After a tumultuous change in power last year, the interim government faced the daunting task of rescuing the economy from the brink of collapse. The extent of the economic devastation under the previous regime became apparent as reports from various commissions revealed a multitude of challenges. These included skyrocketing inflation, depleting foreign reserves, persistent trade deficits, financial irregularities endangering the banking system, and pervasive corruption eroding institutional integrity.
To steer the economy back on track, bold measures were imperative. The government implemented rigorous monetary and fiscal policies, enforced stringent austerity measures, and initiated corrective actions to instill discipline in the financial sector while combatting corruption.
Key initiatives under the reform and recovery programs encompassed conducting a thorough asset quality assessment, prescribing structural reforms to uphold financial sector discipline, launching asset recovery efforts from financial system theft, and ensuring adequate liquidity in banks. To enhance fiscal governance, steps were taken to boost revenue collection by phasing out special tax privileges and segregating tax policy from administration. In a bid to curb inflation, the policy rate was raised to 10 percent to stabilize the exchange rate.
Reflecting on the past year, Bangladesh’s remarkable macroeconomic achievements stand out as a testament to successfully navigating what seemed an insurmountable challenge. Recent macroeconomic data and indicators underscore this progress.
Contrary to the norm seen in countries experiencing regime changes, Bangladesh bucked the trend with a decrease in inflation and sustained positive GDP growth.
This robust macroeconomic resilience, attributed to effective government policies, has bolstered investor confidence, exemplified by the Dhaka Stock Exchange’s noteworthy performance ranking third globally in July. The DSEX surged by 12.5 percent, closing at 5,443, marking its highest level in over nine months.
The interim government’s strategic actions have halted the economic decline in Bangladesh, paving the way for a rebound. Record levels of remittances channeled through official channels have bolstered foreign exchange reserves, alongside restored confidence in the financial system. The local currency has stabilized under a market-driven exchange rate regime.
Nevertheless, challenges persist, particularly in the financial sector, necessitating prudent risk management and tough decisions to mitigate vulnerabilities. Focus remains on curbing unnecessary expenditures, enhancing project implementation, and implementing innovative strategies in sectors like power to reduce subsidies. Ongoing support in critical areas such as food security and social welfare is paramount.
What once seemed unattainable is now within reach, with ongoing efforts to further enhance economic conditions in the upcoming months. While inflation trends downward, policies are geared towards reducing it below seven percent, leveraging strong fundamentals and macroeconomic stability. Coordinated fiscal, monetary, exchange rate, and capital market policies are expected to drive growth, lower inflation, and sustain stock market buoyancy.
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