Describing the current economic situation of the country as worrisome, economist and former adviser to the caretaker government Dr. AB Mirza Azizul Islam said that the main challenge of the economy is to reduce inflation. He urged to increase supply of goods to reduce this inflation.
He said these things in an exclusive interview given to Khabarer Kagoj. Excerpts from the interview have been published for the readers of Barta24.com:
The interim government has been in power in the country for six months. What is your assessment of the government’s success or failure in the economic sector?
AB Mirza Azizul Islam: The current economic situation of the country is undoubtedly worrisome. There are various difficult problems or challenges in the economy. When you think about growth and inflation and above all, reserves, the situation is not satisfactory. In a special context after the change of government on August 5, the interim government led by Dr. Muhammad Yunus took over the responsibility of running the state. After that, attempts were made to carry out extensive reforms in various fields, including the economy. Needless to say, the problems that have become apparent in the domestic economy are not new problems. They have existed for a long time and still exist. If the problems are not resolved quickly, there is a considerable risk that the situation will become more complicated in the future. Therefore, effective and appropriate steps must be taken now to solve the existing problems in the economy. Those in the interim government have various commissions and task forces - I am optimistic that the country's economy will be able to turn around in a short time in the near future as a result of their capabilities and far-sighted action plans.
What do you think are the main challenges of the country's economy at present?
AB Mirza Azizul Islam: The main challenge of the current economy is to reduce inflation. Secondly, our foreign exchange rate is constantly being devalued, to stabilize it. For this, we need to increase export earnings. Many may talk about reducing imports. But if we reduce imports, in a country like ours, where most of the imported goods are industrial raw materials or intermediate goods, our production will be disrupted. Then there will be various problems in terms of supply. So, we have to try to increase our exports. The money sent by our expatriates has increased somewhat recently. We must ensure that this trend continues. This is undoubtedly a big challenge. Overall, if we are able to do the right things at the right time, considering the importance, the situation will gradually return to normal.
Currently, high inflation is the main challenge of the economy. How can this challenge be addressed?
AB Mirza Azizul Islam: Currently, high inflation has become a serious disease. High inflation has become widespread in the country's domestic economy for several years. The Russia-Ukraine war started before the post-Corona world economy stabilized. As a result, the global economic supply chain collapsed. The US central bank, the Federal Reserve Bank of America (Fed), took various remedial measures, including increasing the policy rate. At the same time, it was able to bring down high inflation to a tolerable level by taking various other measures. Bangladesh Bank has also changed its monetary policy several times though it is not possible to control high inflation in an economy like Bangladesh with monetary policy alone. For this, monetary policy must also be coordinated with fiscal policy. It must be remembered that the demand for goods may be reduced by increasing prices. But if the supply of goods does not increase at the same time, then inflation will not decrease. If the interest rate on bank loans increases, investment in the private sector decreases. If investment decreases, production will decrease. And if production decreases, adequate employment opportunities will not be created. And if employment opportunities are not created for everyone according to their suitability, poverty alleviation activities in the country will not be effective in any way.
The prices of daily necessities are increasing. What do you think could be the reasons behind this?
AB Mirza Azizul Islam: When inflation increases, the marginalized population is more affected. Due to the high price of food items, the general poor and lower middle class people are in great difficulty. The rate of inflation is increasing, but the rate of wage growth is not increasing at the same rate. Due to this difference between inflation and wage growth, the common people are struggling to meet their household expenses. Many families have reduced the amount of food they eat. Some are consuming comparatively less nutritious food. Most of the poor people are now suffering from the scourge of high inflation. The common people of the country are under immense pressure. The upper middle class people may be able to save their savings and maintain their standard of living. But the marginalized population has no savings. We see that the standard of living of these people is gradually declining. What we have to do here; we have to take care that the projects under the government's social security system are implemented properly.
A lot is written about syndicates, but it is not possible to break the syndicate in any way. What do you think the government can do in this regard?
AB Mirza Azizul Islam: Syndicates still exist and they exist widely. This comment is undoubtedly acceptable. Sometimes we see operations. Some people are arrested in those operations. We are talking about that. There may be issues of debate. In general, to break the syndicate, I think that the current law 'Protection of Consumer Life' is necessary to properly implement it. If necessary, the law can be amended and its scope can be increased. To restore the standard of living of ordinary marginalized people, this type of violence must be stopped. They must be suppressed with a strong hand. For economic activities to be successful, the overall law and order situation in the country must be brought under control. The law and order situation in Bangladesh is currently in a very delicate state. Strong steps must be taken to quickly restore the law and order situation to normal. Extortion is still going on during the transportation of goods as before. Extortion is happening in the market. Maybe the extortionist has changed. But extortion is not stopping. These extortions during the movement of goods on the streets are largely responsible for inflation. I think it is important to take strict steps in both the government and private sectors to stop such manipulations by syndicates in controlling market management.
What kind of steps do you think should be taken to restore a stable environment in the country's economic sector as a whole?
AB Mirza Azizul Islam: In general, what I mean by economic stability is that there are two very important things here. One is that GDP growth must be increased. Second, inflation must be controlled. Recently, the economic growth in our country has slowed down quite a bit. The growth statement that the Asian Development Bank, World Bank, and IMF have all given for Bangladesh in the 2024-25 fiscal year is also around 4 percent. On the other hand, inflation has been around 10 percent for a long time. Recently, it has exceeded 10 percent. Keeping these issues in mind, we have to take various steps. Now, to increase growth, we must increase investment. Especially private sector investment is relatively low. For a decade, private sector investment has been limited to 22 to 23 percent of GDP. There are several things to be done to increase private sector investment. First, the law and order situation must be improved. Second, there are various problems in the areas of infrastructure, including infrastructure, transport, etc. Thirdly, Bangladesh ranks very low in the Ease of Doing Business index. There are several sub-indicators in this. They need to be improved. The law and order situation is not satisfactory at all.
