Living Under the Shadow of Inflation
For Ahsan, a 50-year-old rickshaw puller, the promise of relief from soaring inflation remains elusive. Despite the easing of inflation for two consecutive months, Ahsan’s daily struggle for survival continues, highlighting the disconnect between macroeconomic improvements and the lived experiences of ordinary Bangladeshis.
A Personal Struggle
“I have not seen any real change in my life,” Ahsan told us, reflecting on the interim goverment’s performance over the past six months.“The only thing that has become cheaper is potatoes, but the prices of all other essentials have gone up,” lamented the father of four.
Ahsan, the sole breadwinner of his six-member family, earns approximately Tk 700 per day, a meager sum that barely covers his basic expenses, including rent.He embodies the plight of millions in Bangladesh grappling with the lingering effects of continuous inflation.
the Inflationary Reality
Ahsan’s story is a stark reminder of the challenges faced by many as they struggle to afford basic necessities. The price of rice, a staple food in Bangladesh, has increased from less than Tk 50 per kilogram to over Tk 50, placing an additional burden on low-income households. Furthermore, the recent reduction in edible oil supply has driven up its price, exacerbating the financial strain on everyday citizens.
Bangladesh has endured over 9 percent inflation for 23 consecutive months until January of this year. While inflation showed a slight easing in december and January, consumer prices remain elevated, leaving many families struggling to make ends meet.
Uncertainty Clouds the Economic Horizon
Economists and business leaders share a sense of unease regarding the nation’s economic outlook. Mustafizur Rahman, a distinguished fellow at the Center for policy Dialog (CPD), stated, “The economy is yet to emerge from the risks it faced six months ago, though there has been some relief in the form of improvements in certain indicators and containment from further deterioration.”
Rahman points to several concerning trends, including stagnant private investment, which has remained at 23-24 percent of GDP, and sluggish private sector credit growth. Loan flows to private firms have slowed for the fifth consecutive month, reflecting uncertainty in the investment surroundings following the political shift in August.
Breaking the Vicious Cycle
Rahman expresses concern that the economy has entered a dangerous cycle. “It appears that the economy has fallen into a vicious cycle,” he noted,attributing the situation to the government’s contractionary monetary policy,which has increased the cost of funds,hampering private investment.
Bangladesh faces a crucial juncture. Addressing issues like stagnant private investment and credit growth is paramount. Exploring solutions that stimulate economic activity while safeguarding consumer welfare is essential to ensure a enduring recovery and a brighter future for all Bangladeshis, including Ahsan and his family.
Bangladesh’s Economic Challenges: A Mixed Bag of Progress and Uncertainty
Bangladesh’s economy faces a challenging landscape, marked by both glimmers of hope and persistent headwinds. While recent efforts by the interim government have yielded some positive results, experts warn of notable hurdles that threaten to undermine economic recovery.
One of the most pressing issues is inflation. The government’s decision to raise value-added tax (VAT) on nearly 100 goods and services has further eroded the purchasing power of ordinary citizens. “The government’s failure to ensure law and order has created a confidence deficit across the economy.The confidence crisis prevails among both investors and consumers,” stated Selim Raihan,executive director of the South Asian Network on Economic Modelling (Sanem).
Adding to the economic strain,default loans continue to pile up in the financial sector. These issues have contributed to a decline in business confidence, as noted by Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI). “business confidence is low,” he said.
Despite these challenges, the economy has shown signs of resilience in recent months. Export receipts, remittances, and reserves have shown improvements. according to Ahmed, ”the economy has shown signs of turning around over the past six months, largely because of the resilience of people and the private sector.”
GDP Growth Slows Amidst Stagnation
however, GDP growth has slowed to 1.81 percent in the first quarter of FY25, the lowest in four years. This decline is attributed to slowed investment and industrial stagnation. Adding to the fiscal pressure, the government is facing a tk 58,000 crore revenue shortfall.
Experts Call for Urgent Action
Mohammad Zaved Akhtar, president of the Foreign Investors’ Chamber of Commerce & Industry (FICCI), stresses the urgency for tangible changes on the ground. ”While the reform initiatives undertaken so far offer some hope, what remains missing is any tangible change on the ground,” he said. He warned that failure to address these issues could lead to a significant loss of investor confidence in the country.
Asif Ibrahim, former president of the DCCI, notes that while some economic indicators have improved, private sector investment remains a concern. He also highlighted the current account balance, which turned positive, reaching $1.93 billion by the end of December last year. This positive growth is encouraging, but it doesn’t fully address the broader economic challenges facing the nation.
To achieve sustained economic growth and stability, Bangladesh needs to tackle its mounting economic challenges head-on. By prioritizing law and order, controlling inflation, and fostering a more predictable and conducive business environment, the government can pave the way for a brighter future.
Uncertainty Casts Shadow Over Bangladesh’s Economy
Bangladesh’s economy faces significant challenges amid ongoing uncertainty, raising concerns about investor confidence and potential repercussions for industrial production. Experts warn that if the situation doesn’t improve, everyday citizens will continue to bear the brunt of the economic slowdown.
Investor confidence erodes
Ibrahim, a leading economist, expressed deep concern about the decline in investor confidence. “Investor confidence has declined remarkably due to ongoing uncertainty. If investor confidence is not restored, industrial production may suffer in the coming months,” he stated.
This decline in confidence stems from various factors, including political instability, regulatory hurdles, and global economic headwinds. These challenges create an unfavorable environment for businesses, discouraging investment and hindering economic growth.
Ripple Effects on Daily Life
the economic downturn is directly impacting the lives of ordinary bangladeshis. Rickshaw puller ahsan, struggling to make ends meet in Dhaka, reflects the widespread sense of anxiety.”Without a clear direction from the authorities,chaos rules the streets. Every day feels like a struggle, not just to earn a living, but to survive,” he lamented.
Ahsan’s experience highlights the vulnerability of informal sector workers, who are particularly susceptible to economic fluctuations. Rising prices, reduced consumer spending, and limited employment opportunities exacerbate their daily struggles.
Addressing the Challenges
Bangladesh needs comprehensive measures to restore investor confidence and stimulate economic growth. Addressing political instability, streamlining regulations, and fostering a stable macroeconomic environment are crucial steps.
Investing in education, infrastructure, and technology can create opportunities for sustainable development. Moreover, providing targeted support to vulnerable populations, such as informal sector workers, is essential to mitigate the negative impacts of economic uncertainty.
Only through concerted efforts from policymakers, businesses, and citizens can Bangladesh overcome these challenges and pave the way for a brighter economic future.
What specific steps can the government take to alleviate the concerns of citizens like Ahsan, who rely on daily earnings, and stimulate broader economic growth?
BangladeshS Economic Rollercoaster: An Interview with AsifIbrahim
The Bangladesh economy is a complex tapestry woven with threads of both progress and uncertainty.
Asif ibrahim, a leading economist and former president of the Dhaka Chamber of Commerce and Industry (DCCI), provides insights into the challenges and opportunities confronting this dynamic nation.
interview with Asif Ibrahim
Q: What are the primary economic headwinds facing Bangladesh currently?
A: The scenario is quite complicated. we’re grappling with stagnant private investment, wich is crucial for sustainable growth. Add to that a sluggish private sector credit flow, reflecting the hesitancy of businesses to invest in this climate of uncertainty.
Q: we’ve seen some positive indicators in recent months, like improved export receipts.Is this enough to offset the negative trends?
A: While those improvements are encouraging, they don’t fully address the broader picture. The decline in private investment is deeply concerning.If this doesn’t change, it will have repercussions for industrial production and overall economic growth.
Q: Investor confidence seems to be a major issue. What can be done to rebuild trust in the bangladeshi economy?
A: It’s vital for the government to address political instability head-on. A stable political surroundings is essential for attracting investment. Regulatory hurdles also need to be streamlined. We need to make doing business in Bangladesh more predictable and less cumbersome.
Q: What are the implications of this economic uncertainty for ordinary citizens like rickshaw puller Ahsan,who we spoke to earlier?
A: The impact is felt most sharply by the most vulnerable. people like Ahsan, who rely on daily earnings, are directly affected by reduced consumer spending and job insecurity. The rising cost of living puts immense pressure on families, pushing many into deeper poverty. This is a grave concern.
Q: What specific steps can the government take to alleviate these concerns and stimulate growth?
A: Focusing on education, infrastructure, and technology is crucial.Investing in these areas can create new opportunities and attract foreign investment. Targeted support for informal sector workers is also essential to shield them from the worst effects of economic downturns.
Q: Looking ahead,what is your overall assessment of Bangladesh’s economic prospects?**
A: Bangladesh has immense potential. However, navigating the current challenges will require decisive action and a concerted effort from all stakeholders.We need stability, predictability, and a clear vision to build a more prosperous and inclusive future for all Bangladeshis.
