Energy, economic crises may drag on beyond a year: CPD
The economic and energy crises that Bangladesh is facing may extend beyond a year, the Centre for Policy Dialogue said yesterday.
The measures the government has taken to ride out these crises -- dollar crunch, energy shortfall, food insecurity, and soaring inflation -- are mostly on the right path. But they are inadequate and short-term in nature while the problems are likely to persist for the medium term, it noted.
To overcome the crises, the independent think-tank recommended cost-effective production and employment-oriented measures, and also called for focusing on spending in areas that will benefit the poor.
It suggested the government form a committee to monitor the key economic indicators and come up with policy advice and actions to tackle the growing crises.
The committee will be comprised of representatives from the Prime Minister's Office, the ministries of finance, planning, commerce, power and energy, food, and agriculture as well as civil society members.
The CPD yesterday unveiled its review on the challenges the country's economy is facing amid a global economic slowdown.
"We are not going to get rid of the problems even in 2023. One cannot expect we will be free from these crises within the next one year," CPD Executive Director Fahmida Khatun told a press briefing at its office in the city.
The nature of the current crises is global, and the world economy is adversely impacted by the challenges stemming from inflation, the Russia-Ukraine war and the Covid pandemic.
Mentioning that some domestic problems aggravated the crises in Bangladesh, she noted that the country's internal policies and plans should be strong, corruption removed and good governance ensured.
All countries are facing the heat of the current global crisis but the ones whose internal policies are strong will fare better, she said.
Khondaker Golam Moazzem, research director at the CPD, said, "The government has taken some steps to overcome the crises, considering them as short-term. We, however, are facing medium and long-term crises… if the problems are not addressed properly, they may lead to a job crisis and then to a political crisis."
Replying to a query, he said the government can take long-term loans from the International Monetary Fund or abroad to expand the fiscal space. The use of funds, however, should be proper.
If funds are misused and capital is siphoned off abroad, the country will face even deeper problems, he pointed out.
Had the government taken reform measures when the economy was in a better shape, it could have got more fiscal space and been in a better position to handle the situation.
"But it [the government] spent over Tk 26,000 crore in the name of capacity charge for power companies in the last fiscal year… Many of the owners of those companies became rich but the government's fiscal space shrank."
Answering a question on food security, Moazzem said the food-importing countries will be in trouble if they face dollar shortage.
Moreover, the government should focus on increasing food production and storage capacity, as food is now becoming a "political commodity" globally.
"Agricultural subsidies should rise," he added.
About the recent price hike, the CPD said the poor and low-income earners are facing increased hardship, as the living cost has been soaring since the spread of Covid in early 2020.
These people continue to struggle because the burden of rising prices weighs more heavily on their meagre incomes.
It is urgent to revisit and revise the minimum wages of workers in all industries immediately, according to the CPD.
Private companies should consider a higher salary increment for all their employees to help them maintain their living standards.
About the energy crisis, the think-tank said the power and energy sector is suffering the fallout from the Russia-Ukraine war and the pandemic. Factories are not getting enough gas and electricity to carry on production as usual.
The industries, especially gas-dependent textile, ceramics, glass, and steel factories, are struggling to meet the production targets.
Recently, oil-exporting countries decided to cut oil production, which may put more pressure on Bangladesh since it is heavily dependent on imported petroleum.
Based on a calculation, the CPD said Bangladesh Petroleum Corporation has been making profits since August.
The BPC should revise down the fuel prices to help reduce inflationary pressure on the domestic market, the think-tank said, adding that Bangladesh took mitigation and adaptation measures to reduce energy use but hasn't given enough attention to renewables-based power generation.
Falling forex reserves continue to be a cause for concern as it depleted to $36.3 billion as of October 12 due to high import bills and slow growth in remittance earnings. It was $41.8 billion at the end of fiscal 2021-22, the CPD said.
It recommended ensuring market-based floating exchange rate to help improve the situation.