The start of the new financial year (2017-18), by any measure, has not been that auspicious. The prospect of the economy hitting the growth target, set at 7.4% this fiscal, now appears clouded.
The new financial year inherited a few negatives such as falling remittance income, the lackluster growth of exports leading to the largest-ever trade deficit and stagnancy in investment from the previous fiscal year.
But on the top of everything nature after quite a long gap, ten years, to be precise, seems to be very hostile this time. Lately, it has started taking a heavy toll on the economy. Natural calamities such as recurrent floods are more likely to upset, at least partially, the arithmetic the policymakers have done about growth.
The flash floods in the Haor areas caused the first damage. Though the calamity occurred in the latter part of the immediate past fiscal year, its ill-effects do have a bearing on the performance of the economy during the current financial year.
Nearly one-fifth of the country’s the last Boro output was destroyed by the flash flood. The loss of crops coupled with callousness on the part of the Ministry of Food to maintain the government’s buffer food stock at a satisfactory level has put the country’s food security under threat.
Then again, the country has been reeling under these recurring floods over the last couple of months. More than 19 districts in the north, northeastern and central regions are severely affected. An estimated 17 million people in these districts are in distress. The floods have caused extensive damage to standing crops, and the prospect of next Aman rice crop in many flood-hit areas is not that bright as floods have destroyed seedbeds there. Farmers may not get enough time to grow Aman seedlings for transplantation. Thus, any substantial fall in following Aman output might prove a severe problem for the economy.
Though belated, the government has embarked on a program to procure a significant volume of food grains, rice in particular, from external sources. However, the timing of the government’s entry into the global rice market has not been perfect. The global rice market was dull until recently because of weak demand for the staple. But many rice exporting countries, namely, India, Vietnam, and Thailand, have raised their prices sensing urgency on the part of Bangladesh in the case of purchase of a substantial quantity of rice. The entry of the Philippines and Sri Lanka lately as procurers of rice has also heated up the market.
The country’s import expenditures in all likelihood would go further up because of the procurement of food from the international markets by the government and the private sector traders.
Besides, an alarming feature of the spending on imports has been the increase in capital goods import in recent years. The issue has been noted by various quarters with grave concern, but the policymakers have not yet tried earnestly to find the causes behind it. The rise in imports is supposed to be reflected in the country’s income from exports. But there has been a gross mismatch between the growth of imports and that of exports. It is widely suspected that funds are being transferred illegally through trade transactions, the capital goods import being the main conduit. This phenomenon is, undoubtedly, hurting the economy.
The country’s exports, in terms of value, recorded a notable rise to $3.2 billion in the first month of the current fiscal over that of the corresponding month of the previous fiscal, but the same was slightly below the target. Shipments of the major readymade garments totaled $2.4 billion, up 17% on year-on-year basis. The export performance in the first month of the new fiscal is quite encouraging. But the country’s foreign trade for the last few weeks suffered much because of severe congestion at the country’s premier port at Chittagong. Damage caused to two gantry cranes by a foreign ship while berthing is responsible for keeping many ships waiting at the outer anchorage. The situation deteriorated to such an extent that many international shipping lines levied surcharges on users of their services at the Chittagong port. Besides, some shipping lines are now refusing to use the port.
These are, however, recurrent problems that the businesses face in this country. They have learned to live with those, notwithstanding the fact that they have to count costs for all these. The government is now working overtime to improve the situation at the Chittagong port. But the fact remains that the port suffers badly from a shortage of equipment, efficient human resources, and space. A move is on to appoint an international operator to manage the affairs at the port. If that is done through a fair selection process, some improvement in port operations is expected.
As mentioned earlier, floods have done substantial damage to life and properties this year. There have been allegations that the government is not doing enough to help the people affected by the natural calamity. However, such charges are common in this part of the world.
What will be crucial under the present circumstances is the post-flood rehabilitation work in the affected districts. The government would have to spend a substantial sum on the program, only if the government is sincere in helping the flood-hit people.
The economy now faces the risk of inflationary pressure. The prices of many food items, including rice and vegetables, have gone up in the recent months. Though official data show otherwise, the people are now experiencing the bite of the soaring prices of many essential items. Despite the substantial import of rice by the government and the private sector, the prices of the main staple are sticking to higher levels. The central bank’s half-yearly monetary policy (July-December), announced some days back, was found to be particularly focused on the issue of inflation.
With a major post-flood rehabilitation task remaining on its shoulder, the government appears to be not comfortable with the revenue situation. It suffered a setback when it had to defer for another two years the enforcement of the new VAT law. The new law was supposed to mobilize an estimated Tk 200 billion to the state coffer. Thus, the government’s capacity to maneuver as far as spending is concerned this year seems to be limited. It might be forced to go for austerity in some cases.
The writer is a senior journalist. He can be reached at zahidmar10@gmail.com
