Bangladesh made strong economic recovery from Covid: WB

The post-pandemic economic recovery has helped Bangladesh in reducing poverty, according to the World Bank, who also claim that Bangladesh has made a strong recovery from the COVID-19 pandemic.

In its most recent report, "Bangladesh Development Update - New Frontiers in Poverty Reduction," which was published today, the World Bank claimed that rising inflation, financial sector vulnerabilities, external pressure, and global economic uncertainty hindered the post-pandemic recovery in FY23.

The Development Update was also released at the same time by South Asian county director offices in India, Pakistan, Nepal, Sri Lanka, Bhutan, and the Maldives.

At the inaugural ceremony, Bernard Haven, a senior country economist, and Nazmus Sadat Khan, a country economist, worked together on a power analysis. Abdoulaye Seck, the World Bank's Bangladesh Country Director, also spoke.

Seck emphasized the need for Bangladesh to adopt a more ambitious approach in addressing poverty goals. He stressed the importance of sustaining and enhancing reforms, urging the country to take bolder and faster action.

Drawing attention to the current macroeconomic situation, Seck highlighted that inflation is expected to gradually subside, but the economy will face significant external sector pressures. He emphasized the importance of flexibility to counter the declining trend of foreign currency reserves, and suggested lifting the cap on lending rates to enhance the effectiveness of monetary policy.

When asked about the World Bank's report on offering financing to Bangladesh at high rates, Seck stated that if Bangladesh aims to become a higher mid-income country by 2031 and a developed country by 2041, it should seek available finance. He added that the country should pursue finance that generates returns higher than the interest rate it has to pay.

Seck expressed the view that interest rates are increasing globally, making it crucial for countries like Bangladesh to mobilize more resources. He stressed the need for tax-to-GDP ratios to surpass double digits.

In response to further inquiries, Seck stated that delaying reforms comes with a cost, emphasizing the importance of policymakers accelerating reforms in the financial sector. He underscored the need for bold and swift measures in the current exceptional circumstances.

When asked about potential uncertainties surrounding the next general election, Seck acknowledged that elections can introduce uncertainties, noting that this was not specific to Bangladesh. He emphasized the importance of remaining focused amidst such uncertainties.

Recognizing the significance of robust bank supervision, Seck ranked financial sector reforms as a top priority, offering the World Bank's support to Bangladesh in this endeavor.

According to the latest Bangladesh Development Update, reforms addressing inflation, monetary and fiscal policies, and financial sector vulnerabilities are crucial for sustaining growth and reducing poverty. The report also stressed the importance of structural reforms such as exchange rate flexibility, modernization of monetary policy, and revenue mobilization to accelerate growth.

In order to promote foreign currency inflows through permitted channels, strengthen the balance of payments, and boost reserves, the research recommended adopting a single market-based exchange rate.

Due to economic progress, Bangladesh has improved living circumstances and decreased extreme poverty from 9.0% in 2016 to 5.0% in 2022. These figures are comparable to those of the Caribbean and Latin American regions and higher than the South Asian average. The estimates of poverty are based on information from the Bangladesh Bureau of Statistics' Household Income Expenditure Survey 2022 and the $2.15 per day (using 2017 Purchasing Power Parity) international poverty threshold.

Bangladesh has made several improvements for the less fortunate, including a drop in infant mortality.

Franziska Ohnsorge, the World Bank chief economist for South Asia, said, “South Asia’s energy intensity of output is about twice the global average and the region lags in the adoption of more advanced energy-efficient technologies. Improvements in energy efficiency, in the context of a rapid global energy transition, are an opportunity for South Asia to make progress toward both environmental and economic goals.”