In 2023, Bangladeshs economy faced a severe test, exposing its vulnerabilities on multiple fronts. The challenges, largely triggered by global events, led to a significant economic downturn, high inflation, a fragile banking sector, a trade deficit, and the depletion of foreign reserves. These macroeconomic indicators, while unprecedented, also underscored the resilience of Bangladeshs economic structure. Contrary to popular belief, an economic downturn can, in certain circumstances, present an opportunity for a country to not just survive but to thrive.
Before the economic vulnerability, the country was experiencing flourishing growth, which made the regulators reluctant to fix what was wrong for fear that it might slow down growth. But when the country ultimately took the blow, there was nothing to be feared. This was the perfect time to start renovating the countrys economy from the very core.
The question then arises: Is Bangladesh merely surviving, or is it on the path to strengthening its economy? The answer to this question is crucial not just for the 17-crore people of Bangladesh but also for the many nations that have invested significant resources in the countrys economic potential. The potential for growth and strengthening is not just a possibility but a clear and promising reality, instilling a strong sense of optimism for the future.
To assess Bangladeshs situation, the strategy, directives, reformation, and policy measures need to be checked. At the very onset, how the country immediately responds should be assessed. Bangladesh Bank, as regulator of the financial systems, faced challenges in promptly addressing the countrys escalating difficulties, potentially due to underestimating the repercussions of global economic upheavals. Their response through monetary policy, though delayed, inadvertently contributed to exacerbating the situation. A more flexible approach from the bank in adjusting directives could have prevented the issues from escalating further. However, the government swiftly stepped in to tackle the crisis. Measures such as adjusting budgets, bolstering social safety nets, introducing cash incentives via mobile financial services for the first time, and selling products through TCB to ease the burden on the lower-income group were timely decisions. Yet, some irregularities persisted due to gaps in the distribution system in certain areas.
Efforts were made through market monitoring, import rationing, cost-efficiency measures, and fund prioritization to address high inflation, the dollar and liquidity crisis, and money laundering. Although the central banks policy corrections came late, they eventually allowed interest rates to rise, adopting a restrictive monetary policy. Signs of progress are now emerging: inflation is decreasing, foreign reserves are growing, and banks are intensifying efforts to reduce non-performing loans. However, amidst these advancements, the central banks frequent rule changes are fostering uncertainty and destabilizing its directives. This inconsistency poses a significant challenge that the countrys financial authorities must now confront.
Bangladesh, known for its resilience and rich history, finds itself at a critical juncture. While there were loopholes in the economic system, the countrys swift response, implementing immediate measures to safeguard the economy from further downturns, underscored its potential for resilience. Moving forward, long-term strategies to fortify the economic structural framework should be the next step in Bangladeshs unwavering commitment to resilience and sustainability.
Bangladeshs journey towards "Bulletproof Economy": The term "Bulletproof Economy" is commonly attributed to former US President Bill Clinton. He used it during his presidency in the 1990s to describe the robustness and resilience of the economy during a period of sustainable growth and low unemployment. However, its often used to describe efforts by policymakers, economists, or financial experts to strengthen an economy against potential downturns or crises. Various measures such as fiscal policies, monetary policies, regulatory reforms, and other economic strategies combined make the economy bulletproof.
For any nation to achieve economic bulletproofing, self-reliance is crucial. However, from an economic perspective, no nation can achieve complete self-reliance due to factors like climate and resources. Bangladesh, with its strength in agriculture, is close to this goal. Despite diminishing cultivable lands, agricultural production has surged, showcasing relentless efforts to increase food production. The country had already been making headlines for being self-reliant on food. However, the price and efficiency are still not up to the mark. Unless price stability is ensured for foods, self-reliance can do much.
Experts have long advocated for diversification to reduce dependence on any single industry or sector. Undoubtedly, Diversification can help mitigate the impact of a downturn in any specific sector.
Bangladesh is not only diversifying its exports but also expanding its global trade partnerships. Strengthening these international ties can provide stability amidst global economic fluctuations, driving the country to engage with various nations to foster friendly connections. It is not just balancing between the USA and China; the country is engaging in strategic partnerships with Japan, South Korea, and Qatar, exploring every avenue to build a robust portfolio of global alliances
Undeniably Bangladesh has made economic progress and has achieved several milestones. However, Bangladesh lacks Research. The scarcity of researchers poses a threat to progress and innovation, highlighting the crucial need for accessible data. If the country does not facilitate enough research, it will not be able to strengthen its economy from another global turmoil in the future. Then again, savings are scarce as well. Bangladesh requires a long-term plan to cultivate savings and sovereign wealth funds during periods of economic prosperity. These funds can serve as a financial buffer during economic downturns.
According to the Dhaka Chamber of Commerce and Industry (DCCI), Bangladesh needs substantial investments of $245 billion in logistics infrastructure by 2030 and $1 trillion by 2041 to achieve developed nation status.However, stability is a prerequisite for such investments. Without stability, the risk of economic failure persists, undermining every other effort.
Implementing adaptable policies that can be adjusted based on prevailing economic conditions and fostering flexible policymaking is crucial for building a shock-proven economy. Its essential to tailor these strategies to Bangladeshs specific circumstances and challenges.
In summary, while the first three pillars of a bullet-proof economy-developed infrastructure, reduced sector dependence, and diversified global trading partners-are nearly in place, a disconnect remains between Fiscal Responsibility and Flexible Monetary Policies. Establishing a regulatory framework that promotes fair competition, encourages entrepreneurship, and prioritizes investment in education, innovation, and research should be the next milestone on Bangladeshs path to economic resilience.
The writer has completed his B.B.A and M.B.A from Department of Finance, University of Dhaka
