SANEM for forming panel of experts to advise govt on economic challenges

The South Asian Network on Economic Modeling (SANEM), among other recommendations, has suggested the formation of a high-level panel consisting of experts from different fields to advise the government on how to overcome the ongoing economic hurdles in the country.

The local think-tank offered a set of recommendations to tackle the economic challenges at a webinar on Tuesday. SANEM Executive Director Dr Selim Raihan hosted the webinar where he presented the keynote presentation titled “Current economic situation in Bangladesh: Areas of concerns and what needs to be done”.

Dr Selim Raihan, also a professor of economics at University of Dhaka, suggested that the authorities should be fiscally responsible, prudent in debt management, and properly deal with subsidies.

It should also manage the exchange rate, Interest rate, supply-side issues, and banking sector governance by reforming the sector.

Furthermore, SANEM suggested increasing public spending on health and education.

The think tank praised the government’s special economic zones, which should attract more FDI. It also wants the government to utilise the full potential of Padma Bridge.

Finally, SAMEM urged the need for coordination among policies and agencies.

In the presentation paper, SANEM said Bangladesh’s economy is now under a lot of stress due to the current global and domestic situation.

Inflation jumped from 7.47 percent in July to 9.52 percent in August and the figure hovered around 9 percent, according to World Bank data.

SANEM identified four reasons behind high inflation in Bangladesh: escalated world prices of food, fuel and other commodities; domestic production shortage; anomalies in domestic market and supply side issues; and currency depreciation.

Furthermore, SANEM doubts the proper estimation of inflation as the Bangladesh Bureau of Statistics (BBS) still uses 2004-05 weights to calculate inflation.

To ensure food security, SANEM recommends a four-pronged strategy. These include- boosting agricultural production, facilitating imports, monitoring the market, and expanding social protection.

Bangladesh has a low Foreign Direct Investment (FDI) of 0.58 percent of GDP. This looks minuscule when compared to Vietnam at 4.88 per cent, South Asia 1.57 percent.

The paper pointed out several problems in the banking sector: very high non-performing loans, scams, weak, governance, lack of autonomy of the central bank, and ad hoc fixation of the interest rate.

SANEM’s paper highlighted hundi as a major challenge for the country’s depleting foreign reserves. It also mentions- pending adjustment, slow adjustment, improper adjustment, and multiple rates as other factors.

Furthermore, to manage exchange rate issues, SANEM recommended restraining imports: restricting hundi business, managing exchange rate, and bank interest rate.

The think-tank praised the government’s effort to restrict imports by limiting LC opening. However, the government’s bid to manage the exchange rate management was inadequate, while its social protection measures have institutional challenges.