Pessimism Deepens

Growth in major sectors stalls As trust in the economy falls.

Three months have passed since the new government resumed power. Many policy makers and administrators anticipated that economy would bounce back and show positivism after the election. Because many uncertainties will disappear and economic indicators will show some positive trends including the inflation.

As for the inflation,there is no good news. February inflation rate surpassed the January rate. March data has not seen the light yet. BBS may divulge the data after Eid perhaps. But coarse rice prices in general registered an increase of Taka 4/5 per kilo. Poultry meat,beef still remain out of reach to many households. Prices of water melon,date,lemon,brinjal and potato---which are quintessential items in iftar---did not give any sigh of relief to the fast-observing people. Press is abuzz with reports that potato traders pay Taka 33/kilo for the potatoes in the field, indicating higher prices for potatoes in future. In this backdrop,it is highly unlikely that inflationary situation will improve in the coming months.

World Bank in its economic updates for South Asian countries observes that persistent high inflation coupled with delay in market adjustment of exchange rate poses serious challenges to Bangladesh economy. It lowers GDP growth forecast to 5.6% for current fiscal year. It stresses on monetary and fiscal tightening and reliance on consumption and income taxes to improve the ongoing situation.

Gap between actual export earnings repatriated at the end of the year and export earnings reported during the time of order became wider. Last year, it stood at $ 9 billion! Last month ,a fraudulent app laundered Taka 4 billion to UAE, where many wealthy Bangladeshis applied for second home program. This indicates that trust deficit on the economy is growing and money laundering continues unabated.

Government's outstanding energy bill stood at Taka 200 billion. And government already issued bonds to pay energy subsidies. Key sectors like real estate,IT and stock market where investment of undocumented money is not questioned/probed have not seen any growth in these three months. Rather, stock market witnessed record fall,ruining many small individual investors. Flat and apartment sale data is not available. Rising interest rates along with rising cost of living makes it untenable to undertake new housing project. Growth in used apartment sale also stalls. NBR's revenue target forces it to review its policy of tax exemptions towards ICT sector. E-commerce platforms have not witnessed any major FDI. Rather, like PaperFly ,many are planning for closure or merger. Trouble-ridden ones are yet to settle their dues to the merchants and face overwhelming counts of lawsuits.

IMF has made it clear if Bangladesh Bank fails to meet the reserve target for March,then it may stall the third tranche of its $4.7 billion credit package. The need to finance the budget has become so acute that NBR quite rightly decided to tax Metro fare,unreasonably put high by the authority, but met unprecedented criticism from the power corridor. Meanwhile, development projects face peculiar fate over mismanagement and willful delay. Chinese financial institutions like Export-Import Bank of China have stopped funding Elevated Highway authority after it failed to project a clear deadline to end the construction work. Financing by local institutions also becomes difficult. To deal with the Non Performing Loans, authorities encourage merger between banks. Some see it positively,but others remain skeptic about the intended result. This is not sending positive signals to the market and economy. This is clear indication that pessimism is gripping the economy. And it may prolong the recovery.