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Updated August 30th, 2022 at 21:05 IST

PM Sheikh Hasina dispels possibility of Sri Lanka-like economic crisis in Bangladesh

Addressing an event of her ruling Awami League here, Hasina said her government took every development project considering their economic return and the national budgets were prepared in a planned way as well to evade economic disasters and facilitate smooth development.

Sheikh Hasina
Image: PTI | Image:self
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Dhaka, Aug 30 (PTI) Prime Minister Sheikh Hasina said on Tuesday that Bangladesh would never plunge into a Sri Lanka-like economic crisis as her government was steering the country's development in a planned way.

Addressing an event of her ruling Awami League here, Hasina said her government took every development project considering their economic return and the national budgets were prepared in a planned way as well to evade economic disasters and facilitate smooth development.

"Bangladesh will never become Sri Lanka, it won’t be," Hasina said. "We think in a pragmatic way before taking any development project (and so) the country will continue to move ahead overcoming all global challenges." The premier, however, said as Bangladesh started overcoming the COVID-19, the impact of the Russia-Ukraine war aggravated the situation which prompted her government to categorise the development projects in four segments in terms of budget allocations considering their economic returns.

"We don't eat ghee by borrowing money," which could lead the country to any debt trap, Hasina said, adding Bangladesh was repaying all loans on time very carefully.

Sri Lanka has been witnessing one of the worst economic crises since its Independence in 1948. They have defaulted on international loans as well.

In an apparent reference to China, she said the amount of "our debts is not so high that we would fall into the any debt trap of anyone".

Her comments came days after the global rating agency Standard & Poor's (S&P) cautioned Bangladesh that further depreciation of its currency would mount domestic inflation pressures, and make more expensive external debt servicing costs.

Financial analysts also predict the inflationary pressure to continue hurting people in days ahead while main opposition outside parliament Bangladesh Nationalist Party (BNP) of ex-premier Khaleda Zia feared the government's "inefficiency" could create the Sri Lanka type crisis.

Bangladesh liberalised further its trading mechanism in June 2022 and since then nominal exchange rate of Taka, the local currency, has depreciated by about 10 per cent against the US dollar, marking a notable shift in the country's foreign exchange dynamics.

The S&P said the measure weakened Bangladesh's external profile following a marked rise in its current account deficit, driven by surging domestic demand and higher commodity prices.

"These trends have driven net outflows of foreign exchange from the economy, resulting in declining reserves and depreciatory pressure against the taka," it said.

"Bad times are looming large as the general point-to-point inflation may hit 10 per cent in the coming months,” financial think-tank Policy Research Institute (PRI) executive director Dr Ahsan H Mansur said earlier this week adding that the monetary policy was not working well to contain the inflationary pressure.

The S&P, however, said Bangladesh's economy accelerated in 2022 and underlying momentum remains sound and added that the normalisation of the global economy continued to drive a strong pick-up in the country’s garment sector, contributing to a 12.3 per cent expansion in manufacturing activity in the outgoing fiscal year.

"The sector's recovery has also underpinned a durable recovery in the condition of Bangladesh's labour market, supporting robust domestic demand conditions," the rating agency said.

"The outlook remains stable (and) the stable outlook reflects our expectation that Bangladesh's solid growth prospects and policy adjustments will manage the risks associated with a challenging external landscape over the next 12 months," it noted.

The agency also said Bangladesh's economic recovery remains on a sound footing, and "we project real GDP growth to average 7.0 per year over the next three years." Bangladesh Bank’s Chief Economist Dr Habibur Rahman said the central bank took various steps to contain inflation stabilising the exchange rate while “efforts are on to control inflation through improving the supply side without raising the interest rate".

Hopefully, he said, the exchange rate of the US dollar against Taka would come down soon and there would be improvement in other sectors as well.

State Minister for Planning Dr Shamsul Alam, himself an economist, said there is no denying the fact that people were now suffering due to the inflation, largely caused by fuel price hike “but, the government has taken various steps and hopefully the inflationary pressure will come down by October". 

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Published August 30th, 2022 at 21:05 IST

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