A crunch time prompts Bangladesh to go for deferring implementation of less-priority development projects to curtail spending from its foreign-exchange reserves.
Finance Minister AHM Mustafa Kamal Wednesday unveiled the government's belt-tightening plan, a day after the country's central bank virtually pressed the brake on imports by way of jacking up cash LC margin on high-end, luxury imports.
In tightening letter of credit (LC) rules the Bangladesh Bank doubled requisite margin for all non-essential imports to 50 per cent from 25 per cent.
The LC margins for the import of high-end motor vehicles like SUV and Sedan cars along with electrical and electronic products have been re-fixed up to minimum 75 per cent from 25 per cent in the past.
After a virtual meeting of the cabinet committee on government purchase Mr Kamal said the government would also restrict unnecessary foreign trip of its officials to lower forex spending.
He noted that such decisions need to be taken considering changed global situations. "The present situation worldwide is not the same the way we had been passing time."
The finance minister said luxury imports were open so far but until the external vulnerabilities finally end, the government may need to take tough decisions. "But that does not mean the wheel of our economy and development is going to be stopped."
"We can defer import of luxurious items for two to six months -- it is natural…," he told reporters, adding that the projects which were under plan for starting now but not so important can be deferred.
"We are restructuring the plans not for lack of anything but to effectively manage the present moment," said Mr Kamal, who holds the purse strings of the exchequer.
Elaborating on the austerity measures the minister said development projects having no immediacy for implementation would be put on hold for the time being.
He cited the Russia-Ukraine war that has disrupted global supply chains and stoked inflation as the main reason for contractionary financial measures.
"The Covid is over. But the impact of war has spread all over the world -- and everyone is being affected."
In the recent months the county's foreign-currency reserves fell significantly and now stood at $44.14 billion, which can meet import bills for 4.8 months. Moreover, the country's trade gap widened by nearly 64 per cent or $9.69 billion to $24.91 billion during the July-March period of this fiscal year from $15.22 billion in the same period in the last fiscal.
As such, the current-account deficit now hit an all-time high at $14.07 billion as widening trade gap coupled with lower remittance receipts affects the macroeconomic balance, which created concern among economists and many.
Replying to another query, the minister said the latest foreign tours of public servants in question were given approval in the past. "But now the Prime Minister clearly stated that no more foreign trip unless necessary."
Commenting on doubts aired by country's top economists on estimation of 7.25-percent economic growth in fiscal year 2021-22, as stated by the Bangladesh Bureau of Statistics (BBS) on Tuesday, the finance minister differed with them.
"The way we usually calculate the gross domestic product (GDP) this time we did the same," he said, adding that no additional components have been added in this case.
Mr Kamal suggests the economists to consult the International Monterey Fund and the World Bank if they have anymore doubt over the GDP-calculation method.
Replying to another query the minister agreed to disclose the modalities followed in GDP calculation, as demanded by the economists.
The minister requested the economists not to distrust the government in all cases.
syful-islam@outlook.com
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