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Consensus to address political uncertainty
May send a signal of greater clarity. |
Central bank once again raised the policy rate by 50 basis points, making it 10% in a desperate measure to curb inflation. Governor earlier in an interview hinted to raise it even one more time in the coming weeks. Meanwhile, IMF downgrades Bangladesh's growth projection to 4% and anticipates that inflation will be around 10% next year. Earlier, the World Bank had downgraded the growth rate. Since inflation shows no sign of coming down, contractionary monetary policy will be prolonged.
The political protest,sit-in continue unabated. If the political crisis prolongs, it will create new problem as well as cast shadow over the economy. Unlike Sri Lanka where political parties formed the interim govt (which had support of even the outgoing regime) in a consensus, here the former ruling regime is nearly decimated,its student wing is facing ban and other parties are in no mood to have a dialogue with the former ruling regime before its trial. Some key groups associated with former regime signal to wind up their businesses. In addition, govt freezes bank accounts of many groups and owners who have been accused of corruption and money laundering activities. In the absence of greater political reconciliation, budget deficit may continue in the future. Many are demanding an election date. A specific date of the next election will clear away half of the uncertainty. Investors, businessmen and in general the economy will get a signal when the stalemate will be over. Maybe by mid November or by the end of November the draft reform policies and the white paper on corruption will be made public. This will further dispel the ambiguities on the objective of this govt. If this political uncertainty persists or lack of confidence on govt exists ,it will create new problems along with the ongoing economic woes.
Incumbent govt has a new responsibility in addition to fix the economy and start some reform programs. It is to clear political uncertainty arising from this regime change.
If it announces a date,even if it is 5/7 years later, or go for people's mandate for duration of the govt,which I propagated earlier in one of my pieces, it will give tremendous confidence to the economy and people. Because both will know where the country is heading and when it will be over.
When we are in the middle of an economic crisis, all the stakeholders (people,administration,parties) of this country have to think again whether our troubled economy and innocent people can bear the cost of frequent political misadventures.
Lack of reconciliation, rule of law and people's participation almost jeopardize bipartisan political structure, which somehow gives a kind of stability in many countries,in our country. Former ruling regime tried to do the "unnayan" (development) for people without taking their consent. By the same token, we see that "songsker" (reform) is being pursued for people bypassing their mandate. Trapping into the narrative of "biplobi sarker"(revolutionary govt) may cost the incumbent govt. Boasting such argument may invite another unsettling event that we should all try to avoid. People's mandate may throw cold water into all kinds of debate surrounding this govt. And it will be good for the economy. At the end of the day both " unnayan" and " songsker" will be done for the people. So they should be at the center stage of everything. Otherwise, I apprehend, vested quarters may exploit the situation as they did during the tenure of previous regime and during the caretaker govt. Our economy and taxpayers may not bear the cost of wrong policy decisions.
China recently lowers its policy rate. Earlier it had appreciated its currency. Low Chinese policy rate paves the path for cheap Chinese credit for the private sector. While foreign currency keeps coming, a large trade deficit in the bilateral trade calls for taking Chinese credit for the private sector to pay the bills for doing business with China. Previous regime did manage to get 1 billion yuan. If it necessitates, govt may go for another package when we need more credit to give our private sector to rejuvenate the economy.
Govt took some right steps to address inflation woes. Now it needs to unveil reform plans and address political uncertainty before it gets worse.
