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TK 6.80t national budget for FY23 to be released!
The targetted revenue of the national Budget for the Fiscal Year 2022-2023- which is about 15% of the country’s GDP, intends to address some of the development-related issues of the country- financed through this new budget scheme. This gives hope to boosting the rate of Bangladesh’s Mega Projects. The revenue target for the Annual Development Programme (ADP) was set at Tk 2.44t, however, it is anticipated that Bangladesh might still need to borrow from domestic and foreign sources. Due to the increased prices of the daily commodities emerging from the Russian-Ukraine crisis- the necessary goods despite being price inelastic have negatively affected people’s purchasing power. The targetted budget intends a 7.5% GDP growth and 5.5% inflation. The government has allocated subsidies and decided to exempt tax from agriculture, food processing and the sector of development has planned several safety net programmes to avoid stagflation.
Are bank deposits still a good decision?
With surging inflation levels, citizens are losing their incentive to deposit money in banks as the inflation rates consume 2.2% of their savings in real-time. The real deposit rate had fallen from 0.03% in March 2020 to -2.21% in March 2022. Furthermore, inflation rates reached an 18-month high of 6.29% in April of 2022. Rising inflation rates mean that consumers are able to purchase fewer goods and services with the same amount of money in the future for which people are choosing not to save. Furthermore, the lowered real interest rate on bank deposits adds woes to the consumers as they drain the value of their savings. People within the low-income bracket have been most impacted by rising prices and falling interest rates as they are unable to get significant returns due to inflationary pressure.
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Taka falls yet again!
Taka has again depreciated for the 13th time in a row yet in 2022 against the US Dollar set at $92.50. The decision initially intended to boost remittance flow and let the market decide on the exchange rates anticipating the depreciation of the country’s currency. Needless to mention, the global crises across the world’s largest economies have triggered inflation, increasing the prices of daily in-elastic commodities, and enforcing Bangladesh to import heavily. In July-April, 2021-2022, imports grew by 41% to $68.66 billion, while exports increased by 35% to $41 billion. This resulted in a record trade deficit of $27.56 billion, up 53% year on year. Moreover, remittance inflow fell 16% year-on-year to $19.2 billion hitherto. All these led the foreign exchange reserve to decline to $41.7 billion on June 1 against $46.15 billion on December 31 last year.
https://www.thedailystar.net/business/news/taka-falls-again-1-usd-now-tk-925-3046496
Indian rice traders fear a ban on rice
A sudden ban on rice exports by India has led the traders to place excessive orders (approximately 9.6 million tonnes) on rice going as far as signing Letters of Credit (LCs) to secure the orders from cancellation. After another ban on the export of rice, the fear of insufficient goods has led to such bureaucracy. Indian rice has a certain price advantage in the global market which has ensured its advanced demand- striking deals for the next few months. India is a huge exporter of grains and with the amount of wheat stuck at ports. This is yet another disrupted supply chain posing hunger threats to several other dependent regions. Likewise, the rice traders want zero risk as they fear a similar ban on the exporters of their products.
China’s covid curbs still affecting nearby regions
Despite depreciated levels of coronavirus levels around the globe, China’s restrictions to curb the virus still disrupt supply chains which “dampen” demands. The spillover effects of these restrictions affect the nearby regions heavily dependent on China’s supply of raw materials. Furthermore, economies such as Japan and Taiwan struggle to keep inflation levels stable with tightened monetary policy while not-lowering the already-dampened production levels.
China’s Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) had a point of 48.1- despite being higher than last month, it is still below the threshold of expansion. Even though restrictions are being lowered in some cities in China, fears of outbreaks have held back the markets from fully producing stemming from a lack of raw materials.
Revenue boost through Sri Lanka’s decision to increase taxes
Sri Lanka has been undergoing a severe economic crisis since the first quarter of 2022. The crisis originated due to a tax cut by the government in 2019 and although this expansionary monetary policy step might have been handy in the long run, it was unfortunately worsened by the pandemic the next year. In order to curb the insufficient revenue, policymakers recently mandated to increase tax and reduce spending i.e. taxpayers’ relief. But as the prevailing inflation in the post-pandemic time made the citizens worse off, the initiative is certainly challenging for them to adopt and further economic growth is uncertain given peoples’ consumption and investment will be affected.
India’s attempt at handling its post-pandemic hampered growth
The Indian economy slowed in the month of January to March at a rate of 4.1 percent, the lowest in a year. The growth was hampered due to the susceptibility of the Omicron variant and high commodity prices, impacting the Indian economy adversely. Strong government spending, combined with an investment push, helped to keep the month-over-month rise basically unchanged. Higher prices and tighter interest rates are causing considerable challenges for the economy. The latest government steps may alleviate some of the strain, but the situation remains uncertain, as the governor of the Reserve Bank of India stated in a recent interview, that it will be determined by how the global geopolitical picture unfolds.
Russia’s economy seems to be back on track
Since the beginning of the war between Russia and Ukraine, sanctions were imposed on Russia from different corners of the world. Due to these restrictions, Russia had to experience unpleasant economic ups and downs within its boundaries. One of the consequences was that these sanctions reduced the sovereign wealth funds of the nation for which the money supply in the economy had reduced. However, after several sanctions on buying gas and oil from Russia, the prices of these commodities were increased by the Russian government in order to deal with the sudden slump in demand. Furthermore, the Russian market demanded for the payments for gas and oil to be made in rubles. These strategies were key in bringing the Russian economy back on track by the increase of money flow into the country.
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