Hedging the macro economy
Ahmed Jubair | Sunday, 29 June 2008
The stresses on the macro economy due to various external and internal factors are growing though the government is aware of the developments. The externalities such as higher prices of fuel oil and other commodities in the international market are beyond the control of the managers of the economy. However, probably there are ways of limiting their impact. And to this end, the government needs to concentrate its energies and policies.
The soaring fuel bill, for instance, may be put on a leash through deals with brotherly countries for long term contracts for supplies and also through seeking concessions from them in the matter of price. The price concessions, plus stable prices from longer term contracts to avoid price fluctuations, can help to attain a measure of stability in the price of fuel oil in the medium- and longer-terms.
Besides, the quickest expansion of capacity -- locally -- to refine imported crude oil into various petroleum products will also help to keep the overall fuel bill on the lower side in the present context of the volatile international market of these commodities.
Government can also consider a range of duty reduction on imported products to achieve a similar dampening effect on their import prices. In fact, a leading chamber body urged the government to take a range of fiscal measures to this end . Duty reductions involve loss of revenues and, therefore, there is a limit to such reductions. But there are probably opportunities for duty reductions to cover capital machinery as well as basic consumer products that should not endanger revenue collection on the whole. But such duty reduction steps will make a considerable contribution towards taming the trend of inflation from higher-priced imported products and encourage higher productivity.
Side by side, the government would be expected to resort to measures to squeeze the import of luxury and non-essential goods. The latest available figures indicate the signs of opportunities to increase the export of the traditional jute goods is possible. The opportunities in this sector will have to exploited with timely execution of official policies. Greater opportunities have been also sensed for the export of a number of non-conventional products. The positive trend for the export of these non-conventional products will need to be bolstered with appropriate policies and support from the government.
There is also need to explore whether there are more ways and means to attract funds of expatriate Bangladeshis and to further encourage remittance by Bangladeshi workers abroad through the official channel. All these measures, and more, can help raise the foreign currency reserve. And by striking a balance between imports and exports, the balance of payments could also be improved. All these are important from the perspective of achieving macro-economic stability.
The prospects of external aid have not improved. The differences in outlook and other points of discord with the donors, therefore, will have to be sorted out with a sense of urgency to get the aid resources fully flowing in order to better hedge the macro-economy.
The soaring fuel bill, for instance, may be put on a leash through deals with brotherly countries for long term contracts for supplies and also through seeking concessions from them in the matter of price. The price concessions, plus stable prices from longer term contracts to avoid price fluctuations, can help to attain a measure of stability in the price of fuel oil in the medium- and longer-terms.
Besides, the quickest expansion of capacity -- locally -- to refine imported crude oil into various petroleum products will also help to keep the overall fuel bill on the lower side in the present context of the volatile international market of these commodities.
Government can also consider a range of duty reduction on imported products to achieve a similar dampening effect on their import prices. In fact, a leading chamber body urged the government to take a range of fiscal measures to this end . Duty reductions involve loss of revenues and, therefore, there is a limit to such reductions. But there are probably opportunities for duty reductions to cover capital machinery as well as basic consumer products that should not endanger revenue collection on the whole. But such duty reduction steps will make a considerable contribution towards taming the trend of inflation from higher-priced imported products and encourage higher productivity.
Side by side, the government would be expected to resort to measures to squeeze the import of luxury and non-essential goods. The latest available figures indicate the signs of opportunities to increase the export of the traditional jute goods is possible. The opportunities in this sector will have to exploited with timely execution of official policies. Greater opportunities have been also sensed for the export of a number of non-conventional products. The positive trend for the export of these non-conventional products will need to be bolstered with appropriate policies and support from the government.
There is also need to explore whether there are more ways and means to attract funds of expatriate Bangladeshis and to further encourage remittance by Bangladeshi workers abroad through the official channel. All these measures, and more, can help raise the foreign currency reserve. And by striking a balance between imports and exports, the balance of payments could also be improved. All these are important from the perspective of achieving macro-economic stability.
The prospects of external aid have not improved. The differences in outlook and other points of discord with the donors, therefore, will have to be sorted out with a sense of urgency to get the aid resources fully flowing in order to better hedge the macro-economy.