While the headwind was due to rising commodity prices post the Russia-Ukraine crisis that had decelerated global economic growth, the tailwind was an after-effect of the COVID-19 pandemic, opined Ginting in his assessment titled ‘Bangladesh macroeconomic outlook in the evolving global phenomenon’ at the recently held luncheon at the American Chamber of Commerce in Bangladesh (AmCham).

The current dollar liquidity crisis and slowdown in imports will impact private sector investment and eventually lead to sluggish growth of the Bangladesh economy, said Edimon Ginting, country director, Bangladesh of the ADB. Ginting also noted that the nation’s economy was facing both headwinds and tailwinds and highlighted reforms in the banking sector.

“The private sector is the second biggest engine of the economy. It is also affected by the dollar liquidity and slowdown in LC [letter of credit] which will affect investment down the line. That will contribute to slower growth of the economy,” Ginting was quoted as saying by Bangladesh media reports.

LC opening fell by 22 per cent in July-December of the current fiscal year in comparison to the same period the previous year, as per data from Bangladesh Bank. The sharp fall in LC opening was a result of import restrictions enforced by the central bank to save reserves.

Ginting added that several customers have been unable to open their LCs with importers pressed to acquire foreign currency irrespective of the price.

“We watched the reserve very closely. It is now above $34 billion, which is now a safe range, and the government is proactive in having 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,” he said.

The AD director highlighted comprehensive reforms in the banking sector, including a resolution mechanism for non-performing loans among other policies. He also suggested that the government revise the lending rate cap and look beyond the garments sector regarding export growth.

Fibre2Fashion News Desk (NB)