Editorial
Facing challenges to the economy
Prudent handling needed
The Bangladesh economy has been facing strains on the task of fulfilling its growth targets. The apex business body, the Metropolitan Chamber of Commerce and Industry (MCCI), has identified, among others, the soaring inflation as well as constant depreciation of taka and increasing budgetary deficit as the major challenges facing the economy.
The accelerating inflation is a major hurdle in the way of achieving the targeted economic growth at 7 and 8 per cents in the fiscals 2011-12 and 2012-13. And the high consumer prices and inflationary trend in the economy have also been eroding the public's real income. The situation puts pressure on the central bank to adopt a restrictive monetary policy. But this measure can also lead to restraining credit growth thereby putting a brake on the pace of investment in the economy.
Similarly, the government's extensive borrowing from the banks to meet its budgetary deficit is crowding out the private sector's access to bank credit.
The falling value of taka is another threat to the economy, for it is instrumental in increasing the cost of imported goods, which has its knock-on effect on the consumer price index. In addition, the government has been importing large amounts of fuel oil to feed the rental power plants dipping the foreign currency reserve alarmingly.
There are, however, some silver lings, too, to this generally cloudy scenario. For example, outputs in the farming and manufacturing sectors are very optimistic.
So, whatever the pressure from other sectors, the government should continue to help the farmers through subsidies on farm inputs. The manufacturing, too, should enjoy support in the form of essential bank credit as well as at the policy level. In all, the government will have to make a tightrope walk to steer the economy clear of the rough sea it is now sailing through.
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