Let reserves not fall below $15b: Ahsan H Mansur
The government did not take any action due to political reasons, Dr Ahsan H Mansur said, advising the government to come out of this “syndrome of ‘all is well’”.
Foreign reserves should not be allowed to fall below $15 billion, said economist Dr Ahsan H Mansur on Sunday.
"Quick action should be taken now. In no way should foreign exchange reserves fall below $15 billion," he said at a seminar titled "Fiscal Challenges in South Asia" held in Dhaka.
Dr Ahsan H Mansur, executive director of Policy Research Institute (PRI), also said, "There is absolutely no political leadership in managing the economy, and the government is showing extreme indifference to everything without even acknowledging the reality."
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The government did not take any action due to political reasons, he said, advising the government to come out of this "syndrome of 'all is well'".
Dr Franziska Lieselotte Ohnsorge, the World Bank Group's chief economist for South Asia, said Bangladesh is not yet in such a situation that it cannot repay its foreign debt instalments, but the challenge for the government is to maintain this reputation.
Weak internal revenue collection could escalate Bangladesh's debt repayment pressure as it is no longer in an advantageous position to get global loans, often incurring high interest rates, Ohnsorge said.
South Asian nations are experiencing rapid growth, but face challenges of high debt burdens, low revenue generation, which may lead to future debt repayment difficulties, she added at the event jointly organised by South Asian Network on Economic Modeling (Sanem) and the World Bank.
Stating that economic indicators are gradually weakening, she expressed fear of financial deterioration surrounding elections in some countries.
The global challenges have prompted countries worldwide to implement necessary policy changes, but in Bangladesh, there is a lack of effective cost control, high-interest loans are being taken, and the issuance of new notes has led to inflation and a weakening currency, said Dr Ahsan H Mansur.
He said, "While the state's debt-to-GDP ratio is comfortable, high-interest borrowing has increased and domestic wealth accumulation is not increasing. In this situation, the government has to reorganise the financial sector management.
"For this, revenue collection should be increased. Strong political decisions have to be taken on controlling inflation, fixing exchange rates, government spending, domestic borrowing, diversification of exports."
He advised that the government must boost revenue collection to enhance investment capacity, focusing on quality investments, with particular emphasis on healthcare and education.
Barrister Md Sameer Sattar, president of the Dhaka Chamber of Commerce and Industry (DCCI), said the government must increase the scope of taxation, and the informal sector should be brought under tax.
Sanem Executive Director Salim Raihan said the next two to three years are critical for Bangladesh's economy, necessitating urgent steps to stabilise the macroeconomy to prevent further negative consequences.
Citing Sri Lanka's transition from middle to low-income status, he emphasised the need for prioritising the economy over politics in Bangladesh to prevent a similar decline and the necessity of implementing economic measures to prevent further deterioration.
He said Bangladesh weathered the pre-Covid decade successfully, but the onset of the pandemic and the Russia-Ukraine war have strained the economy.
"Significant economic issues should not be ignored; instead, proactive solutions are necessary. The government's planned reforms in the five-year plan are yet to materialise, requiring decisive political actions against those hindering the reform process." he added.
