Economy at crossroads

MAN doesn’t need to know rocket science to understand that the country’s real economic situation is seriously alarming at the moment. Although the country’s per capita income is quite high at around 2,824 US dollars compared to neighboring countries such as India, Pakistan or Sri Lanka, a large majority of people cannot support their income with the huge price increases for fuel, transport, rice , vegetable oils and other important raw materials for their daily livelihood.

Many of those on limited incomes have been forced to cut their daily food intake in half to cope with the rise in prices. Many of them have been forced to cut or recklessly cut the cost of milk and protein for their children from their daily budget. Many of them were forced to divert their children from school to child labor to earn a living. Many of them are literally starving.

The sudden increase in fuel prices by an average of around 51 percent in one fell swoop has literally shaken people. The increase in fuel prices, especially diesel prices, has almost doubled transport costs. The price increase of rice, the only staple food of the people of Bangladesh, by 10 to 20k per kilogram only added fuel to the fire.

There is no point in mentioning the incredibly high prices of fish, meat and dairy products, which are now far beyond the reach of the common people. Beef is sold for 700-750k per kilogram, mutton for 1000k per kilogram. All fish except tilapia, pangash and koi (farmed) from the farm are sold at Tk 350 to Tk 1200 per kilogram. Eggs are sold for Tk 130 to Tk 150 per dozen. Barely 20 percent of the country’s population can afford these costs. The remaining 80 percent are helpless bystanders.

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The reason for this abnormal situation is not difficult to find. Fuel prices have increased by 50 percent, increasing the cost of transportation and hence the cost of all essential goods. The value of the taka against the dollar depreciated within a few months from 86k to 100-105k in the banks and up to 115k on the free market, which led to high import costs for every article of daily use.

What does it matter if the country’s per capita income is $2,800 or $3,000? Humans need food to fill their stomachs. Babies need milk and protein for their nutrition. Elderly people need medication and health care for their survival.

The Bangladesh Bank replenishes commercial banks with dollars from the country’s foreign exchange reserves, thereby depleting the reserves. The country’s foreign exchange reserves are currently about $36 billion, compared with about $46 billion a year ago. The reserve will likely be further depleted with the start of foreign debt payments against credits for ongoing mega-projects from next year.

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The country’s economic experts are largely unanimous in their assessment of the country’s economy. They see a bleak picture of the country’s economic horizon. Given the prevailing global economic scenario, which is already undergoing a hard-hitting recession, they find no way to map out a roadmap for a quick recovery from the impending catastrophe of a deep economic crisis.

The World Food Program has already warned of a global food crisis, mainly due to climate change, leading to severe droughts and unusual floods in many countries on the one hand, and war in Ukraine on the other. Bangladesh has prided itself on being self-sufficient in food production for the past decade. It has already announced that it will import 1 million tons of edible grains this year to meet local demand.

Austerity measures in public spending are a sine qua non to meet today’s economic challenges. The government has already announced some measures, such as restricting the import of luxury items, deterring government officials from traveling abroad on flimsy grounds, and so on. These measures alone may not be enough to deal with the situation. The government must expand its net to contain corruption, money laundering and tax evasion with an iron fist.

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At independence in 1971, the number of billionaires was only five. Now it shall be more than a lakh. Do they pay enough income tax on their earnings? If so, why should the country’s income tax revenue be so small, barely 30 percent of total revenue? The country has about 170 million inhabitants. At least 20 percent should be wealthy enough to pay income taxes. According to NBR data, the number of people with tax identification numbers in the country was 7.4 million in 2021-22, but the number of actual taxpayers who filed their tax returns during the year was just 2.3 million. Unfortunately, only 30 percent of registered taxpayers filed their tax returns. At 7.7 percent, Bangladesh’s tax rate is the lowest even among South Asian countries. It should be at least 18 to 20 percent.

These are the questions that the concerned authorities in government must ask themselves seriously and find satisfactory answers.

The country is at a crossroads. On the one hand, it aspires to become a developing country in a few years or so, and on the other, an ominous signal of a socio-economic crisis like Sri Lanka’s is stalking its journey. How they get out of the dilemma depends entirely on how skillfully they can handle the situation.

Hussain Imam is a retired merchantman.

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