The government assumed office at a time when the world was in the grip of a deep recession. The new government has handled this challenging period most efficiently. As a result, Bangladesh has been one of the few countries who successfully overcame this economic crisis. It could happen due to the spirit of the 1971 liberation war, an invincible strength to turn around in adverse circumstances and above all prudent monetary policy of the central bank. Alongside providing necessary support to the export sectors affected by weak global demand, the new government extended budgetary assistance to small, medium and large-scale initiatives in the productive sector, including agriculture, in order to strengthen internal demand and production. The coverage of social safety network for the poor has been widened. The Bangladesh Bank also adopted a supportive monetary policy for facilitating productive and investment pursuits.
The economic base of the country has been strengthened due to timely incentive packages for the export sector, effective assistance rendered by the central bank especially in the expansion of agricultural, small and medium enterprises, adoption of an export-friendly foreign exchange policy for the exporters and sustained flow of remittances sent by the hardworking expatriate youths. As a consequence, Bangladesh is walking on the path of a 6 percent growth rate alongside modest inflation despite a global recession. The principal characteristic of the global recession this time has been a liquidity crisis in banks. No such liquidity crisis was observed in Bangladesh due to a disciplined banking sector.
Today, the Bangladesh economy stands on top of sufficient liquidity and a foreign exchange reserve of over $10 billion. The private sector credit flow including those in agriculture, small and medium enterprises (SME) and large industries has already increased by 15.4 percent compared to last year. The amount of refinancing has been enhanced substantially leading to the flourishing of small and medium enterprises and the creation of additional opportunities for participation of women entrepreneurs in the SME sector. A separate division has recently been opened in Bangladesh Bank for expansion and supervision of SME Loan Programme. Open loan distribution program is being implemented throughout the country with the objective of disbursing highest ever 11,500 crore taka credit annually in the agriculture sector. The disbursement of agricultural credit during the first five months (July-November 2009) of the financial year has been 4249.69 crore taka. Besides, a 500 crore taka refinancing scheme for sharecroppers has been undertaken for the first time by Bangladesh Bank.
The country’s exports-imports and investment position have shown promising improvements in the backdrop of fresh dynamism infused in the economy of the developed world in recent days. Although exports showed a negative trend during the first quarter of the current fiscal year (2009-10), it bounced back to a positive trend from October 2009. The export-receipts have increased by 18 percent compared to the same period in October last year.
On the other hand, the growth in letters of credit for imports increased by 17 percent up to December this year compared to the same period last year. The downward trend in import of capital machinery has been checked and it is now showing an upward trend since October 2009. It indicates dynamism in the country’s investment scenario. Foreign investment has risen by $111 million during the first three months of the current fiscal year compared to the previous year. Besides, domestic investment rose by 20.2 percent during January-October 2009. An initiative has been taken for introducing sovereign credit rating in Bangladesh in order to bring investment funds from external sources at a concessionary rate.
Infusing dynamism in revenue collection is essential for achieving high economic growth rate. Necessary reforms in tax administration have already been brought about alongside ensuring technology-based infrastructure for its smooth functioning.
As a result, revenue collection has increased by 14 percent during the first four months of the current fiscal year (July-October 2009) compared to the same period last year. It would be helpful in achieving desired progress in the implementation of the government’s budgetary proposals. The remittances sent home by the expatriates have marked an increase of 22.4 percent during the first five months of the fiscal year (July-November) compared to the same period last year.
Simplification of procedure for foreign exchange transactions, use of mobile phones in collection and distribution of remittances, involvement of NGOs and the postal service for the purpose, providing investment opportunities to expatriate Bangladeshis by offering attractive interest rates (such as introduction of US dollar investment bond, premium bond, wage earners’ development bond), and according CIP status to Bangladeshi businessmen have played a significant role in this advancement.
The Bangladesh Bank has already introduced technology-based, environment-friendly and humane banking approach. Initiatives have been taken to introduce e-banking, automated clearing house, e-commerce, online CIB and e-tendering in order to reach banking services to the doorsteps of the common people. Bangladesh Bank has launched a 200 crore taka refinancing scheme from its own fund for installing solar panels, bio-gas and waste-treatment plants under the newly introduced “green banking” program with the objective of encouraging use of solar and alternative energy for meeting deficits in power and gas supply.
The banks have been directed to gear up their corporate social responsibility (CSR) activities under the humane banking program. The banks have been already advised to place an official as focal point in each bank-branch for providing banking services to the handicapped. According to the findings of a recent study titled “Long-term Outlook for the BRIC and N-11 Post-crisis” conducted by the US investment bank Goldman Sachs, Bangladesh is a notable nation among those who have proved their adeptness in facing the global recession; furthermore, Bangladesh is one of the 11 promising countries of the 21st century.
Among these 11 nations, Bangladesh is the only country where all microeconomic indicators have shown sufficient improvement. The economy of the country also stands on a strong footing based on macroeconomic indicators. It would not take long for Bangladesh to prove the accuracy of Goldman Sachs’ study if proper coordination is established between the financial and revenue sectors for achieving success in the domestic emerging sectors through agriculture, SME, external economic sectors and financial intermediation.
Overall, the dynamism of Bangladesh economy during 2009 has created the foundation for achieving higher economic growth, stability and poverty alleviation. The challenge for 2010 would be wider inclusion of the country’s masses in economic activities and expediting growth and poverty alleviation by incorporating environment-friendly attributes. I believe that we shall definitely be able to confront these challenges through united endeavour.
— The author is the governor of Bangladesh Bank
