Grim forebodings for the economy

The 2014 began neither with any better outlook nor any new enthusiasm, but with a burden of debts on the economy of Bangladesh. The last days of 2013 passed off not amid exuberance over the national election but with the key economic indexes falling alongside misgivings and political fatality. The new year was ushered in with no new hopes but with fears and uncertainties. The entrepreneurs apprehended loss of capital, wage-earners apprehended loss of wages, bank borrowers ran the risk of turning defaulters, the common people were apprehensive that they might come under inflationary pressure, the commodity producers feared disruption in production, let alone the loss of lives, properties and so on. It is apprehended that these realities of the past year will continue into the new year and there is no end to it in sight.
There is a feeling of despondency associated with the continued fall in the capital market, the fall in foreign aid and grants, the ebbing remittance inflow, continued rise in prices of daily necessities was great. The flow of revenue to the state coffer also fell. Moreover, there was a pressure of enhanced state expenditures in the new year. To meet this pressure of expenditures the only way out for the government is to rely on bank loans and it will lead to more inflationary pressure. The only positive aspects in the last year were good export earnings and good foreign exchange reserves that gave the solace to the economy.
The economy bore the brunt of political chaos and instability last year. The costs of commodity transportation increased many times due to the violent political programmes. Hoarding of commodities went up. Uncertainty over regular payment of wages to the workers increased in the absence of businessmen's ability to sell their commodities. There was also pressure on the RMG (ready-made garment) manufacturers to implement the minimum wages for apparel workers. Some opined that the uncertainties had been created over announcement of the enhanced wages. They maintained that to keep the wheels of trade and commerce in motion an environment free from political antagonism needed to be ensured in the new year. The businessmen say the economy has been caught in the web of political chaos.
The negative aspect in the previous year was the sluggish business in all sectors, including banking, new investments, creation of new employment opportunities and import of capital machinery. The additional burden of bank loans was already there behind the crisis in the business sector. Under such circumstances it was a big challenge for the entrepreneurs and the business community to survive. To address the problems the government came forward with some sort of declared advantages to console the entrepreneurs in the form of providing easy bank loans. Still experts opine that the economy performed badly last year.
The research organisation, Policy Research Institute of Bangladesh (PRI), maintains that the country suffered heavy losses in terms of lives and properties in 2013 and the economic growth was the least. It will take a long time to overcome the losses that have been suffered because of the present political crisis. The Bangladesh Bank estimate shows that 12.79 per cent of the bank loans disbursed have been defaulted on. The wheels of the share market were almost stuck despite various initiatives taken by the government to regain confidence. The share market index that was at 4,055 points in January 2013 closed at 4,266 on December 30, 2013. The remittance inflow decreased by 10.16 per cent in the first five months (July-November) of the current fiscal year in comparison to the last financial year's corresponding period. But the growth in export earnings was remarkable despite the year-long diverse sorts of crises. The growth in export earnings during the period of July-November of the current financial year was 18.2 per cent more than that of the corresponding period of the previous financial year. Side by side, the foreign exchange reserves progressed to the level of $ 18 billion due to a fall in expenditures on the import front because of the political crisis. But this cannot be termed a good sign for the economy as it was achieved at the cost of imports that were necessary for further progress of the economy.
The rate of government revenue earnings was not satisfactory. The revenue earnings fell short of the target of Tk 54.55 billion in the first five months from July to November in the present financial year. If the government fails to reach the target to some extent, then it will have to take the recourse to increased bank borrowings to meet its necessary expenditures giving rise to an additional inflationary pressure. Though the rate of inflation in the country in November last was 7.5 per cent, it is apprehended that it may shoot up in the new year.
To stop the economy from further slipping back, it will have to be kept outside the purview of the political programmes. The loss that the economy suffered might be overcome in future, if a congenial atmosphere can be ensured. But the way the political developments are taking place the present crisis is poised to deepen further causing more loss of lives and properties and ruining the national economy.                           
The writer is a retired professor
of Economics, BCS General Education Cadre.
 [email protected]