Bangladesh (Commonwealth Union)_According to Edimon Ginting, Country Director of the Asian Development Bank (ADB) in Bangladesh, the ongoing dollar liquidity issue and slowdown in imports will have a negative influence on private sector investment and subsequently result in sluggish economic development. Additionally, Ginting remarked that the nation’s economy was experiencing both headwinds and tailwinds.
At a recent luncheon hosted by the American Chamber of Commerce (AmCham) in Bangladesh, Ginting revealed his opinion in his presentation titled, “Bangladesh macroeconomic outlook in the evolving global phenomenon”. According to him, the headwind was the result of surging commodity prices following the Russia-Ukraine crisis, which slowed global economic growth, and the tailwind was a result of the COVID-19 pandemic.
According to media reports, Ginting said, “The private sector is the second biggest engine of the economy. It is also impacted by the dollar liquidity and slowdown in LC [letter of credit] which will further affect investment down the line. That will lead to slower growth of the economy”. According to data from Bangladesh Bank, LC openings decreased by 22% from July to December of the current financial year compared to the corresponding period of the previous fiscal year. In order to save reserves, the central bank imposed import restrictions, which caused a dramatic decline in LC openings.
Ginting stated that a number of clients were not able to open their LCs because importers are under pressure to purchase foreign currency regardless of price. He added, “We observed the reserve very closely. It is now above $34 billion, which is now a safe range, and the government is proactive in getting support from the International Monetary Fund (IMF). I will not call the IMF loan a bailout; rather I see it as a pre-emptive measure as big turbulence is coming and the government is preparing itself to have more dollar liquidity”.
The director of AD also highlighted the substantial changes made in the banking industry, including a resolution mechanism for non-performing loans among other things. In addition, he urged that the government revise the loan rate cap and consider export expansion beyond the apparel industry.
