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Ghost of past habits still prevails at large, |
The IMF has downgraded growth forecast of Bangladesh to 4.9% from 5.4% for 2025-26 fiscal year in its "World Economic Outlook Report". The global lender anticipates an inflation around 8.7%,which is higher from earlier projection, for next year. Even this projection tells the exorbitant prices of consumer goods people are dealing with in Bangladesh,which endures higher inflation than other neighbors in the subcontinent.
What is worrying contesting parties of the February general election have not come up with specific plan on how they tackle the $34.71 billion Non Performing Loan(NPL), missing from the banks and risking the stability of Taka. As I have mentioned in one of my [pieces], the new government will have exactly 24 months to roll out a detail plan and fix the economy even if they are deeply committed to reforms(See "NPL Endangers Exchange Rate"). The rest of the tenure will be used to win the next election, witnessing expansionary fiscal policy and compromising the contractionary policy.
Adding salt to injuries is Henley's downgrading of Bangladeshi passport by three notches. Bangladeshi passport is ranked 100th among 106 countries in Henley's latest passport index. East Timur's ease of visa and Pakistan-Bangladesh treaty on visa waiver on [govt official] passport holders have little reflections on latest passport index. Rather, UAE continues visa restrictions on Bangladesh following street agitation by Bangladeshis in July last year in that country. Sri Lanka has recently hardened on arrival visa by making compulsory e-appointment. Indonesia and Thailand walked in the same direction. Malaysia has yet to resume recruitment of Bangladeshi workers following corruption in the process involving Malaysian officials and visa officers. Several EU countries limited visa activities in Bangladesh, curbing cost and securing their borders. Sweden stopped processing Dutch visa in Dhaka ,outsourcing the job to Delhi-based third party. France is also doing the same. UK reviewing its caregiver visa policy following unprecedented abuse of the policy. Moreover, free trade agreement with India has allowed Indian RMG,workers and investment to enter UK easily. This means weak passport and visa restrictions limit Bangladeshis' overseas employment, farther casting shadow on a stable remittance inflow. Interim govt has given an aura of regime change that is why remittances coming in abundance. We do not know how the new government will behave. If it is business as usual like before,then a dip in remittance inflow is anticipated.
Risk about Taka's rapid fall against major currencies may prompt capital flight. Already many rich businessmen are queuing up for leaving the country. When Taka plummets, it downsizes wealth of [the] rich if the assets are denominated in Taka. That is why the rich have a tendency to transfer wealth abroad when local currency falls sharply against major currencies. If they cannot do it legally, they will do it through other means. This prospect is very real when the new elected govt will assume power next year. There may be a greater urgency to transfer wealth abroad if retribution and fall of Taka gathers pace.
In 25 months/ little more than 2 years ,we see 3 elections: 1 held in January 2024 boycotted by the opposition, another will be held in February in 2026,which may also see absence of a major party, and a referendum in the same time or a bit earlier. The regime change alone cost $1.7 billion to the economy. Following the 2024 election govt doled out Tk 300 billion to partisan businesses. These are costing govt huge public money without giving any assurance to political stability. Moreover, in the name of "Mujib Shotoborsho" (Mujib's birth centenary) govt spent huge money across Bangladesh. Following regime change, most of the structures built in commemoration of Mujib witnessed demolition. Now public money is being used to implement "July Movement" projects. Despite regime change, past habits remain intact.Point is we are spending billions of public money in political projects without any assurance of political stability,which is vital to economic stability. All this unfolding during the time of austerity.
The tariff debate unveils that in initial years we may [lose] tariff, as import duty is relaxed on crucial import items like cooking oil and LNG, unless some contingency plan (like taxing remittance and export) is chalked out. At one hand we are [losing] revenue, on the other we keep spending on political projects with no guarantee on stability. Failure to a clear roadmap on how to deal with the NPL puts stress on Taka and prompts capital flight. Weakening of passport casts shadow over remittances. Still we hope there will be a better tomorrow.
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