Let's prepare for the worst, hope for the best

Gloomy forecasts are all around the globe. Global growth to fall, inflation to reign, energy to stay volatile. Food security will be at stake. As the Ukraine-Russia war continues, so do the prospects for the year ahead grow darker.

But there are flickers of hope too, both globally and at home. Global stock markets rebounded from multi-year lows, US inflation softened, China's Covid restrictions were eased, major currencies like euro and pound sterling rose against the US dollar, challenging the greenback's free ride.

On top of all these events just in a month, the presidents of the world's top superpowers – Joe Biden of the US and Xi Jinping of China – had their first meetings in Indonesia's Bali on the sidelines of the G20 summit, giving an unexpected boost to the global market sentiment that hit rock bottom due to surging inflation and historic race of rate hikes.

Any hint of easing US-China tensions brings relief for the world. It is good news for Bangladesh too, as the country depends largely on the two largest economies for exports and imports.

But the sudden turnaround does not mean that the world can rest assured. All countries are having contingency plans to deal with any emergencies in the future. Policymakers in Bangladesh are also preparing for the worst to come.

The most pressing need is to ease pressure on the foreign exchange reserves. Earlier this month, the International Monetary Fund agreed to give Bangladesh $4.5 billion loans with the first instalment expected by February. Bangladesh expects $500 million budget support from the World Bank in the current fiscal year. These developments give policymakers some relief. Central bank Governor Abdur Rouf Talukder on Thursday said foreign exchange crisis will ease in January. Measures to slow import have shown some results. Monthly imports fell to the level of $5 billion from over $8 billion. Data shows opening of LCs for fresh imports also marked a significant drop to $4.72 billion in October from $6.51 billion in September and $9.8 billion in March.

The central bank chief pledged to toughen monitoring of hundi and trade-related money laundering as investigations found 20%-200% over-invoicing in imports.

Some actions are made visible. The central bank's Bangladesh Financial Intelligence Unit on Thursday suspended cash out from 230 customer accounts with four mobile financial service (MFS) providers for transacting remittances through hundi.

The recent decline in remittance inflow has been attributed to hundi transactions encouraged by the wide gap in multiple rates of dollar. Checking hundi is expected to prevent further slide in remittance inflow through the banking channel, regulators hope.

The government looks serious about the next Boro season which is the source of 60% of rice production. Though import of urea fertiliser from Saudi Arabia is facing payment complexities in Saudi banks, the agriculture ministry claims there will be no fertiliser shortage as the government is determined to ensure food security at any cost.

Following the prime minister's repeated warning about a possible food crisis and calls for not leaving an inch of arable land uncultivated, the agriculture ministry has already instructed local administrations to mark such lands and take initiatives to bring those under cultivation.

Keeping up with the move, the central bank has created a Tk5,000 crore refinancing scheme to give farm loans at 4% interest repayable in 18 months with three months' grace period.

With the gradual fall in temperature, the frequency of power outages has been reduced as expected earlier. This will give some relief to farmers during the next irrigation season. But worries over timely and adequate supply of fertilisers remain as the boro crop consumes most of the fertilisers and requires intense irrigation. Questions also remain about the high costs of farm labour and fair prices of crops for growers, who end up getting prices lower than their production costs and whose loss from crop failures is never compensated.

Agriculturists have called for crop insurance, price support and mechanisation to encourage farmers and landlords not to leave any piece of farmland uncultivated. They also felt that the government should buy more paddy from farmers directly and build a bigger food stock to face any food emergency.

Agriculture economist Prof Saidur Rahman points out that though reduced outage will help irrigation, the hiked price of diesel remains a concern for farmers as 70% of irrigation pumps are still fuelled by diesel. "There should be some mechanism to subsidise diesel prices for irrigation to reduce the cost of Boro farming," he says, adding that it won't cost the government much compared to the amount needed for future food imports in case of lower domestic harvest.

The state-owned agency for fertiliser imports and distribution, Bangladesh Chemical Industries Corporation has expressed its concern over import of urea fertiliser from Saudi Arabia, the single biggest import source of urea fertiliser, as two banks in the kingdom are unable to open LCs. Local production of urea has declined due to gas shortages in factories.

In a meeting with senior bureaucrats earlier this month, the prime minister asked the central bank to make dollars available for import of fertilisers and gas. The private sector adviser to the prime minister and the state minister for energy earlier assured a business audience of persuading the central bank into releasing dollars from its reserve to import LNG to help factories – particularly export-oriented ones – run. Export sectors have offered to pay higher for LNG as they expressed their confidence that even costlier gas would help them deliver on export orders timely and protect their market.

There is some more good news in the world market. LNG spot price drops by 40%. The deal between Russia and Ukraine to allow Ukrainian food grains and oilseeds supplies through Black Sea has been extended for another four months. Russia has offered to export more ammonia, an important ingredient for fertiliser.

Unctad Secretary-General Rebeca Grynspan has termed the renewal of Black Sea grain deal as a "beacon of hope" for global food security and good news for the developing world. "Solving the fertiliser crunch must come next," she said in a twitter message.

These developments mean that gas, grains and fertilisers will be there on sale, only one thing is needed, sufficient dollars in the vault.

The offers made by global lenders and measures initiated by the central bank are expected to help Bangladesh rebuild a safer foreign exchange reserves to pay for essential imports.

Prof Saidur hopes that the accelerated initiatives following the prime minister's call for cultivating more land would encourage farmers for higher production in the next crop season. If this happens, there would be less pressure on reserves from food bills.