Macro Optism,Micro Unease

Forex swells and taka heads to stability, Amid debate referendum clears ambiguity.

There is no short of loan pledges since the interim govt assumed power. World Bank pledged to provide $1 billion as part of carrying out some crucial reforms in the banking sector. Islamic Development Bank pledges to provide $5 billion in the next 3 years. ADB will provide $400 million as budget assistance by December 2024 and another $500 million by March next year. The USAID is going to provide $200 million as development assistance. Meanwhile, inflow of remittances breaking record after record. August witnessed a record inflow of remittances, $2.2 billion. Previous year's August fetched $1.6 billion. In July, $1.9 billion worth remittances ended up in government coffer. Forex reserve is around $20 billion,which is likely to rise in the coming months. Riding on remittances and foreign loan commitment, exchange rate of Taka against the US dollar remains stable: the difference between the unofficial and official rates is less than 1%. If this trend continues for 6 months ,taka may become a stable currency and foreign investors' confidence on Bangladesh will be restored.

However, there are some dark clouds in the distant horizon. Though official data show that inflation eased to 10.49% in August from 11.66% in July, essential kitchen commodities have yet to reflect the official figure. Government eased import restrictions on egg,potato,onions and other items ,yet prices of these items soar. Record torrential rainfalls in the southeast and across the country worsen the waterlogging problem. Rice cultivation and pisciculture sustained severe damages due to this unusual precipitation. Post flood rehabilitation has yet to be started. Export sector shows some signs of unease. This year Bangladesh's RMG exports to the US dropped by 10% compared to previous year. In addition, workers' unrest in the industrial belt on the outskirts of Dhaka continues,resulting in forced closure of many factories. Authority is optimistic to restore the situation. However, rising food prices coupled with worker's agitation and incessant demand from political parties to hold reform under elected govt unveils a path strewn with new challenges before the interim govt. Since the issue may recur again, I think it is better to go for a referendum on duration of the govt along with draft reform policies it will undertake. Once this happens it will throw cold water into such debate and the govt will earn confidence and loyalty of bureaucracy that remains shy in the wake of peculiar state of the constitution. The attitude that politicians are sources of all the problems should be discarded. At the same time,reform should be initiated in all the key institutions of public and private sector. As people have right to know about their public representatives( through RPO and other reports) ,they also have right to know details about those heading key institutions. Similarly, institutions that do not have any accountability cannot steer any kind of special drive until a major reform about their accountability is introduced. A kleptomaniac organization that sustained corrupt regime cannot go after other kleptomaniacs. Else it will add another chapter of human rights violation. Instead of binationals, if we recruit more foreign black/white individuals as advisors or consultants, our economic recovery will be faster. If economy and the country are in good state, then recruitment of these binationals has not become an issue. That is not the case. From bureaucrats to utility company boss, they are subject of debate and a genuine source of corruption.Comment like "America e to shokal / bikal bank khole / bondho hoe( In USA, everyday a bank gets opened/ closed)" came out of their mouth and banking act was amended to make directors from the same family, proved catastrophic in the context of Bangladesh. Dual nationality is a problem to try them in the local court when an issue surfaced. Do you think other countries will accommodate them in key policy making positions? Then why should we be an exception? I think interim govt should refrain from taking major policy decision like setting up quick rental power plants in 2007(see reference 1).That decision was taken during the time of caretaker govt. It did more harm than good,wasting millions of dollars of taxpayer's money. Major policy decisions should be shelved for elected govt who has people's mandate.

Macroeconomic optimism is more pronounced under this govt. But the micro reality is still biting the grassroot people. Witch hunting and banality about reforms may create confusion and political uncertainty ,which is not good for this govt. Specifics of reforms and referendum about their duration clear any ambiguity.

References:

1. "2007 E Tottabodhayok Sorkarer Somoy Quickrental Er Jatra Shuru(Quick rental Starts Its Journey In 2007)",Abu Taher,Daily Bonikbarta, September 02,2024.Link: https://bonikbarta.net/home/news_description/397522/%E0%A7%A8%E0%A7%A6%E0%A7%A6%E0%A7%AD-%E0%A6%B8%E0%A6%BE%E0%A6%B2%E0%A7%87-%E0%A6%A4%E0%A6%A4%E0%A7%8D%E0%A6%A4%E0%A7%8D%E0%A6%AC%E0%A6%BE%E0%A6%AC%E0%A6%A7%E0%A6%BE%E0%A7%9F%E0%A6%95-%E0%A6%B8%E0%A6%B0%E0%A6%95%E0%A6%BE%E0%A6%B0%E0%A7%87%E0%A6%B0-%E0%A6%B8%E0%A6%AE%E0%A7%9F-%E0%A6%B0%E0%A7%87%E0%A6%A8%E0%A7%8D%E0%A6%9F%E0%A6%BE%E0%A6%B2-%E0%A6%AC%E0%A6%BF%E0%A6%A6%E0%A7%8D%E0%A6%AF%E0%A7%81%E0%A7%8E-%E0%A6%95%E0%A7%87%E0%A6%A8%E0%A7%8D%E0%A6%A6%E0%A7%8D%E0%A6%B0%E0%A7%87%E0%A6%B0-%E0%A6%AF%E0%A6%BE%E0%A6%A4%E0%A7%8D%E0%A6%B0%E0%A6%BE-%E0%A6%B6%E0%A7%81%E0%A6%B0%E0%A7%81

[update: this piece has been updated at 7:04 am BST on September 02,2024; update includes insertion of reference to starting of quick rental powerplant.]