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Containing inflation will be a big challenge in the coming months as the situation could worsen in the face of rising prices of essential commodities such as food items, according to the Metropolitan Chamber of Commerce and Industry. The picture was taken recently.

Manage subsidies in energy sector skilfully

MCCI says containing inflation a big challenge
STAR BUSINESS REPORT
The government should properly manage subsidies in the energy sector as taxpayer-backed spending is set to surge owning to higher commodity prices in the global market, according to the Metropolitan Chamber of Commerce and Industry (MCCI).
“Skilful management of the high subsidies on electricity, gas and fertiliser prices is necessary for Bangladesh,” the organisation said while presenting its quarterly review of the economic situation for January-March.
As per the quarterly review, the rate of inflation increased in that period.
However, the chamber predicted that inflation could to go up further by the end of May because of a probable rise in the price of some essential commodities.
“Containing inflation will be a big challenge in the coming months,” the MCCI said.
The chamber urged the government to stabilise the country’s macroeconomic situation by taking cautionary measures in spending foreign currency in view of limiting imports and the cascading Russia-Ukraine war fallout.
“It is necessary to be careful when opening letters of credit so as to avoid unnecessary imports and save foreign currency as one of the potential thrifty measures,” it added.
According to the review, Bangladesh’s low labour costs are widely regarded as appealing to foreign investors. However, they hesitate to make fresh investments in the country due to its underdeveloped infrastructure and other impediments.
The government should address the underdeveloped infrastructure, policy consistency and corruption in the country to attract more foreign direct investment (FDI) to the country to ensure its full economic recovery from the coronavirus pandemic.
“FDI inflow to Bangladesh is low compared to that of many countries at similar levels of development,” the chamber said.
However, they also predicted that foreign exchange reserves will likely fall in May 2022 due to payments to the Asian Clearing Union (ACU) against imports.
According to the review, Bangladesh’s robust export earnings have facilitated economic recovery in recent times.
The export-oriented garment and leather industries have resumed full-scale operations while the domestic market-oriented steel, food processing and transport sectors are fully up and running as well.
“Inward remittances also increased, which has multiplier effects on other economic sectors,” the MCCI said.
The chamber then expressed satisfaction over the progress made in major macroeconomic indicators.
For example, robust export earnings have facilitated the country’s economic recovery in recent times.
On the other hand, some of the economic indicators appear to be less promising than projected earlier.
“The fiscal framework continues to be weak in view of poor achievements, more specifically, both in terms of revenue mobilisation and public expenditure,” it added.
The MCCI went on to say that unemployment and low investment in the country are still big challenges.
The chamber also said the steady outflow of migrant workers in the January-March period of 2022 has raised hopes for a healthy growth in overseas employment, a vital source of Bangladesh’s foreign exchange reserves.
According to the Bureau of Manpower Employment and Training, 322,583 workers went to various countries in the first quarter of the year while the number was 146,895 in the corresponding period of 2021, up 119.60 per cent.
“Such a steady growth is expected to continue in coming months and the sector could see record levels of employment by the end of 2022,” the MCCI said.
Job opportunities have also been created in developed countries such as Greece and Italy, which would help increase quality migration.