The shockwaves of the COVID-19 pandemic have created severe challenges for Bangladesh’s macroeconomic management. In particular, the vague and highly uncertain future of the banking sector, combined with extreme volatility in the prices of essential food commodities during the pandemic, has pushed the livelihoods of ordinary citizens into jeopardy. These findings were revealed by the Centre for Policy Dialogue (CPD), a leading private think-tank, in its report titled ‘Interim Review of Bangladesh’s Macroeconomic Performance for FY2020-21’.
The report presented a rigorous, threadbare analysis of the government’s economic recovery initiatives, highlighting several critical dimensions:
The ‘Uncertain Future’ of the Banking Sector CPD characterized the country’s banking sector as having a “vague present and an uncertain future.” Despite a surge in excess liquidity within banks during the pandemic, the pace of credit disbursement remained sluggish. The drop in the daily call money market interest rate and a declining Advance-Deposit Ratio (ADR) both point to deep-seated structural vulnerabilities in the banking sector. Furthermore, the overall profitability and earning capacity of commercial banks have come under serious scrutiny.
Turbulence in the Food Commodity Market Severe instability was observed in the markets of daily essentials, particularly rice and wheat, during the coronavirus pandemic. This crisis was exacerbated by a widening mismatch between international market rates and domestic retail prices, alongside a drastic depletion of public food stocks. CPD noted that the pandemic-era price fluctuations were far more severe than in normal times, pushing basic food items beyond the purchasing power of common people—a situation attributed to a lack of targeted public policy interventions.
Stimulus Packages and Public Expenditure Disparities The implementation of the massive stimulus packages announced by the government to combat the pandemic was highly uneven. While large-scale industries rapidly reaped the benefits of these financial packages, the Agriculture sector and Small and Medium Enterprises (SMEs) lagged far behind in accessing funds. Additionally, the implementation rate of the Annual Development Programme (ADP) fell short of expectations, significantly slowing down the momentum of overall economic recovery.
Strains on Macroeconomic Management Revenue mobilization growth during FY2020-21 remained comparatively low, posing a formidable hurdle for the government in managing its budget deficit. On the external trade front, while positive growth in readymade garment (RMG) exports and robust remittance inflows provided temporary relief, unusual hikes in import costs continued to mount pressure on the country’s external economic balance.
CPD’s Recommendations for Recovery To ensure a sustainable and resilient turnaround from this economic crisis, CPD strongly urged the government to enforce strict monitoring over the banking sector, implement effective measures to curb inflation, and widen the social safety net for small entrepreneurs and marginalized citizens. The think-tank also strongly recommended bolstering public food stocks and undertaking immediate institutional reforms to dismantle market syndicates.
