It's nice to learn that the government has begun moving at full throttle to tame its foreign exchange spending. Any further delay would have spawned a plethora of woes for the nation amid the ongoing global economic volatilities. As had been expected, the government has found it wise, at least for now, to defer implementation of less-priority development projects. The step is aimed at curtailing spending from its foreign exchange reserves. Disclosing the emergency measure, along with some others, the Finance Minister on Wednesday last unveiled a belt-tightening plan for saving the foreign exchange reserve. Finance Minister AHM Mustafa Kamal was talking to the press after a virtual meeting of the cabinet committee on public procurement on the day. The austerity plan unfolds a day after the Bangladesh Bank slapped restrictions on imports of luxury goods by raising cash LC margin.
In accordance with tightening the letter of credit (LC) rules, the Bangladesh Bank has doubled the requisite margin for all non-essential imports to 50 per cent from 25 per cent. For import of highly exclusive motor vehicles like SUV and Sedan cars as well as electrical and electronic appliances, the LC margins were re-fixed up to a minimum of 75 per cent from 25 per cent. However, a notable feature of the thrift measures is the restrictions on unnecessary foreign trips by government officials. The step is expressly aimed at limiting forex spending.
Evidently alluding to the 'changed global situations', viz. the emerging global economic vulnerabilities, the Finance Minister noted that these decisions were unavoidable. This recognises the fact that the present situation worldwide was not the same but high inflation was hurting all. Undoubtedly, it was a plain recognition of the reality which might start exposing itself in worse-hit sectors. The minister referred to the Russo-Ukrainian war which has disrupted the global supply chain and stoked inflation --- a potent reason for contractionary financial measures. However, he understands that the belt-tightening measures cannot be in place for an indefinite period. As he noted, the nation may put on hold the import of luxury items for two to six months. But he sticks to the measure of non-implementation of the less-urgent development projects. They can be deferred until a suitable time and condition are created. The foreign currency reserves fell to a notable extent in the recent months. It now stands at $44.14 billion, which can meet import bills for around six months.
Concurrently, the country's trade gap widened by nearly 64 per cent or $9.69 billion to $24.91 billion during the July-March period of this fiscal year from $15.22 billion in the same period in the last FY. Accordingly, the current account deficit now stands an all-time high at $14.07 billion as the widening trade gap coupled with lower remittance receipts has affected the macro-economic balance, which has given rise to worries among economists. The nation has started figuring out the real shape of the spectres looming over it. It's time it stared them in the face. To overcome any possible slump, the government has rightly focused on the need for not pouring funds into non-vital projects and also taking firm steps against forex depletion.