Economy on the eve of elections

Publish: 3:12 PM, December 28, 2018 | Update: 3:12:PM, December 28, 2018

Only a day away from now Bangladesh’s over 100 million voters will have to make the crucial choice between who has been pulling up the country in the economic sense for the last nearly a decade and who paid only lip service to this all too important aspiration that should be closest to the hearts of the preponderant number of voters. If they fail to make this choice correctly then a tragic state would await the country in the next five years when the country was so near to take-off fully in the economic sense.
First of all let us see how under the economic governance of the incumbent Awami League Bangladesh has shaken off recently the label of the least developed country (LDC). It has now not only acquired the respectability and status of ‘ developing country’ and also ‘middle income country’. Though this state remains to be consolidated but one should ponder before voting whether it would be retained if the current opponents of the incumbent party in power are installed in power by any perverse decision of the majority of voters in the upcoming national elections.
How stands the Bangladesh economy on the eve of its national elections 2018 ? The foreign currency reserve of a country is considered as one of few most important indicators of the strength or otherwise of its macro economy. The reserve is a guarantee for smooth conduct of its foreign trade, capacity to carry out emergency imports of essentials such as food grains and other indispensable commodities. Seeing the size of its reserve, foreign creditors are willing to consider additional or new credits for it.
The smaller the size of the reserve, the less the chances of sustaining its external trade and more its chances of going bankrupt. In case of a paltry foreign currency reserve, foreign banks may not issue letters of credit for import of goods by such a country fearing that it may not have funds ultimately to pay for these goods.
Usually, a country must have a foreign currency reserve sufficient to smoothly pay all its import bills for a period of at least three consecutive months to be judged as meeting the minimum criterion for financial solvency. The longer the period of time when its total import payments can be met by its foreign reserve, the better.
This crucial foreign currency reserve was some 5 billion US$ only in 2008 for Bangladesh when the previous BNP led elected government departed from power. But according to latest media reports , the vital foreign currency reserve has surpassed US$ 32 billion even after paying the three monthly regular payment of US$ 718 million to the Asian Clearing Union (ACU). This is the highest ever recorded level of the foreign currency reserve of Bangladesh in the last over forty seven years after clearing the dues of the ACU and sufficient to take care of over seven months of uninterrupted import operations. The size of the reserve, therefore, is much more than the size that the predecessor government had left it in 2008.
One may say that US$ 32 billion is not a very big amount of money. But the point is, compared to the past when our reserve used to be meager and sometimes even slid below the amount required for three months of import operations, today the reserve is not only several times larger but nearly all of it is composed of the country’s own earnings from export activities and remittances from workers.
If we look at the US$ 5 billion or so reserve left by the previous elected BNP government, then even that far smaller reserve reflected foreign loans and aid which were added to it. But in contrast, the very substantially increased reserve -nowadays– is almost entirely the outcome of proceeds from higher and higher export earnings and workers’ remittance inflow. Foreign aids or loans are but a small part of it. Thus, the government of the day can surely take credit for building up this relatively impressive reserve with its policies and sustaining the same.
Another comparison should make clearer why Bangladesh and its government have reasons to be justifiably happy and proud with the reserve position. For example, our South Asian neighbour, Pakistan, has a foreign currency reserve of only about US$ 8 billion which is nearly three times smaller than our reserve size.
And out of this US$ 8 billion, the greater part consists of loans from the International Monetary Fund (IMF) and grants and other assistance from certain Arab countries. As it is, Pakistan is trying hard to get a loan of another $ 3 billion from the IMF to keep its reserve from depleting fast and bringing that country again on the edge of bankruptcy.
But Bangladesh’s much bigger foreign currency reserve has been built almost entirely by its own efforts and not relying on foreign doles. It underwrites the present economic security of the country convincingly. What is notable is this sound reserve position just did not happen automatically. It is the outcome of very able implementation of policies in different fields by the government and the country’s central bank, Bangladesh Bank (BB).
Power availability is like the life-blood of a modern economy. The previous government left the country with a rather hopeless situation in 2008 with a generation capacity of some 3,000 mw. The situation was too grave for household and commercial or industrial consumers of power. The generation capacities have shot up to over 20,000 mw and greater generation capacities are likely to be added fairly soon that should underwrite the country’s short and mid term industrial and economic growth.
The country’s per capita income has increased notably and amply in the last five years and stands at US$ 1,750 from US$ 700 only . This again is an indicator of the appreciably rising purchasing power of the people. Fueled by higher consumer spending, the economy is benefiting remarkably as more and more entrepreneurs are stepping up their activities to establish enterprises to produce adequately goods and services to meet the fast rising local demand for the same.
Bangladesh today is no longer a country that feeds on foreign dole. Unlike many other countries that could not service their past external loans, Bangladesh’s record is very good in unfailingly and regularly servicing its old loans. Bangladesh can no more be described as an utterly aid dependent country. It meets its entire administrative costs by itself and also a lion’s share of its developmental spending requirements from its own resources. Its biggest current mega project, The Padma Multipurpose Bridge (PMB), is under construction utilizing 100 per cent its own resources.
Voters need to be extremely careful and ponder these issues to avoid taking the wrong decision.