Bangladesh Bank believes that relief from the pressure on the economy due to various global and internal reasons depends on the stability of the exchange rate of rupees against the dollar.
The central bank said in a statement that the economic situation will improve rapidly after the formation of the government through the next elections and the economy will turn around by the end of the fiscal year.
In the statement titled ‘Current trend of Bangladesh’s economy’ on Tuesday, Bangladesh Bank said that the growth will be more than 6.5 percent and the inflation will be reduced to 6 percent at the end of the fiscal year. The central bank will try to bring down the high inflation that has been affecting everyone for several months to 8 percent in January and 6 percent by the end of June.
Regarding the growth, it is possible that the GDP growth rate will be more than 6.5 percent in the current financial year as a result of the ongoing economic activities of the government and increasing the agricultural production to the desired level. The government has set a growth target of 7.5 percent in the budget.
Regarding inflation, it has been said that utmost importance is being given to control inflation through various measures.
Regarding this statement, Bangladesh Bank spokesperson and executive director Majbaul Haque told bdnews24.com, “It is a statement on the current state of the economy on behalf of Bangladesh Bank.”
The statement mentioned that due to the rapid increase in import costs, the foreign sector of Bangladesh, especially the foreign exchange reserves and exchange rates, has been under severe pressure.
Bangladesh Bank is hoping that, subject to improvement in the global economic situation, stability in the foreign sector of the country’s economy and a comfortable situation in the inflationary situation will soon return through the increase in the country’s exports and remittance flows.
“The foreign exchange balance will soon return to a comfortable state, which will be more helpful in bringing stability to the currency exchange rate along with preservation of Bangladesh’s foreign exchange reserves.”
“If the US central bank does not raise or lower its policy interest rates in the future, it will play an important role in bringing stability to our exchange rate,” the statement said.
Explaining the economic stress, it has been said, “The foreign sector of Bangladesh’s economy has been under a lot of pressure recently due to various adversities caused by the Covid-19 epidemic, the Russia-Ukraine war and the continuous increase in policy interest rates in the developed world.”
However, the Bangladesh Bank claims that almost all indicators of the real sector of Bangladesh’s economy are in a ‘comfortable condition’.
Highlighting the fact that the Bangladesh Bank and the government have taken various initiatives to reduce this pressure, it is said, “There has been a significant improvement in the current account of the foreign exchange balance and the current pressure on the currency exchange rate has been alleviated a lot.”
“The overall foreign trade balance is still somewhat in deficit due to the emergence of a deficit situation in the financial account from an earlier comfortable surplus,” the statement said, citing a reduction in the current account deficit of $3.3 billion to nearly $1 billion in September last year. ”
Explaining the reasons for the high rate of inflation, which has run rampant in a stressed economy, it is said, “The rise in global commodity prices, the devaluation of the Bangladeshi rupee, and the adverse effects of domestic seasonal weather and the increase in production costs, together with supply chain disruptions, have led to high inflation in the country.”
“Government has cut spending in unproductive sectors to control inflation. The government is increasing the coverage of the social safety net (eg, one crore family cards, truck sales, etc.).”
Measures taken by Bangladesh Bank to control inflation, reduce pressure on exchange rate and foreign exchange reserves, increase policy interest rate, delimit the interest rate on deposits and bank loans and make them market-oriented, not printing money to the government, control import expenditure and export income and Initiatives have been taken to increase remittances.
“In addition to this, there is a market-oriented exchange rate of foreign currency, increased supervision of the foreign currency market including checking import prices, and a system to meet the import costs of necessary goods from the reserves of Bangladesh Bank.”
“The prevailing currency exchange rate is very much in line with the real effective exchange rate index,” the central bank said, keeping the rupee’s exchange rate against the dollar in line.
Current foreign exchange reserves as per IMF’s BPM-6 are around US$ 20 billion, which can cover about 4 months of import expenditure, the statement said.