Consensus For Early Recovery

Consensus in economic reform policy Makes the recovery early and easy.

While the winter vegetable market witnesses a decline in prices of vegetables, govt embarks on importing rice from abroad. Govt has a plan to import 800000 tonnes of rice from abroad to check the prices of rice. There is a commitment to bring down the food inflation at any cost. Meanwhile, in the first two quarters of this fiscal year, foreign direct investment registered 22.33% decline. Taka against USD remains stable after a brief spell of volatility in the month of December. If it remains stable for another six months, it will give confidence to foreign investors. They will not come amid anarchy,elevated inflation and when the currency remains volatile.

The central bank may unveil the much awaited Monetary Policy Statement (MPS) in the first week of February. Unlike the previous MPS, this one may raise the policy rate further after reading the January inflation data. I personally think the govt should remain unpredictable about its monetary policy moves in a bid to thwart speculative move at home and abroad. In the wake of protest, govt is making 180 degree turn in its stance on indirect taxes, which accounts large part of revenue earning. But this time budget support from abroad will be less as the Trump administration halted foreign assistance for 90 days. In this backdrop, it has to curtail the spending significantly, backtracking the move to give inflation allowance to govt employees. As I mentioned in one of my earlier pieces, govt is reluctant to start bold economic reforms , which is vital for the economy.

This interim government is apolitical and lacks the vigour to initiate bold economic reforms, which it can do at anytime. The main reason is it is concerned about how the major political parties will see the move. Unlikel the west where opposition parties have their own shadow cabinet and alternative policies to call into question the prevailing policy, our political parties have not shown interest in forming such shadow cabinet and share their thoughts and opinions with the interim govt. If they would do that, the interim govt could confidently take into account those policies and align them with the ongoing reform policies as prescribed by the IMF. This govt still has more or less 1 year,enough time to start vital structural economic reforms. Early economic reforms (i.e. fiscal restructuring, tightening monetary policy, policy sovereignty of the central bank, true reporting of economic data, closure of troubled banks, separation of tax policy and revenue collection etc) will put less strain on people a year later. Otherwise, if it is shelved for the new elected govt,which is highly likely to happen for most of the anticipated reforms except for few, then true economic recovery will be delayed and ordeal of ordinary people will be prolonged. For the sake of the economy, major parties should coordinate their economic policies with the one of interim govt,making its economic reforms task much easier.