The Financial Express

Meeting challenges of post-pandemic economic recovery

| Updated: December 20, 2021 22:04:58

-Representational image -Representational image

In line with the post-pandemic global trend in economic recovery with its attendant issues including energy price hike pushing up inflation, Bangladesh is no exception. Understandably, domestically, the push factors have to do with increase in imports and the private sector credit growth. Obviously, the Bangladesh Bank (BB)'s latest review about the economy's performance in the past quarter of the current fiscal (FY 22) and its prospects in the months ahead has also expressed cautious optimism. However, the need for caution as noted by the BB arises from three possible risk factors. These include unanticipated spikes in the global inflation, tightened monetary condition in the global markets or from any negative impact of the newest variant of the COVID-19, Omicron, on the global supply chain. Also, any dislocation in the supply chain or change in the exchange rate affecting costs of production of goods and services may also contribute to overall inflationary pressure in the economy. In that event,  to meet emergencies, interventionist supply-side policies might be employed to prevent any situation of market failure. That may involve higher government spending on transport, education and communication. Side by side with it, the central bank would be required to use its monetary tools to keep the inflation within a tolerable limit. It hardly needs explaining that such measures aim to increase productivity and efficiency in the economy. Similarly, on the external economic front, widening current account deficit due to rising costs of import, particularly,  of foods and fuels, poses a challenge. The still strong foreign currency reserve, despite recent decline in remittance receipts and earnings from robust exports, it is believed, can meet the challenge squarely. Needless to say, prudent fiscal and expansionary monetary policies adopted by the government have so far helped the economic activities to bounce back and stay on course.

At this point, going by the data provided by the Bangladesh Bureau of Statistics (BBS), over the past few months, the Consumer Price Index (CPI) has risen from 5.53 per cent in September to 5.70 per cent in October. Consider that still earlier, the CPI was at 5.36 per cent .Of course, these developments are issues of immediate concern and need urgent addressing. Evidently, the standard approach to contain the rising trend of CPI is to tame volatility of the essentials price market through judicious planning of essential commodities import. In this way, by ensuring adequate supply of essentials in the market, the dishonest trading cartels' bid to distort the market and thereby artificially create consumer-price-driven inflation can be obstructed. In a similar vein, to stimulate the economy, an enabling environment has to be created for the entrepreneurs in the private sector so they may come forward to make further investments taking advantage of the government's loose or the so-called, expansionary, policy. It is important to note here that the government intervention to increase domestic demand should not exclude the micro and small scale entrepreneurs. Especially, their access to government finance has to be made encumbrance-free so they may stand the inflationary pressure and run their small business sustainably. Since it is an issue of increasing domestic demand, the vulnerable social groups should also be covered by the policy to prop up their purchasing power. In this regard, to meet the various challenges of post-pandemic economic recovery, the government may well think of introducing a separate stimulus package as part of its expansionary policy.

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