For the first time, Bangladesh is going to apply for two new macroeconomic models in order to estimate the potential GDP and for raising the external debt management skills of the Economic Relations Division (ERD).
A macroeconomic model is an analytical tool designed to define the operation of the economy of a country.
These models are usually designed to examine the dynamics of aggregate quantities, such as the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the level of prices.
Korea-sponsored KSP developed the models for Bangladesh free of cost. It presented the models at a workshop held at a city hotel Wednesday.
The models suggest that potential GDP (gross domestic product) is crucial for accurate policy implications, but due to lack of data it cannot be measured properly in Bangladesh.
"We'll analyse the models. Then we'll implement them," Mohammed Yousuf, a joint secretary, told the FE on the sidelines.
He also said at least two months were required for giving a detailed feedback on the two models.
He, however, said these two models would help predict more accurately the macro indicators like the GDP.
The models have suggested Bangladesh's need to accumulate employment data and conduct accurate growth accounting that enables the government in better estimating and forecasting potential GDP.
"There is need to accumulate more data and develop model on banking and capital account sectors and link them to the fiscal sector for better estimate," the models suggested.
The KSP's second model is set to improve external debt management skills of ERD.
The model developed for ERD notes that Bangladesh government should make a centralised control tower to manage total foreign capital (commercial and public) because shorter commercial loans will increase the country's debt service ratio.
It says there is need for strong regulation in the context of foreign capital. It notes that sometimes companies which have received foreign capitals become insolvent companies.
"Reducing the number of insolvent companies is very important and there should be transparent selecting procedures," the second model cautions.
It has advised that Bangladesh government should choose good agents, who can arrange commercial loans at low cost.
"These agents also can train Bangladesh government officials and supply knowledge about international commercial market," it said.
Centre for International Economic Studies, Sookmyung University and Korea Fixed Income Research Institute, in collaboration with Bangladesh Ministry of Finance, hosted the final reporting workshop on the models.
