Economy faces tough challenges: economist
Bangladesh's economy is facing tough macroeconomic challenges originating from a higher imbalance in its external account, depleting foreign exchange reserves, and an elevated inflation, said a noted economist today.
Foreign exchange reserves have declined by 30 per cent, said Sadiq Ahmed, vice chairman of the Policy Research Institute (PRI) of Bangladesh on the opening day of the three-day Annual BIDS Conference on Development at the Lakeshore Hotel in Dhaka.
The Bangladesh Institute of Development Studies (BIDS) has organised the event.
Sadiq said there is no conflict between macroeconomic stability and GDP growth acceleration. Indeed, macroeconomic stability is necessary to achieve sustained GDP growth.
"A combination of flexible management of the exchange rate, some tightening of credit growth and a judicious use of tax and expenditure measures are required to support the adjustment agenda."
Sadiq suggested the adoption of a uniform and market-based exchange rate, the removal of interest rate caps on banks' lending and increased cash transfer programmes for the poor and vulnerable people.
He also recommended increasing the collection of tax.
Planning Minister MA Mannan said he heard of criticism about the low tax-to-GDP ratio from various stakeholders.
"Is it really in such a bad position? Then how has the economy grown by 5 to 6 per cent on average annually?" he asked.
Bangladesh has one of the lowest tax-to-GDP ratios in the world although it has posted higher economic growth in the last one decade, maintaining an average annual GDP expansion of 6.4 per cent.
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