Barely a couple of days have passed since the finance minister's expression of optimism over the country's economic recovery and now the World Bank (WB) sticks to its earlier projection of Bangladesh's gross domestic product (GDP) growth to 5.6 per cent for the current fiscal year and even downsizes it to 5.7 per cent from its earlier projection of 5.8 per cent for 2024-25. The 5.6 per cent economic growth is way behind the target of 7.5 per cent the government set in its budget. More concerning is the fact that the projected growth is lower than the South Asian average of 6.0 per cent. The WB's projection is even grimmer as the economic growth is likely to stay below 6.0 per cent for three consecutive years including the current one.
Now, what really made the finance minister optimistic about the economy's turnaround to leave economic worries behind? True, the country's merchandise exports have topped $5.0 billion for the fourth straight month ever since it crossed that mark in January last year. But the exports are not on a consistently higher trajectory. In December, 2023, exports amounted to $5.30 billion, which rose to $5.72 in January this year, but fell to $5.18 billion in February and $5.10 last month. Although increase in remittance inflow could complement export earning, the former is yet to prove particularly positive. Even in the month preceding the Eid-ul-Fitr, March that is, a time when inflow of remittance has traditionally surged, this has fell below the previous month's mark. In February the country, according to Bangladesh Bank data, received US$2.16 billion but in March, it dropped to US$1.99 billion which is 1.23 per cent lower than that of the same period of last year.
Apart from this two vital pillars of economic strength and source of foreign currency, the finance minister grounded his optimism on stabilisation of exchange rate of currencies---between US dollar and taka. The exchange rate is a long way to get stabilised. This is exactly why the WB has recommended in its 'Bangladesh Development Update' report a reform or, better say, a market-dictated exchange rate. Finally, the minister relied, rather overly, on the assurance of financial support from the Asian Infrastructure Investment Bank (AIIB). Financial support from multilateral financiers comes at a price and this by no means is a country's own resource. Already, the growing interest payment obligation is proving insurmountable so much so that the country's forex reserve is at risk of falling below the IMF-mandated benchmark.
Clearly, the WB report on Bangladesh economy points out many of the lapses of and weakness in monetary policy. The banking bedlam, in particular, has come under severe criticism and for obvious reasons. Non-performing loans have not only caused liquidity crisis but also sapped this country of its economic vitality. The WB has shown the link between the rise in NPL ratio on the one side and lax definitions and reporting standards as well as forbearance measures ---all of which favour loan defaulters---on the other. Or else, the NPL ratio could not climb to 9.0 per cent in December 2023 from 8.2 per cent a year ago. Then, with its revenue-GDP ratio one of the lowest in the world, the country collects only about half of its potential revenue. So putting the grey area of internal resource mobilisation in order can bring the economy back on its feet.
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