Economy at crossroads

Economy at crossroads

Newagebd.net

Hussain Imam | Sep 23,2022

ONE does not need to know rocket science to understand that the real economic situation of the country is, at the moment, seriously alarming. Although the country’s per capita income — at around $2,824 — is reasonably high compared to that of the neighboring countries like India, Pakistan or Sri Lanka, a vast majority of people cannot match their income with the staggering price increases of fuel, transport, rice, vegetable oils and other essential commodities for their daily living.

Many of them, with limited income, have been forced to halve their daily food intake in order to cope with the price hike. Many of them have been forced to reduce or ruthlessly cut the cost of milk and protein for their children from their daily budget. Many of them have been compelled to divert their children from schooling to child labour to maintain their livelihood. Many of them are literally starving.

The sudden increase in fuel prices by about 51 per cent on average in one go has literally sent a shock wave through the people. The rise in fuel prices, particularly the cost of diesel, has nearly doubled the cost of transportation. The price hike of rice, the only staple food for the people of Bangladesh, by Tk 10 to Tk 20 per kilogram has only added fuel to the fire.

There is no point in mentioning the unbelievably high price of fish, meat, and dairy products, which are now far beyond the reach of the common people. Beef is sold at Tk 700–750 a kilogram, mutton at Tk 1000 a kilogram. All fish, except tilapia, pangash and koi (cultured) from the farm, are sold at Tk 350 to Tk 1200 a kilogram. Eggs are being sold at Tk 130 to Tk 150 a dozen. Hardly 20 percent of the country’s population can possibly afford this cost. The remaining 80 per cent are helpless bystanders.

The reason for this abnormal situation is not difficult to find. Fuel prices have risen by 50 per cent, raising the cost of transportation and, as a result, the cost of all essential commodities. The value of the taka against the dollar has devalued from Tk 86 to Tk 100–105 in the banks and up to Tk 115 in the open market in a matter of months, resulting in the high import cost of every item of daily necessity.

This being the ground reality, what does it matter whether the country’s per capita income is $2,800 or $3,000? People need food to fill their stomachs. Babies need milk and protein for their nourishment. Elderly people need medicine and health care for their survival.

The Bangladesh Bank is replenishing the commercial banks with dollars from the foreign exchange reserves of the country, thereby depleting the reserve. The country’s foreign exchange reserve is currently around $36 billion, down from around $46 billion a year ago. The reserve is likely to face further depletion with the start of foreign debt payments against loans on ongoing mega projects beginning next year.

The economic experts of the country are by and large unanimous in their assessment of the economy of the country. They see a grim picture of the economic horizon of the country. Given the prevailing global economic scenario, which is already going through a hard-hitting recession, they find no means to draw a road map for quick recovery from the imminent disaster of a deep economic depression.

The World Food Programme has already warned of a worldwide food crisis mainly due to climate change, resulting in severe drought and unusual flooding in many countries, on one hand, and the war in Ukraine, on the other hand. Bangladesh has been, for the last decade or so, proud of being self-sufficient in food production. It has already announced the import of one million tonnes of food grain this year to meet local demand.

Austerity measures in public spending are a sine qua non to meet the economic challenges of the day. The government has already announced some measures such as restricting the import of luxury items, discouraging foreign travel by government officials on flimsy grounds, and so on. These measures alone may not be enough to cope with the situation. The government has to widen its net to curb corruption, money laundering, and tax evasion with an iron hand.

At the time of independence in 1971, the number of billionaires was only five. Now it is reported to be more than one lakh. Do they pay enough income tax for their earnings? If they do, why should the revenue earned by the country from income tax be so poor, hardly 30 per cent of the total revenue earned? The country has a population of about 170 million. At least 20 per cent are said to be wealthy enough to pay income taxes. According to NBR data, the number of people with tax identification numbers in the country in 2021–22 was 7.4 million, but the number of actual taxpayers who had submitted their tax returns during the year was only 2.3 million. It is unfortunate that only 30 per cent of registered taxpayers submitted their tax returns. Bangladesh’s tax-to-GDP ratio, at 7.7 per cent, is the lowest even among the South Asian nations. It should have been at least 18–20 per cent.

These are the questions the concerned authorities in the government need to look into seriously and come up with satisfactory answers.

The country is at a crossroads. On one hand, it is aspiring to be a developing country in a couple of years or so, and on the other hand, an ominous signal of a Sri Lanka-type socio-economic crisis is haunting its journey. How it comes out of the dilemma will all depend on how aptly it can handle the situation.

Hussain Imam is a retired merchant mariner.