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Trading Away the Ebb: Half Yearly Assessment of Bangladesh Economy

Bangladesh Economic Update, December 2014 

MEU Dec 2014

The Unnayan Onneshan (UO), in its current issue of Bangladesh Economic Update aims at carrying out half yearly assessment of the economy for FY 2014-15 against the backdrop of current economic management by the new government of which 154 members of parliament get unelected in the national parliament election of 2014 which is widely questioned because of its quality of not being participatory as country’s one of the largest political parties did not take part in the election. Following a rigorous scrutiny of the major macroeconomic indicators, the Update puts forward a seven-point policy measure as well as a particular call for an inclusive political dialogue that reducing the exigencies of current political uncertainly will ensure consolidation of democracy through regular transfer of power and cause the economy to grow faster.The Update reveals that the rate of growth in gross domestic product (GDP) may fall short of the target of 7.3 percent in FY 2014-15 due mainly to increasing savings-investment gap, unsatisfactory collection of revenue vis-à-vis target, declining rate of growth in agriculture and manufacture, disarrays in external balance, infrastructural underdevelopments, institutional weaknesses and political uncertainties.

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Energy Security: Trends & Challenges

Bangladesh Economic Update, November 2014 

MEU Nov 2014

The current issue of the Bangladesh Economic Update attempts to reveal current nature of power and energy situation to evaluate the energy security in the country. Shortage of power supply, depletion of gas reserve, and frequent price hikes in energy are not only exerting immense pressure on current production, but also posing a serious threat to energy security.Energy security is simply defined as the uninterrupted supply of energy from available sources at a reasonable price with even distribution (IEA, 2014; EU 2014). Diversification in power generation capacity, stable price level and infrastructure development determine the secure supply of energy .On the other hand, dependence on concentrated suppliers, lack of expertise, and unfavorable political situation, both the internal and the international can peril the energy security of a country.Based on the definition of the energy security, it can be said that Bangladesh has to walk a long way to secure its energy sector. Increase in population, expansion of production in agriculture and industry, fast urbanisation, and development in road and transportation have increased the demand for energy but the supply is not sufficient to satisfy the demand.

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Debt and deficit: Recent Trends

Bangladesh Economic Update, October 2014 

MEU October 2014

The current issue of the Bangladesh Economic Update analysing the current trends in deficit and debt reveals that increases in per capita debt, share of GDP and debt service payment have been lowering public spending on physical and socio-economic infrastructure and escalating intergenerational debt burden in the future. Deficit as percentage of GDP is increasing which is not that alarming level but swelling every year can be menacing for the economic growth. The expenditure – both the development and non-development expenditure – is increasing but collection of revenue is not at desirable level to cover the expenditure. In order to meet up this gap, debt from domestic and external sources is mandatory. Debt is, however, common for both the developed and developing economies but success of a country depends on prudent use and efficient management of debt. In this regard, financing and managing the deficit in a best possible way becomes a challenge for the government. Debt may be considered as a fiscal stimulus which has a multiplier effect on economy if it is used for productive purpose otherwise the debt make the problem worse (Leech, 2012). The per capita debt burden of Bangladesh has been mounting rapidly since FY 2009-10, and debt as a share of GDP is high.

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External Sector: Current Trends

Bangladesh Economic Update, September 2014 

MEU September 2014The current issue of Bangladesh Economic Update attempts to understand the current status of external sector against the backdrop of existence of negative balance in service for a long time, decrease in remittance with fall in number of expatriates, large trade deficit and unsatisfactory inflow of Foreign Direct Investment (FDI) and the foreign aid in the country. Overall external balance is showing positive balance because of inflow of one or two items in a huge amount, but decrease in remittance and export of manpower, increasing deficit in service and trade balance impede the growth rate of the economy. Inflows of remittance became negative in the last Fiscal year (FY) for the first time within ten years mainly because of the decline in labour migration to major markets like Saudi Arabia, UAE and Malayasia. This declinig inflow of remitance is likely to exert adverse impact on rural economy since consumption and expenditure of people living in rural areas are largely contingent upon remittance sent by their household members living aborad. Increase in Import payments and export earnings cause decrease in trade deficit, because earnings from export grow more than that of import payment. Investment stagnation and the recent political contestations in the country, however may create an uncertain business environment as regards setting up new industries which will result in decreased investment demand-induced import of capital machinery and thus will further affect the trade balance.

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Monetary Policy Statement (July-December,2014): A Rapid Assessment

Bangladesh Economic Update, August 2014 

MEU August 2014The current issue of the Bangladesh Economic Update focuses on the recently announced half-yearly Monetary Policy Statement (MPS) for the period of July-December of FY 2014-15, by the central Bank, Bangladesh Bank (BB). The Update examines the current MPS in the background of three major economic issues – debt-financing-instrument-based (bank borrowing) deficit financing leading to higher inflation, presence of huge idle money in the banking system not coming into system as investment and the implications of both in affecting the national income. A review of the last five MPSs including the recent one announced by BB indicates that the targets set in the MPSs have been falling short, implying the lack of effectiveness and crisis of credibility in both formulating and implementing the MPSs. With a view to restraining the inflationary pressure and ensuring sufficient credit growth to stimulate inclusive economic growth, the central bank has recently pursued a monetary policy that keeps high policy rate along with higher cash reserve ratio (CRR).

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