Bangladesh economy rises higher than expectation
DHAKA: Bangladesh economy after a lull has rebounded in a perfect way and its foreign exchange reserves have crossed the $20 billion mark for the first time in its history due to declining import payments and high buoyant remittance inflows, reports Fatima Hossain for Dispatch News Desk (DND).
According to Bangladesh Bank (BB) data, the reserves crossed $18 billion with the help of a rise in exports and inflow of remittances and decline in imports in December 2013.
Bangladesh economic activities had a dip in the first half of the fiscal year due to political uncertainty and turmoil.
“A recovery in export growth and increases in public expenditure are likely to help achieve 5.4% GDP growth in FY14 lower than last year’s 6% which was expected to 7.2 percent in the budget”, said BB documents.
In a World Bank report published this week indicated that political turmoil in the last quarter of 2013 inflicted a value-added loss of about $1.4 billion, of which 86% was in services, 11% in industry and the remaining 3% in agriculture. Inflation has increased in recent months due to cost push from supply disruptions and wage increases. Stability in international commodity prices, weak domestic demand, and some appreciation of the nominal exchange rate combined with a restrained monetary policy to moderate the recent increase in inflation.
Report indicates:
1-Foreign exchange reserves have increased to adequate levels, with a sustained large surplus in the overall balance of payments. The external current account surplus has remained comfortable due to good export growth and weak imports, which offset the decline in workers’ remittances, added WB report.
2-The financial sector is stressed. A rise in default risk across the board due to losses inflicted by a prolonged disruption in production and trade has worsened the state of the banking sector. The state-owned banks were already negatively impacted by the earlier financial scams. The growing nonperforming loans of private commercial banks are also a matter of concern.
3-It also said prudent macroeconomic management continues. Monetary policy pursued a restrained path, achieving broadly the targets for the first half of FY14. Implementation of monetary policy benefited from slowdown in private credit growth, contributing to an increase in excess liquidity.
4-The fiscal deficit and public borrowing have remained within sustainable limits. Fiscal management this year is facing challenges because of a large and growing shortfall in NBR tax revenue, demand for fiscal support from sectors adversely affected by the political turmoil and slower utilization of ADP.
5-Tax revenue growth in the first seven months of FY14 was barely 10 percent. Government bank borrowing so far has been contained, while net nonbank borrowing has increased.
