Macro-economy facing challenging time: IMF

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Shakhawat Hossain
The country's macro-economy is facing a challenging time due to high inflation and slow-down of overall economic activities following erosion of business confidence.
"Bangladesh is now facing a very challenging macro-economic environment," said the Resident Representative of the International Monetary Fund (IMF), C. Dunn.
He attributed the challenging macro-economic environment to the anti-corruption drive, uncertainty among the businesses, high international commodity prices, high domestic inflation and escalation of import costs.
"I have no enough data, but high international commodity prices, already high domestic inflation, import cost escalation…all these show that the country's macro-economy is under challenge," he added.
According to Dunn, these unfriendly business factors might lead the country to slower growth path than initial projection of 7.0 per cent in the current fiscal year.
Although it is very early in the fiscal year, the IMF resident representative said, available data on export, capital machinery import and other related matters are giving some indicators of slow growth.
Dunn, who is representing the Washington-based multilateral agency in Bangladesh for more than three years, said maintaining the macro-economic stability is a critical issue for restoring confidence among the businessmen.
In most countries, sustainable macro-economic environment constitutes a key element of the overall business confidence, he said adding that the present situation in Bangladesh is not favourable to promotion of such confidence.
He said restoration of business confidence is a big challenge that the caretaker government is now facing, along with high inflation, retention of export growth and payment of high costs for petroleum products import.
Focusing on the inflation, Dunn attributed the prevailing double and higher single-digit point-to-point inflation to long-time disparity between supply and demand.
He suggested that the government should make preparation to deal with the inflationary expectation, which is entrenched.
Dunn pointed out that the demand for increased wages in both public and private sectors would be pressed for, because of the inflation. Bangladesh did not face such a situation during the last few years due to macro-economic situation.
To a query on immediate price adjustments in energy sector, Dunn said it is up to the government. But he pointed out that losses would mount up without a hike in energy prices.
The IMF expressed the hope that the country's consumers should at least pay for the import and production costs of power and energy items so that the government can maintain a sound current account balance.
He also wants to see the government providing power and energy subsidies in targeted areas, not in a generalised way.
According to Dunn, 40 per cent of the country's bottom line population are being deprived of benefits from the generalised subsidy that also helps flourishing of non-competitive businesses.