Bangladesh Bank said that almost all the indicators of the real sector of the economy of Bangladesh are in a comfortable position.
These things were said in a press release sent by the central bank on Tuesday (November 21).
According to the notification, the foreign sector of the economy of Bangladesh has recently come under a lot of pressure due to the impact of various adversities including the Covid-19 pandemic, the Russia-Ukraine war and the continuous increase in policy interest rates in the developed world. However, almost all indicators of the real sector of the Bangladesh economy are in a comfortable state.
The circular also said that as a result of Bangladesh Bank and government policy support, the situation of rural economy especially agricultural production and small and medium industries is in a good condition. Also, industrial production, as revealed by the Industrial Production Index, is witnessing good growth.
Bangladesh Bank said that the government's increase in production-oriented and development-oriented expenditure has played a helpful role in keeping the economy moving. On the other hand, the government's revenue has also increased considerably due to various revenue collection measures. As a result of various measures taken by Bangladesh Bank and Bangladesh Government, the growth of national income of Bangladesh is expected to remain satisfactory in the fiscal year 2023-24.
It appears that the GDP growth rate will be more than 6.5 percent in the current financial year as a result of the ongoing extensive economic activities in the industry and service sector along with the implementation of various infrastructural mega projects of the government and the increase in agricultural production to the desired level.
In the circular, the central bank said, despite the good growth of exports and remittances in the prevailing economic situation, due to the very rapid increase in import costs, strong pressure has been observed recently on the foreign sector of Bangladesh, especially the foreign exchange reserves and exchange rates. In addition, the country experienced high inflation due to rising global commodity prices, devaluation of the Bangladeshi Taka and domestically adverse effects of seasonal weather and supply chain disruptions leading to increased production costs.
Bangladesh Bank has taken multi-pronged measures to mitigate pressure on exchange rate and foreign exchange reserves, including controlling inflation. Among them, increasing the policy interest rate, raising the limit on the interest rate of deposits and bank loans and making them market-oriented, not giving loans to the government by overprinting money, taking measures to control import costs and increase export income and remittances, market-oriented foreign currency exchange rates, foreign exchange market supervision including checking import prices. It is noteworthy to increase and take measures to meet the cost of import of necessary goods from the reserves of Bangladesh Bank.
According to Bangladesh Bank, a surplus of about 1 billion US dollars has been observed by September after overcoming the deficit of about 3.3 billion dollars last year. However, there is still a slight deficit in the overall foreign exchange balance due to the emergence of a deficit situation from an earlier comfortable surplus in the financial account. It is expected that 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.
According to the regulatory body of the financial institutions of the country, due to the adoption of timely and effective policy of Bangladesh Bank, the current exchange rate is very consistent with the actual effective exchange rate index. In this case, if the central bank of the United States 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.
Regarding the foreign exchange status, the central bank said that the current reserves are about 20 billion US dollars according to IMF BPM-6, which can cover about 4 months of import expenses. It is comfortable for any economy by international standards.
On the other hand, Bangladesh Bank is giving utmost importance to controlling inflation and maintaining its expectations. At the same time the government has reduced its spending in unproductive sectors. Increased scope and coverage of social safety nets (eg 1 crore family cards, truck sales etc.) to mitigate the impact of inflation on the poor.
The inflationary situation is expected to improve rapidly as a result of the contractionary policy measures of the Bangladesh Bank and the Bangladesh Government and supportive policies for production and investment. It should be noted that Bangladesh Bank will continue its efforts to reduce the country's inflation to 8 percent on a point-to-point basis by the end of January and to 6 percent by the end of June.
Bangladesh Bank believes that after the formation of the government through the next general elections, the economic situation will improve rapidly and the country's economy will turn around by the end of the financial year.
The central bank's circular also said that both the Bangladesh Bank and the government are taking various measures in the financial and revenue sectors to boost the country's economy by addressing the recent macroeconomic challenges.
With the improvement in the global economic situation, it is expected that 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. In the rapidly changing global geo-economic context, Bangladesh will become a stronger economy by increasing its capacity to take advantage of global opportunities.