The dollar crisis caused major damage in all sectors of the economy
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Special Correspondent/
Due to the prolonged dollar crisis in the country, major wounds have been created in all sectors of the economy. Beyond the visible problems, there are also invisible wounds. Which is slowly unfolding. Several lesions are now visible.
These include rampant inflation and unsustainable load shedding. There is also a rise in the value of the dollar and a fall in the value of the rupee. Foreign debt and import costs are increasing. The price of imported goods has increased and the prices of other goods have increased. Energy, electricity and gas shortages have reduced industrial production and increased industrial and agricultural production costs. Due to low domestic and foreign investment, the pace of employment is hampered.
Short-term loans at high interest rates have to be paid more to cope with the dollar crisis. At the same time, the government has to take more internal debt due to increased expenditure and less revenue. This increases the interest payment pressure. These wounds of the economy are directly and indirectly hurting the people of the country. These data were obtained from Bangladesh Bank and World Bank reports.
According to sources, invisible wounds include deficits in the government’s foreign exchange current account, fiscal account and overall foreign exchange position. At the same time, the deficit in foreign trade is increasing. The foundations of economic stability are weakening. As a result, the economy is becoming unstable with little shocks.
According to related sources, in August 2021, the foreign exchange reserves of the country increased and touched a record of 4,806 million dollars. At that time, the monthly import expenditure was slightly more than 5 billion dollars. As such, there was a reserve equal to 9 months of import expenses. When Russia-Ukraine attacked in February 2022, the price of all products including fuel oil increased in the international market, Bangladesh could not handle that shock. The dollar crisis occurred in April. It became evident in May. Then the crisis continued to grow. It increases the price of the dollar by about 30 percent.
In this context, an official of the central bank said that at that time Bangladesh Bank had taken steps to control imports as an advance warning. That’s why the crisis has not become big till now.
The two main problems seen are rising inflation and power shortages—also due to the dollar crisis. Besides, there is a shortage of gas due to lack of dollars.
The two major crises that are currently being talked about are inflation and power shortage. Both of these are caused by the dollar crisis. As the dollar is low, coal, gas and fuel oil cannot be imported for power generation. Due to which load shedding has become unbearable. Due to this, industrial and agricultural production is being hampered with unlimited suffering in public life.
As more products are imported from the international market and the price of the dollar increases, the prices of the products are also increasing within the country. Along with this, the prices of products produced in the country are also rising. Inflation has risen to close to double digits. That is 9.94 percent. According to many, this rate is even higher. This rate has been above 9 percent for 3 consecutive months. This rate has already started to decrease in India, Europe and America.
The price of the product in the international market has also decreased a lot. Monthly import expenditure has come down from $8.5 billion to $5 billion. Still, the dollar crisis is not over. The dollar is rising. Inflation is on the rise along with rising commodity prices within the country.
According to the World Bank report released on Tuesday night, Pakistan has the highest inflation rate among Asian countries at 38 percent. This they have set a target of bringing down to 8 percent. Inflation in Sri Lanka has dropped to 25 percent. They have set a target of bringing it down to 20.25 percent. Inflation rate of Bangladesh is 9.34 percent in April. It has increased by 9.94 percent in May. The target has been set to bring down this rate to 7 and a half percent. However, the government has set a target of keeping it within 7 and a half percent in the current financial year.
Inflation rate of Nepal is 7.76 percent. They want to bring it down to 7 percent. 4 percent of Maldives. 3.15 percent of Bhutan. India’s inflation rate is 6 percent. Meanwhile they want to keep.
According to the report, the dollar crisis in South Asian countries including Bangladesh has put the overall economy in a multifaceted risk. Imports of industrial raw materials have decreased due to import restrictions due to the dollar crisis. It is hindering industrial production.
Maldives is now at the top in industrial production and tourism industry. The next position is India. In the third position is Pakistan, which is plagued by economic and political crisis. Next is the position of Bangladesh. Sri Lanka is at the bottom of the economic crisis.
According to sources, the gas crisis has also become evident. Uninterrupted supply of gas to the industry is not being increased despite increasing the price by 100% in two phases. Because there are no dollars to import gas according to demand. Although the price of gas has already decreased three times in the international market. Due to non-availability of gas, industrial production is decreasing, cost is increasing. Its negative effects are yet to be seen. Many people think that if the gas crisis continues like this, many gas-dependent industries will be closed. Workers will be unemployed. Instability will increase in the society.
Fertilizer prices have been increased by 78 percent in two phases due to the increase in international market prices and the increase in dollar prices. It increases the cost of agricultural production. As a result, the prices of these products are increasing in the market.
Even before Corona, there was a slowdown in some indicators of the economy. During Corona there was a recession in all sectors except remittance. Before it could be overcome, the recession was exacerbated by the effects of the Russia-Ukraine war. This reduces the growth of private sector credit. Earlier where the growth was 12 to 14 percent. Now it has come down to less than 8 percent. However, the increase in the price of the dollar increases the money account, but the growth in dollar terms is negative.
According to economists, the dollar account is logical in this case. This is because a portion of private debt is spent on imports, which are denominated in dollars. If calculated in dollars, the country’s progress can be understood internationally. For this reason, growth must now be increased in terms of dollars. Not as money. Because the value of money is unstable.
Due to the dollar crisis, short-term loans have to be taken to import essential goods. Its amount has increased to 7 billion dollars. These amounts have to be repaid in a short period of time with high interest due to which the pressure on the reserves has increased. Because there are no more dollars after paying for imports and other expenses. Then the dollar has to be sold from the reserve. The reserve is decreasing. As a result, the price of the dollar is increasing.
Imports are decreasing due to the dollar crisis. Production and sales of goods have decreased. As a result, the revenue of the government has been stretched. Revenue increased by 15.5 percent in July-April of last financial year. In the same period of the current financial year, it has increased by 10 percent. Government expenditure has increased even as the growth in revenue has slowed. As a result, the government took a loan to finance the deficit. During the current financial year, the government’s debt has increased by 25 percent. It had increased by 15 percent in the same period of last financial year. A major part of the loan has been taken from the central bank, about Tk 42 thousand crores. Inflation rate has also increased.
According to the World Bank report, India has the highest foreign exchange reserves among South Asian countries. With which they can meet the import expenses of 10.41 months. Then Bhutan has reserves equal to 9.9 months of imports. Nepal’s reserves equal to 8.9 months of imports. It is equal to 5 months import of Bangladesh. Sri Lanka has import reserves equal to 1.82 months and Pakistan zero and 72 months.
According to the report of the central bank, the foreign debt of the country has increased by about one and a half lakh crores due to the increase in the price of the dollar. Dollars must be bought with money to pay off those debts. As a result, more money has to be paid.
Import-export situation is negative due to increase in dollar price. Loans in this sector increased by 19 percent in terms of rupees. But the debt has not increased in dollar terms. Instead, it decreased by 1 percent. That is, import-export trade has decreased.
Due to the dollar crisis, industrial machinery and other products including raw materials cannot be imported commercially. As a result, import-dependent industries are now sitting on the sidelines.