Business & EconomyBusiness LensDevelopment ThoughtsInterview

Unlocking Bangladesh’s Economic Potentials: Navigating Challenges and Seizing Opportunities

COLORS magazine correspondent Nahid Tabassum in a captivating dialogue with Professor Mustafizur Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD) and a leading economist of the country, dissects Bangladesh's economic landscape, talks about a range of issues from inflation challenges to job creation strategies, and explores insightful pathways for sustainable development. An essential read for policymakers and general readership alike, this conversation offers valuable insights to unlock Bangladesh's economic potentials

Bangladesh, a country with a rich history and a vibrant culture, has made impressive strides in its economic development over the past few decades. From registering robust macroeconomic performance to leveraging global market opportunities, Bangladesh has emerged as a formidable economy and a key player in the South Asian landscape. However, as with any developing economy, Bangladesh faces its own share of problems and challenges, ranging from ongoing high inflation to institutional weaknesses. To discuss these and other issues, COLORS magazine had an elaborate discussion with Professor Mustafizur Rahman.
Professor Rahman is currently serving as a Distinguished Fellow at the Centre for Policy Dialogue (CPD), a prestigious think tank in South Asia. He is also a member of the CPD Board of Trustees. After 25 years of teaching at the University of Dhaka, Professor Rahman decided to take early voluntary retirement from the University to take up the responsibility as a Distinguished Fellow at the Centre for Policy Dialogue (CPD). In an open discussion with the COLORS correspondent, he shared his views on some of the major challenges confronting the Bangladesh economy, explored possible strategies to address those, and highlighted opportunities of sustainable economic development of the country.

Professor Mustafizur Rahman

Challenges Confronting the Bangladesh Economy
“In my opinion, major success indicators of the Bangladesh economy over the recent past years have been macroeconomic stability, with low inflation and consistently high GDP growth rates,” notes Professor Rahman. This helped Bangladesh to achieve accelerated poverty reduction and notable improvements in terms of some of the key socio-economic indicators. However, currently the Bangladesh economy is facing challenges on all three aforesaid fronts. According to him, curbing high inflation, restoring macroeconomic stability and improving the balance of payments scenario ought to be the priority concerns on the part of the policymakers. The Professor says, “I would add that efforts towards higher domestic resource mobilization, raising institutional efficiency, a practice of accountability, enforcement of rule of law and establishment of good governance in all spheres of macroeconomic and sectoral management should receive heightened importance and highest priority if Bangladesh is to overcome the current challenges and attain its developmental aspirations. He also feels that whilst some may argue that many of the current difficulties facing the Bangladesh economy originate from the global scenario, adverse footprints of COVID and the after-effects of the Russia-Ukraine war, key explanatory factors primarily originate from within the country rather than outside. These are manifested in a lack of enthusiasm for undertaking long-standing reforms, an absence of energetic efforts towards, domestic resources mobilization, weakened capacity of public service delivery institutions, and a weakened macroeconomic management. Going forward, these could prove to be binding constraints which could undermine the sustainability of the Bangladesh development narrative. Policymakers must get on with the task of addressing the attendant challenges in all earnest and with the urgency that they deserve. It is a good indication that the newly elected government has started to take a number of steps in the right direction with a view to addressing the emergent difficulties and challenges.

Curbing Inflation Through Monetary Policy
Dr. Rahman says, “I feel that right now the major challenge before the government is curbing the ongoing high inflation which is hurting particularly the low-income and fixed-income earning and disadvantaged groups. These have experienced significant erosion of their purchasing power over the recent past. The ongoing high inflation is having an adverse impact on growth, equity, employment and investment. The Bangladesh Bank and the government are now taking a number of measures to address these, which is welcome.” The January-June, 2024 monetary policy statement of the Bangladesh Bank gives a clear signal that the Bangladesh Bank will pursue a contractionary monetary policy as a tool to bring down inflation. According to the monetary policy statement, “Bangladesh Bank’s policy strategy involves a nuanced approach: tightening monetary controls to rein in inflation while ensuring sufficient liquidity to nurture growth sectors. Additionally, reinforcing the balance of payments and wisely managing the foreign exchange reserves are pivotal.” Bangladesh Bank is also raising the policy rates in order to push the interest rates up curb the money supply and restrain the growth of credit uptake. The central bank is also taking a number of steps to stabilize the exchange rate. “In response to these challenges, there is an increasing call for a gradual shift towards a market-based exchange rate system. This transition is advocated to stabilize the exchange rate and prevent further depletion of the country’s foreign exchange reserves,” stated the monetary policy (January-June, 2024). In giving his reaction to the monetary policy stance of the Bangladesh Bank, Dr Rahman says, “I think that these are appropriate measures; however, these will generate the expected results only if other initiatives are also put in place.” He feels that improving the governance of the banking sector and undertaking reforms of the banking system are no less important. The Bangladesh Bank has started to address some of the important overdue issues, he observes. He also cautions that in view of the rise in the policy rate and the resultant high lending rates, investment, and employment generation will be adversely affected. There are formidable trade-offs involved here which policymakers will need to take cognisance of. Other parallel measures will need to be taken to ensure growth, job creation and distributive justice, he re-emphasised.

Interest and Exchange Rate Liberalization
Over the past years, many economists in Bangladesh have been advocating for interest rate and exchange rate liberalization. “Experts have argued for withdrawing the caps on deposit and lending interest rates for quite some time now. They had also urged for exchange rate depreciation as it was felt that the BDT remained appreciated vis-vis major currencies. Only in recent times, the Bangladesh Bank has been taking some corrective measures in this regard. If the BDT had depreciated earlier, then I think the exchange rate would have stabilized at a more comfortable (lower) level of equilibrium, and we could have avoided the sharp deterioration and risks involving the external sector,” says the CPD Distinguished Fellow. He adds, “The BDT then would not have depreciated to the extent of 30 per cent over a period of 18 months which happened in view of the consequent pressure on foreign exchange and reserves. True there would have been some imported inflation, but not to the extent that we have experienced when global prices went up following the start of the Russia-Ukraine war and the BDT also depreciated significantly. The country had to face a double whammy-high global prices and significant depreciation of the BDT”. Since November 2023, the inflation rate has come down, but only marginally, from 9.93 per cent to 9.41 per cent in December 2023 (Bangladesh Bank). But it has once again gone up to 9.81% in January 2024. In this connection, the monetary policy statement (January-June, 2024) of Bangladesh Bank states, “In this regard, Bangladesh Bank is contemplating the implementation of a “crawling peg” system, which would be linked to a carefully selected basket of currencies and operate within a predefined exchange rate corridor. This strategy is aimed at tempering unusual fluctuations in the currency’s value. By setting a competitive equilibrium exchange rate at the midpoint of this corridor, BB would establish a stable benchmark while retaining the flexibility to intervene in the market as necessary to maintain the currency within the designated boundaries.” Dr. Rahman, however, argues, “A crawling peg may not serve the purpose. There is at present a significant difference between the official exchange rate and the curb market rate, to the extent of about 12-15 per cent. Many importers have to buy dollars from the curb market to open L/Cs. So imported inflationary pressure can’t be avoided by keeping the exchange rate at the current level. Some shock therapy may be needed i.e., further significant depreciation of the BDT. This will also benefit exporters and remittance earners.” He further states, “Even if we bring down the rate of inflation, it will still remain at a high level because of the base effect- while the rate of inflation may come down in future, the price level will still remain at high levels. So the significant erosion of purchasing power that was experienced particularly by the low-income and fixed-income earning people will continue for some time. The government will need to take this into account and take flanking measures to sustain the well-being of these people.” He suggests that the government should enhance entitlement under the government’s Family Card programme, broaden social safety net programmes, prolong their duration and go for open market sale of essential items in urban and rural areas to counter the unintended consequences of contractionary monetary policy and the ongoing policy of exchange rate liberalization.

Leverage Global Opportunities
According to the Export Promotion Bureau (EPB), Bangladesh’s merchandise export earnings after subdued performance picked up in January 2024 when it posted about 11.0 per cent growth. Bangladesh is the second-ranked country in the world in terms of exports of apparel, behind only China whose global market share is about 31.0 per cent again, Bangladesh’s 7.0 per cent. According to the WTO’s World Statistical Review 2023. Bangladesh is scheduled to graduate from the group of least developed countries (LDCs) on November 24, 2026, as per the November 2021 decision of the UN General Assembly. “When Bangladesh graduates from the group of LDCs, it will no longer enjoy the international support measures (ISMs) which are currently in place for the LDCs,” says the expert. He points out that trade-related ISMs for LDCs include preferential market access for goods, services and service suppliers, special and different treatment, flexibilities as regards implementation of obligations under the various WTO Agreements and a number of regional agreements, and the technical assistance and supports LDCs receive for capacity-building. “The adverse impacts will be felt immediately when these are no longer available on graduation. Once the preferential market access facilities are not there, without doubt there will be more competition from countries such as Vietnam, India, and Pakistan that do not enjoy such preferential treatment. Bangladesh will have to compete at par with these countries,” continues the Professor. “On the other hand, with skills upgradation and productivity enhancement, we are well-positioned to translate our comparative advantage into a competitive advantage. That’s where Bangladesh should put emphasis as it prepares for life after graduation. Good that the European Union and the United Kingdom have offered to extend the preferential market access for an additional three years following graduation of the LDCs. For Bangladesh, this means it will enjoy the market access benefits till 2029 in these countries. This additional time should be used to take the necessary preparatory steps. However, the preconditions for preferential treatment are more demanding, with rules of origin, labor rights and gender rights issues, governance, environment and carbon emission compliance requirements becoming increasingly stringent. The same is the case with GSP Plus.”

RMG Diversification
Bangladesh is ranked eighth in non-cotton-based and second in cotton-based apparel export in the international market. In October 2022, a BGMEA presentation revealed that although Bangladesh accounted for a sizable, 13 per cent, of the cotton apparel export market of the US, its share in the non-cotton apparel export market was only 8.0 per cent. “I think there is an enormous opportunity for intra-RMG diversification. Having said that, Bangladesh will need to do the needful to diversify exports, both in intra and extra-RMG products. Light engineering, pharmaceuticals, leather and footwear, IT-enabled services, e-commerce, handicrafts, food processing and assembling plants are some of the prospective ventures identified by experts and business. Labor-intensive but technology-embedded sectors are where we can strengthen our market presence and competitive power,” notes Dr. Rahman. But for this to happen, we will have to raise productivity at enterprise level, invest in the training of workers, upgrade skills of mid-level professionals, promote entrepreneurial activities, negotiate free trade areas, and sign comprehensive economic partnership agreements with our important trading partners. These will allow us to enjoy preferential market access in those markets and also attract investment from those countries to Bangladesh. However, on its part, Bangladesh will also need to open up its own market and provide preferential market access to partner countries, he cautions. “Till now, Bangladesh has enjoyed preferential access primarily on the basis of non-reciprocity. But now the negotiations will need to be carried out on the basis of reciprocity, give and take, and offer and request lists. Negotiating FTAs and CEPAs on an equal footing with other countries will be a challenge, and we will have to undertake adequate preparation for undertaking these properly,” observes the expert. He recalled that in such negotiations countries get not what they deserve but what they negotiate. So, evidence-based research, generation of necessary information and articulation of offensive and defensive interests and non-negotiables based on these will be key to successful negotiations.

Setting up Special Economic Zones
In view of the emerging challenges to be faced by Bangladesh following the country’s LDC graduation, development of special economic zones in Bangladesh could play a critically important role in the country’s transformation towards a highly competitive economy and in its drive to create more and better jobs. As is known the government plans to establish about 100 economic zones across the country (Dhaka Tribune, October 2022). Between 2011 and 2021, the Private Sector Development Support Project (PSDSP) of the World Bank facilitated more than $3.9 billion in direct private investment and the creation of over 41,000 new jobs. The Bank supported various regulatory reform initiatives and helped build the Bangladesh Economic Zone Authority (BEZA) and the Bangladesh High-Tech Park Authority (BHTPA) (source: World Bank). “When the SEZs are up and running, we will be able to remove one of the major binding constraints that deter FDI from coming to the country, which is access to unencumbered land. However, excepting very few private SEZs, others are running behind schedule. Services promised under the One Stop Service (OSS) Act of 2018 will need to be made available to local and foreign investors interested in investing in the SEZs,” notes Dr. Rahman. According to UNCTAD’s 2022 World Investment Report, FDI inflows to Bangladesh increased by 12.9% to USD 2.89 billion in 2021 (compared to USD 2.56 billion in 2020) and rose by 20.2% to $3.48 billion in 2022. However, compared to neighboring countries and competitors FDI flow to Bangladesh is rather low.

Surge in External Debt
According to CEIC data, Bangladesh’s external debt, both public and private, reached 96.5 billion USD in September 2023. To compare, external debt was 22.1 billion USD in March 2012. “We have incurred a lot of borrowings in the recent past years. A large part of these have gone to build the much-needed physical and social infrastructure of the country. Regrettably, many of these projects are overcapitalized and frequent time extensions have led to significant cost escalation. Secondly, because of the country’s middle-income graduation, which took place in 2015, the share of non-concessional loans are going up and that of grants and concessional loans are coming down. Bangladesh is now a ‘blend country’ according to the World Bank. Soon almost all debts will need to be incurred on commercial terms, with higher interest rates and shorter grace and maturity periods. Indeed, this is already happening” says the eminent researcher. “If we can implement the projects with borrowed money efficiently, and with good governance, be it foreign or domestic borrowings, and if we can ensure the expected internal, economic, and financial rates of return, then debt servicing should not be a problem. But if the investment does not generate the expected dividends, then debt servicing could emerge as a major concern for Bangladesh, as has been the case in many developing countries.”

Depreciation of Taka as a Challenge
One of the new emerging challenges that Professor Rahman sees relates to the recent significant depreciation of the taka. The Bangladesh Bank estimates that the value of the taka has fallen by about 30 per cent over the last two years, by 5.8 percent only in 2023. “The debt servicing will become costlier, particularly when the revenue is generated in BDT but the borrowings are made in foreign currency. For example, borrowings incurred to build the power stations”
He cautions that Bangladesh will need to be very careful in managing its debt, recalling that many countries have fallen into the dreaded middle-income trap because of first getting into the debt trap. Selection of projects, terms of borrowings, and good governance in implementing the projects will be of crucial importance in this connection.

Policy Measures to Stimulate Job Creation
“In a country such as ours, job creation should be at the heart of all public policies. In many countries, we have seen high GDP growth but job creation was not commensurate with the pace of growth. In the case of jobless growth, economic growth takes place primarily thanks to productivity and skills upgradation, while the economy fails to expand so that more jobs are created through diversification of the economy and supply-side expansion,” remarks the Professor. Over the period of 2013 to 2016–17, Bangladesh’s GDP increased by 6.6% annually on average; the pace further accelerated over the next five years. The country added 2.8 million new jobs to its 60.7 million existing workforce, according to the latest official data. However, the increase in jobs has been lower than that of the pace of the GDP growth. Dr. Rahman says, “The elasticity of job creation vis-à-vis growth of the GDP has come down in recent years. More than 12 million people had joined the job market during the 7th Five Year Plan (2015-2020). If the economy does not expand at a faster pace, then it’s not possible to ensure employment for all these new entrants to the job market, let alone for the pre-existing unemployed,” he adds, “Our young people are our assets. But to note, the window of demographic dividend will last for only about 15-20 years more; the window is indeed closing as we move forward,” Quality education, training and skills development will be crucial to realizing the demographic dividend, the economist notes.
According to the Quarterly Labour Force Survey of the Bangladesh Bureau of Statistics’, the total number of unemployed persons decreased to 24.30 lakh from 26.10 lakh compared to the corresponding period of the previous year (BBS, 2023). In the second quarter of 2023, there were 25 lakh unemployed people. In this connection Dr. Rahman observes that there is a debate as to how ‘unemployment’ is defined in Bangladesh’s Labour Force Survey and how the number of unemployed is arrived at. He calls for more investment in the education sector to ensure not just access to education but delivery of quality education that embeds necessary skills and enhances employability of young people. Bangladesh should put emphasis on ongoing training of teachers, modernisation of curricula, teachings of foreign language, continuing assessment of teachers and students following international standards, system of accountability and more intensive interface between education system and industries. These activities should target both domestic and overseas job markets, Dr. Rahman recommended.

Strengthening Presence in Overseas Job Market
“One of the distinctive features of the Bangladesh labor force is the strong presence of a large number of people in the overseas job market, more particularly in the Middle-East. Over the past 3 years, about 7.0 million people have joined the labor market; almost 2.5 million have gone abroad for jobs, mostly to the Middle-East countries,” notes the Professor. He recommends developing linguistic knowledge and imparting professional skills to get into the overseas market from a position of strength. He argues that if we can do more to upskill migrant workers, they will get more decent jobs, and the country will also earn more remittances.

Quality of Job Seekers
“From the perspective of the quality of job seekers, I am rather worried because my feeling is that over the past years the quality of education has suffered considerable erosion. I think that many of our young people who are coming out of the education system are not employable in the sense that they are not ready for the jobs their prospective employers are ready to offer.” remarks the Distinguished Fellow. He observes that Bangladeshi enterprises are hiring foreign professionals, but our own young and educated people are not getting jobs because their knowledge and skills do not meet market demands and expectations of entrepreneurs and employers. This is emerging as a major concern. Unemployment also has important social repercussions. So an overhaul of the education system, tuned to the future job market at home and abroad, and catering to the needs of 4IR and 5IR, are becoming increasingly urgent.

Taking Advantage of Demographic Dividend
“The BBS figure shows that the higher the level of education, the higher the rate of unemployment of the particular cohort in Bangladesh. There is a significant number of people in the working age between 15–60 years who are not in the job market; about one-third of the workforce belongs to the NEET (not in employment, not in education, not in training) category, informs Dr. Rahman. He suggests the need for significantly large targeted investment to realise the potentials of Bangladesh’s demographic dividend.

Capacity Building of Young Unemployed People
“We must have well-designed training programmes for young people who are seeking jobs, both in the domestic and overseas markets. The skills should cater to jobs that are demanded in the labor market. For example, in the global job market workers and professionals in the caring sectors will be in high demand- nurses, medical technicians, doctors, as also people with vocational training. We note how India is preparing for the overseas job market in a strategic way, with nurses from Kerala being only one example” observes the CPD scholar. He adds that we also need to change social and behavioral attitudes and mindset. The profession of nursing, for example, is not appreciated enough in our society. Also a large part of the country’s labor force is involved in the informal sector where job security, job safety, and job satisfaction is low and level of wages and salaries are also dismally low. Indeed, a large part of future jobs will be created by small and medium scale enterprises of the country. “The labor market dynamics must be studied on an ongoing basis and we will need to calibrate our education system and training programmes in accordance with the evolving dynamics in the domestic and overseas job markets.”

Small and Medium Industries
Continuing on the topic of the small and medium enterprise sector, the expert says, “We will have to keep in mind that the SMEs include both producing and services sectors. There is a significant domestic market for SMEs. They could also act as subcontractors of large industries, both domestic and FDIs. Demand for low-priced retail items such as those sold in the Dollar shops abroad alone is worth more than 60 billion USD. Almost all of this market is currently captured by China,” notes the expert. He elaborates, “Home-based handicrafts have significant export potentials. The government’s ‘One Village, One Export Product’ initiative is a commendable one. Also, handicrafts have been declared by the GoB as Product of the Year. Small producers must be supported in areas of production, marketing and distribution and exports, through credit support, training and hand-holding at every stage. Many women work in these sectors; so this also has importance from the gender dimension of the labour market. There are also many home-based services such as freelancing and business process outsourcing. Incentivising these activities towards higher value addition is important.”

Freelance Market
Bangladesh has the world’s second-largest freelancer community. In this connection Dr. Rahman observes, “Though freelancers are significant in number, there is no comprehensive strategy to develop the service delivery process and development of human resources involved in this sector. They are spread out across the country, providing services even from villages and small towns. But they tend to remain under the radar screen of the policymakers and policymaking. They are undertaking sub-contracting work at the lower-end of the value chain.” He advocates for improving internet speed, bringing down data cost, and taking steps to enhance skills for more value-additive jobs. “India’s IT exports are worth about 150 billion dollars (2023). This gives an idea about the potential market for IT-enabled services and software. We must give priority to providing necessary support to freelancers, those involved in business process outsourcing and IT-enabled services.” The government has invested significantly in IT infrastructure. He feels “now is the time to take advantage of the triangulation of infrastructure, investment, and service trade connectivities. This is also critically important for closer regional cooperation and integration to get into the markets of neighborhood countries, both of products and services.”

Exports to the Regional Market
“About 88% percent of Bangladesh’s exports are destined for the North American and the European markets. We are not being able to take advantage of the Asian Century through higher exports to the regional markets. India and China are the two most important emerging countries in the region. They are also major importers: India imports about 770 billion USD worth of goods, and China imports goods worth 2800 USD dollars each year. But Bangladesh’s exports to these markets are rather negligible, at less than 3 billion USD annually in the two markets,” informs Professor Rahman. In his opinion, the regional markets are in our neighborhood and have high export potentials for us; their markets and demand patterns are known to our producers and exporters. He points out that there is an emerging opportunity to tune our production and skills to get into these markets to raise our share of exports in the imports of the regional countries. FDI could play an important role here, both in terms of product and market diversification. Triangulation of the three connectivities- multimodal transport, FDI and trade-could play a key role here, he asserts.

Structural Reforms for Sustainable Economic Development
“There are many structural impediments that Bangladesh will need to overcome in going forward. Modernisation of agriculture, backward and forward linkages between agriculture and industry, and modernisation of both industries and services sector, are crucial. Indeed, competitiveness of goods are closely entwined with availability of the required services. Reforms are needed in many sectors, particularly to bring discipline to the banking sector and towards greater domestic resources mobilization through taxation. “The government has in recent times taken some commendable steps to improve the state of good governance in the financial sector and towards greater domestic resource mobilization,” says the Professor. He adds that Bangladesh is saddled with a lot of bad debt in the banking sector. Actual figure of the bad debt will be much higher than what is generally shown, perhaps the amount will be double the official figure of 10 percent if international standards such as BASEL 3 pillars are applied. Indeed, banking sector reforms should receive topmost priority from the policymakers. Institutional reforms, changes in incentive structure, and the capacity of the government entities to operate independently- all these call for an enlightened approach to the management of the economy, observes the Professor. In very recent times the government and the Bangladesh Bank have taken a number of measures and reforms to improve the state of governance in the financial sector, making a distinction between willful and non-willful defaulters and putting in place various measures to improve prudential management and ensure good governance in the banking sector. And these are needed not because these are IMF recommendations, but because these are perceived as our own felt-needs. However, further steps to ensure good governance in the financial sector will be needed including consolidation of banks through mergers and acquisitions and changes in the bankruptcy laws. In case of mergers and acquisitions, market mechanisms rather than top down policies should guide the initiatives. He feels that there are many areas where institutional strengthening and allowing the institutions to work professionally and with independence, with accountability and transparency, are becoming crucially important in going forward. The GDP of the Bangladesh economy currently stands at almost 460 billion USD; this is worth more than one trillion USD in purchasing power parity terms. “It’s not easy to manage an economy of this size. Sound and evidence-based macroeconomic management, institutional efficacy and good governance must inform the management of such a formidable economy. Dealing with the economy will call for zero tolerance to corruption, rent-seeking and non-transparent transactions,” reminds Dr. Rahman. Transparency, accountability and good governance are keys to a well-governed and well-functioning economy. At no time were these in such urgent demand as they are now, he insists.

Strategies for Strengthening the Economy Against Future Shocks
“I think the COVID-19 pandemic has shown us how important the capacity of an economy is to deal with shocks. The Bangladesh economy, compared to many other developing countries, was able to tackle the initial challenges of the COVID pandemic, with a number of appropriate and timely steps. The economy proved to be resilient in spite of the formidable difficulties. Labour market disruptions and adverse effects of the COVID pandemic on the economy were dealt with by taking various measures and coming up with a number of stimulus packages. There are very few developing countries where vaccination, by taking advantage of digitalization and the National Identity Card, could be administered so speedily and so successfully,” notes Dr. Rahman. He adds that this shows the potentials that Bangladesh has if we are serious and determined. Going forward, the Russia-Ukraine war has now emerged as a new challenge and it has had a significant adverse impact on our economy. COVID-related health crises we have tackled quite robustly, but the ongoing economic and financial crises have proved to be more difficult to deal with. Prices have gone up significantly, supply chains are disrupted, balance of payments scenario has suffered unprecedented deterioration and reserves are at the lowest levels in many years. The country had to go to the IMF for balance of payments support and borrow 4.7 billion USD, to be disbursed over a period of three years. However, as I have noted earlier, the war is not the root cause of all the current difficulties the economy is facing,” he reiterates. “The declining quality of our own macroeconomic management must also bear a large part of the reasons driving the ongoing difficulties. So we will first need to put our own house in order.”
In January 2022, Bangladesh had a taka-dollar exchange rate of 86. At present, the official rate is about 110.5 BDT; the unofficial rate is around 125. Professor Rahman observes that the balance of payments, trade deficit, financial account deficit, and overall balance of payments situation, have all come under exceptional pressure in recent times. The sooner we are able to get out of this hole, the better for the economy and the people. The trade balance and current account balance are showing some improvements, but at a cost. Imports have been severely curtailed. Good that remittances have picked up. Loans in the pipeline must be used at a faster pace. Environment for investment and ease of doing business must be improved significantly. There are many trade-offs which will need to be carefully considered and acted upon. He remarks that we have to be both smart and cautious in going forward so that we don’t fall into a debt trap. “We should address the challenges by taking appropriate fiscal policies, by pursuing prudent financial policies, and by coordinating the two. Public service delivery system’s efficiency will need to be significantly strengthened. We should also further strengthen our economic resilience through greater fiscal mobilization to be able to raise our capacity for public expenditure. Bangladesh’s revenue-to-GDP ratio is one of the lowest in the world. Almost all of the Annual Development Programme is financed through borrowings, either domestic or foreign. We have to increase revenue earnings so that the government is able to spend more for public expenditure. Otherwise, we will be incurring a lot of debt, from foreign and domestic sources. In view of rising inequality, issues of distributive justice must inform macroeconomic management, he strongly feels. Here also, raising more revenue through direct taxation is important. Digitalisation, in every sphere, could play a crucially important role in this regard. This is also aligned with the vision of SMART Bangladesh articulated by the government,” says Professor Rahman. He thinks this is highly risky as most development works are having to be underwritten through borrowed money in the absence of revenue surplus. Raising domestic resource mobilization should be at the forefront of Bangladesh’s strategy in going forward. Digitalisation of the taxation system and taxing the digital economy should be taken advantage of this connection. Reforming and strengthening our relevant institutions should be our key policy priorities. He also feels that taking strong steps against tax dodgers, willful defaulters and those who have taken money out of the country illegally should be brought to justice. The political economy signals are no less important than the initiatives that need to be taken in managing the economy with accountability, transparency and good governance.

Role of CPD in Dialogues and Empowerment
“CPD endeavors to generate evidence-based research and through agenda building pursues policy influencing in favor of the marginalized people. These are mandated in CPD’s Mission and Vision. CPD strives to do its work in two ways. The first one relates to giving voice to the disadvantaged groups. We try to capture the problems faced by disadvantaged people; we try to give voice to the relatively weaker sections of the society through local level dialogues, public events, hearings, consultations with grassroots organizations and stakeholders. We think that although Bangladesh has made impressive progress on many fronts, lack of equity in access and distributive justice have emerged as issues that need urgent attention,” notes Dr. Rahman. “Income inequality, asset inequality, consumption inequality, and inequalities in access to education and health are on the rise in Bangladesh. CPD tries to draw attention to these emerging challenges through civic activism. CPD also works by engaging with policymakers, offering constructive criticism and policy suggestions in various areas towards better management of the economy. CPD’s research portfolio include the analysis of state of the economy and macroeconomic management, sectoral management, clean energy, industrial safety, implementation of the SDGs, addressing poverty and inequality, competitiveness of the economy, good governance, trade policy, LDC graduation, environment, regional connectivity and cooperation, globalization and a number of other areas. He mentions the work of the Citizen’s Platform for the SDGs Bangladesh, of which CPD serves as the Secretariat. This is an initiative to contribute to SDG implementation in Bangladesh, particularly from the perspective of the leave no one behind spirit embedded in the SDGs. The Citizen’s Platform has more than 130 partners working in various SDG-related areas. Its work is geared to achieve the SDGs in Bangladesh by tracking SDG implementation, generating evidence, influencing policymaking, and coordinating with those working in various SDG-related areas. “The Platform holds discussions all across the country and tries to identify what are the demands of the vulnerable people. We try to see beyond the average numbers. We have recently prepared 11 Policy Briefs articulating grassroots demands, priorities and aspirations. We have done a number of public hearings where we have invited Ministers, MPs, concerned public officials and civil society leaders and placed before them the parallel realities that are distinct from the dominant development narrative in Bangladesh.” The Policy Briefs were shared with political parties when they prepared election manifestos. Meetings are being held with relevant Ministers of the newly elected government to share the recommendations and to advocate policy pickups based on the Briefs.
Raising awareness about important issues through regular media briefings and organizing capacity-building workshops for media, government officials, civil society and young researchers are other strands of the CPD activities. CPD has also been involved in a number of global platforms which are geared to advancing the interests of the LDCs and low-income countries, particularly in various global forums that deal with multilateral trading systems, environmental sustainability tax justice and ensuring labor rights, among others. CPD is also closely involved with various initiatives to promote regional cooperation in southern Asia and has been pursuing the cause of close collaboration and integration with countries in this region.

In conclusion, Professor Rahman recalled the Bangladesh Vision 2041 which has been formulated by the government as the second Perspective Plan of Bangladesh. I was fortunate to be associated with this important document as a member of the Panel of Experts. The document aspires to an economically developed, socially inclusive and environmentally sustainable Bangladesh. Attaining these high aspirations will require both political commitment and proactive participation of citizens and stakeholder groups. These aspirations also align very well with the SDGs which the government is committed to attain by 2030. If these ambitions are realized on the ground, these will be good for the country, good for the people, and good for the economy. However, the attainment of these goals is not the responsibility of the government alone. I do believe that active citizenship and space for greater civic activism will be crucial to attaining these aspirations which will call for a whole-of-society approach. Through its various activities, advocacy work and civic activism, CPD hopes to remain engaged in this critically important process of nation-building and economic development, in collaboration with its many partners.”

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