. Only a political solution can save the situation.
Production and supply chain is disrupted because of political instability. Inflation is going up. It stood at 6.14 per cent in February as compared to 6.04 per cent in January. It was falling on account of falling international oil prices but is again going up due to political turmoil.
According to the Bangladesh Bureau of Statistics (BBS), rise in prices of fish, meat, fruits, spices, milk and tobacco products is fuelling food inflation. Revenue collection is falling short of target. The government has to borrow to meet revenue shortfall. Instead of borrowing from banks, it is depending on saving certificates and bonds. It is estimated that, revenue shortfall may reach a figure of TK 3,40,000 million. Revenue collection of sources outside the NBR (National Board of Revenue) is also declining.
The NBR set a revenue target of Tk 1,497,200 million in the current year. The amount of collection stood at Tk 5,90,630 million during six months (July-December). This is 39.44 per cent of the target. Revenue shortfall may lead to budget deficit of 7.0 per cent of GDP (gross domestic product). The government estimate of budget deficit is 5.0 per cent.
Remittance is declining. It stood at Tk 1,178 million in February. In January, the amount was Tk 1,243 million. Impact of blockade and hartals on industry sector is serious. During July-January period, opening of letters of credit for industrial imports increased by 4.25 per cent only. In the same period last year, the figure stood at 54.27 per cent. During this period, import of industrial raw materials increased by 5.0 per cent; the rise was 12 per cent in the previous year.
Export earning was Tk 2512.4 million in February as against Tk 2,885 million in January. Due to political uncertainty, export orders came down while export earnings also declined. Companies suffered losses due to cancellation of export orders.
The government will have to take steps to deal with stagnation in the economy. Businessmen have asked for rescheduling of loan repayment and waiver of interest. This should be looked into on case-by-case basis. Private investment may be forthcoming if government investment is accelerated.
According to the central bank report, loans up to December stood at Tk 5,180,000 million. Most of these loans are in industry, agriculture and business sectors. Loans in these sectors may default as these sectors have sustained losses due to political unrest.
Share market is an alternative source for industrial capital. In two months, share market lost about Tk 1,40,000 million. Brokerage houses retrenched staffs in order to reduce losses. The DSE (Dhaka Stock Exchange) index came down to 262 points. Average transactions came down to Tk 2,000 million.
Production has gone down due to disruption in supply chain. Businessmen are asking for compensation. There is a pressure on banks and insurance companies. Businessmen are demanding loan rescheduling, reduction/waiver of interest, suspension of payment of bank instalments, reduction of premium of insurance companies, conversion of short-term loans into long-term loans and so on.
During the ongoing political crisis, foreign investment along with local investment has dropped to the bottom. According to the Board of Investment (BOI), registration for investment went down by 90 per cent in the month of January. Analysts say that the desired level of investment will not be achieved unless the present crisis is resolved. It will also be difficult to achieve target growth rate of GDP.
In last December, foreign investment stood at $420 million. But it came down to $40 million. In February, registration of investment proposals also went down. Accordingly, employment has also declined. This is happening due to political unrest.
The ongoing blockade and shutdowns are pushing up cost of doing business in Bangladesh. A combination of rising transportation cost, supply chain disruption and delay in work has been lowering competitive advantage. Entrepreneurs are saying that cost of doing business has gone up by 20 to 30 per cent. A big garment manufacturer and exporter had to ship apparel items by air to meet the deadline; otherwise, the buyer would have cancelled the order. Now buyers are reluctant to come to Bangladesh. They ask the exporters to meet them in other countries. High cost of doing business is putting additional pressure on exporters and their profit margin has declined.
If political unrest is not stopped, losses will multiply. Environment has to be re-created for doing business and stopping the economy from going further down slide.
The writer is an economist and columnist. [email protected]
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