With the low-income earners' back to the wall as the cost of living is going up irrationally, the government is learnt to have decided to control import of luxury items. Though not having any direct impact on the lives of the common people so far as their struggle to make both ends meet is concerned, the move may, to some extent, help check erosion of the value of taka against US dollar.
The imports of many unnecessary items including the luxury ones have meanwhile increased the demand for the hard-earned foreign currencies, a robust reserve of which is essential to help keep the Taka stable. And a stronger Taka is a blessing for the common people. For it can hold the tendency of import-driven price-hike of essential commodities in check.
However, import of raw materials and capital machinery for the industry cannot be kept limited for a longer interval, if only for maintaining the pace of economic growth intact. But it's a special and a very critical phase of transition that economy and society is going through. So, sometimes, it is necessary to control the expansion of the economy, in order to address other no less important social issues. For example, the currently popular one-way economic development model based on higher GDP growth, though very eye-catching, is not balanced socially.
True, it creates wealth in society, but that wealth remains concentrated in a few hands, the direct beneficiaries of the growth model. But in an underdeveloped society like Bangladesh with a huge population to maintain, the majority cannot get the benefit of this wealth created at their expense. Moreover, flight of capital from such societies is a common syndrome. As a result, the economy fails to keep all the foreign currency it earns from homeward remittances and exports. But these precious foreign currencies are vital to keep importing essential commodities including food grains to ensure food security for the masses in critical times like now.
Even so, the high-income few behind the high GDP growth are for importing hardly necessary consumer items including energy-guzzling expensive cars, building materials including ceramics and toiletries. And, of course, they have to travel abroad often both for business purposes and for pleasure. All such activities need a lot of foreign currencies. So, what can a government do in such times? Keep the bouncy horse of GDP growth galloping, or reining it for a while for the greater good of society? The example of neighbouring Sri Lanka is fresh before us.
Apart from all other crises of economic nature that the country is at the moment going through, that of the foreign currency depletion is one. To keep the wheel of the economy turning what it first needs is energy such as fuel oil which the country does not produce. So, they have to import it using its dollars in reserve. Now that the country lacks this resource in sufficient amount, it will be hard-pressed to deal with the issue of importing it from abroad. But as the country is also learnt to be facing an acute food crisis, that is obviously a double whammy for the nation. Also, that country has a lot of mega-projects, many of which have proved to be solutions are looking for problems, while others are yet to reach completion. This is an avoidable predicament that the leadership of the country, for reasons best known to them, could not foresee.
However, there is no scope to draw any direct analogy from Sri Lanka's situation when it comes to the case of Bangladesh. For, there is a world of difference between the two economies in many respects. Even so, it does not mean that there is nothing to learn from Sri Lankan experience and take precautionary measures to guard against any possible reverses in the future. In fact, in this deeply interconnected and mutually dependent world, no economic activity can take place in isolation anywhere. Foreign currency, in modern world, is a kind of glue that holds economies tied to one another.
So, any shortage of this universal vehicle of exchange, foreign currency or US dollar to be more specific, has the potential to send an economy into a tailspin. That is more so for weaker economies, as their own currencies are not recognised internationally as an acceptable instrument of transaction. This is a modern-day reality that most smaller economies are constrained by. Hence is this concern about keeping our foreign currency reserve at a safe level.
Though our exports are at a comfortably positive level and the inward remittance, though not performing as well in recent months as it did in the past, there has been no sign so far to be unduly concerned. But the trend of import, the volume of which is increasing by leaps and bounds, has to be arrested. This is to keep the country's balance-of-payments situation at a safe level. The measures the government has taken by way of increasing the L/C (Letter of Credit) margin for importers and the decision to restrict import of luxury items in the upcoming budget would hopefully bear some fruit.
But what is more important is to take urgent measures to increase foreign currency earning through diversifying exports and sending skilled people abroad as expatriate workers who can earn more foreign currency than the unskilled workers now employed overseas.