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STATE OF BANGLADESH ECONOMY IN FY2002:
AN EARLY ASSESSMENT
I. INTRODUCTION
The Bangladesh economy is currently facing possibly the most severe exigency since the macro-economic crisis of the late 1980s. The twin shocks emanating from the yawning fiscal deficit and deteriorating balance of payments have exposed the entrenched vulnerabilities of the Bangladesh economy, putting under threat the achievement of the 1990s.
It may be recalled that, thanks to the introduction of a host of stabilisation measures in the early 1990s, macro-economic stability was largely restored in the country. Subsequently, the economy experienced above the trend economic growth rates during the second half of the decade. Today, it seems that both the pillars of success of the macro-economy, viz. stability and growth, are in peril. A large part of these stresses and strains are underpinned by the fundamental structural weaknesses which characterise the Bangladesh economy. But the pressures have been accentuated by a benign neglect in undertaking necessary reform measures to improve the competitiveness of the economy. However, the obtaining situation has been aggravated further by a confluence of external factors ranging from global recession and practices of discriminatory trade preferences to terrorist attacks in the USA on September 11, 2001.
The Independent Review of the Bangladesh’s Development (IRBD) for FY2000-01 prepared by the Centre for Policy Dialogue (CPD) pointed out that the “scissors effect” of the fiscal disequilibrium and weakening of the balance of payments is once again going to put to test the limits of the resilience of the Bangladesh economy in FY02. In this regard the recent developments in the global scene only compounded the challenge.
The fundamental question which is currently haunting Bangladesh is whether the present problems afflicting the economy are a short-run phenomenon which the country will be able to overcome through prudent policy...
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