Bangladesh’s economy faced significant challenges in the fourth quarter of the 2023-24 financial year, with issues such as inflation, shortfall in revenue collection, slow public expenditure, depreciation of the taka and declining foreign exchange reserves continuing to exert pressure, according to the Metropolitan Chamber of Commerce and Industry, Dhaka’s economic review.
The overall economic environment remained strained due to several factors, including political instability and social unrest.
The MCCI article titled ‘Review of Economic Situation in Bangladesh April-June 2024’ said that one of the most pressing concerns was persistent high inflation.
The general inflation rate, although slightly reduced from 9.89 per cent in May to 9.72 per cent in June, remains alarmingly high. The 12-month average inflation rate for FY24 stood at 9.73 per cent, compared with that of 9.02 per cent in FY23.
Food inflation slightly decreased to 10.42 per cent in June from 10.76 per cent in May. Meanwhile, non-food inflation marginally dropped to 9.15 per cent from 9.19 per cent.
Rural areas experienced higher inflation rates compared with urban ones, with general inflation in rural regions reaching 9.81 per cent and non-food inflation 9.26 per cent in June.
The economic review also said that between the end of FY23 and FY24, the taka depreciated by 8.17 per cent against the US dollar.
Foreign exchange reserves also saw a decline. The Bangladesh Bank’s gross foreign exchange reserves fell to $26.82 billion at the end of June 2024 from $31.20 billion in June 2023.
When adjusted to the Balance of Payments and International Investment Position Manual, 6th edition, reserves stood at $21.79 billion, down from $24.75 billion a year earlier.
The National Board of Revenue’s tax revenue collection grew by 14.86 per cent to Tk 3,24,378 crore in July-May of FY24 compared with that of Tk 2,82,417 crore in the same period of FY23. However, the revenue authority fell short by 20.88 per cent of its revised target of Tk 4,10,000 crore in FY24.
The Annual Development Programme implementation rate in June 2024 was sluggish at 23.38 per cent compared with that of the previous month.
According to the Implementation Monitoring and Evaluation Division data, 58 ministries and divisions spent Tk 2,05,858.36 crore or 80.92 per cent of the total revised ADP of Tk 2,54,391.64 crore during July-June of FY24.
The industrial sector grew by 7.03 per cent in the third quarter of FY24, but the data did not reflect the impact of the recent political turmoil.
Investment in private sector remained sluggish. Private sector credit growth stood at 9.84 per cent in June 2024, slightly below the central bank’s target of 9.8 per cent. Public sector credit growth also fell to 9.80 per cent, significantly lower than the previous year’s 34.94 per cent.
The gross inflow of foreign direct investment in July-May of FY24 decreased year-on-year by 6.50 per cent, of which net FDI liabilities increased slightly year-on-year by 3.60 per cent.
The services sector exhibited growth, with a 4.97 per cent increase in the third quarter of FY24, up from 3.06 per cent in the previous quarter.