All areas of Bangladesh economy are ‘flying high’ after COVID-19 shock: Mustafa Kamal

  • Abdur Rahim Harmachi, Chief Economics Correspondent, bdnews24.com
    Published: 2020-09-20 00:41:58 BdST

Bangladesh fares better than many other countries in recovering from the economic fallout of the coronavirus pandemic, Finance Minister AHM Mustafa Kamal has said.

And the credit goes to Prime Minister Sheikh Hasina, according to Kamal. In his words, Hasina is propelling Bangladesh with her “unbelievable” skills to a nation dreamt of by her father Bangabandhu Sheikh Mujibur Rahman.

In an interview with bdnews24.com, the finance minister said the announcement of the stimulus package amid the coronavirus outbreak in Bangladesh and the subsequent reopening of the economy were timely interventions by the government.

“We are doing well in macroeconomy. All the sectors are flying high. All the indices are improving. No other country is in such a condition now,” he said.

Kamal shed light on the overall economic condition of Bangladesh, the banking sector, the stock market and many other issues in the interview.

The Asian Development Bank in a recent report said Bangladesh’s gross domestic product is expected to grow by 6.8 percent in fiscal 2020-21, while the government’s target is 8.2 percent.

The growth reflects a gradual recovery, supported by a strong manufacturing base and strengthening of growth in export destinations, the ADB said.

Kamal referred to the ADB’s observation that Bangladesh’s economy shows early signs of recovery.

“The ADB made the forecast seeing our performance in two months (July and August). We will surely be able to achieve the 8.2 percent growth target if we can work well in the rest of the financial year,” he said.

He also noted that Bangladesh’s GDP growth remained above 7 percent in the past few years, while the Bangladesh Bureau of Statistics reported 5.24 percent growth in fiscal 2019-20 despite the pandemic.

Kamal said foreign currency reserves above $39 billion have raised his hopes for a quick recovery.

He believes the reserves will cross $42 billion by December and $50 billion in another year if the expatriate Bangladeshis continue sending money in the same way they are doing now despite the pandemic.   

The government is seriously pondering over a plan to finance its electricity transmission and distribution projects with funds from the foreign exchange reserves following Hasina’s instructions, Kamal said.

He argued that using the reserves for government projects will be profitable for the country because it needs to pay 4-5 percent interest on foreign loans while investing reserves abroad does not yield more than 1.5 percent interest.

“We have enough reserves to pay import costs of nearly a year. We can keep what is needed to pay the import costs of three months and take the rest. It will increase investment in the country and impact the economy positively,” he said.

The finance minister said exports have begun smarting from the COVID-19 shock on the back of a 2.17 percent growth in July-August period.

The government propped up the garment industry, the largest exporting sector of the country, with the injection of around Tk 100 billion in incentives to pay the workers that Kamal believes helped exports to rebound.

“We’ve kept inflation under control like we always do. The stimulus package geared up investment. And on the import front, low fuel oil prices have kept us in the comfort zone,” he said.        

Asked whether the government was planning more stimulus packages to cushion the economy from the impacts of COVD-19, Kamal said, “There is no reason to think that investment will stall once the incentives run out. We will continue with expansionary monetary policy to speed up investment. And we will surely announce more incentives if necessary to bring pace to investment.”      

The government has brought down the bank lending rate to 9 percent as Hasina had promised. “Both the banks and the investors are reaping benefits of this rate,” he said.       

“And many had said we would not be able to do it, but I’d always said there would be no losses. The earning may be low due to low interest, but net income will be high,because the banks do not need to write off bad debts now,” Kamal said. He blamed Bangladesh’s legacy of bad debt on the old practice of lending money at 14-15 percent interest rate.

Kamal also said he had told the state-owned commercial banks that they must operate on their own money because they would not get capital from the government anymore.

“We’ve taken steps to reduce bad debts. I hope they will yield good results.”

He credited government decisions, such as overhauling Bangladesh Securities and Exchange Commission, which left the stock market vibrant even amid the pandemic.

“The market is regaining the trust of the investors. I hope we will see the market in a good state.”