Md. Mehedi Hasan
Recent days, we have seen many foreign funded Bangladeshi research organisations and their policy preaching economists have been consulting the government to degrade exchange rate as the market mechanism and Bangladesh Bank later fall into their volatile suggestions. If we leave the exchange rate control completely in the hands of the market, it could create more volatility. Such a thing will not surely lead us to Sri-lanka, but it'll certainly lead us to where the Pakistani economy stands today. When we are a net importer with a huge trade deficit each year and our primary industry largely depends on foreign raw materials and foreign consumer markets, then we mustn't enter into a free fall exchange rate as our industry will get hindered in securing raw materials and pay good labor wage. This will be subject to hyper inflation and if you try to squeeze money supply, a lower volatile income group cannot afford the price of daily living. We are entering into such a double-edge problem. Old fashion monetary& fiscal policy may be some relief to that situation, but there are more things to do which I call 'Economic Leadership' rather than 'Prudent Macroeconomic Management'.
For example, the Russian Federation could end up like the Soviet Union back in 90’s on the verge of economic collapse, yet Russia has survived the economic blow from the West, not because of only 'prudent macroeconomic management' but also excellent 'economic leadership' of President Putin or Moscow. As a student of economics, I have closely observed how the Western economic calculation for Russia turned into wrong way and Elvira Nabiullina, the Chairwoman of Russian Central Bank and Putin, the President of Russia, have done tremendous 'economic leadership' effort that has made new history in the field of international trade and economics
Another example, India is also showing great economic leadership in recent days. India is securing 30% low rated oil, gas from Russia while not giving any priority to the Western pressures and saving wheat production and various raw materials to keep up the industrial production for uncertain days of international instability. On the other hand, controlling hyper inflation and the fall of exchange rate quite smartly. Yes, Indian 'economic leadership' is doing a remarkable job which is largely supporting, of course, inter 'prudent macroeconomic management'. Without excellent economic leadership, only prudent macroeconomic management will face double-edge economic problems as stated above. These exceptional days need exceptional economic leadership first.
What could be economic leadership for Bangladesh?
Firstly, fall of the exchange rate needs to be controlled in a way that free fall of taka canbe avoided. What we have recently experienced from Russia is that the exchange rate cannot improve unless you have excellent control over net export income. Bangladesh may be on the way to becoming a middle income country on the arm of cheap labor or labor exploitation as Marxian theory defines, it needs more time to turn into a net exporter on capital-based production. Therefore, we cannot expect a sudden reverse appreciation of Taka and that’s why we mustn’t allow a free fall depreciation of Taka as market mechanisms determine. There should be some sort of control in upholding a justifiable exchange rate system alongside lowering dollar demand.
Secondly, secure main industrial raw materials, mainly from China within mutually fixed exchange currency or bypass dollar to buy raw materials, at least during the Russia-Ukraine war. On the other hand, industrial raw material related to possible dollar crises must get relief. We can also peg or fix Ruble-Taka exchange rate as Ruble is now fixed with gold and gaining more powerful stability against dollar. If Bangladeshi leadership can not do so as they are afraid of the West, Chinese Yuan is the alternative to reduce pressure on dollar demand.
Thirdly, we have to save the vulnerable labor class by rationing under government which will keep them productive within this crisis period. RMG can't secure full raw materials with falling exchange rate and at the same time with the increasing wage rate demand-it's a double-edge problem for the industries. Therefore, the government. has to interfere here smartly by introducing labor basic need relief cards or programs.
Fourthly, we can't buy Russian oil ,gas for a 30% discount directly, but diplomatic friendly countries like China or India could help us with indirect imports which could get a 10-20% discount at least. In this process, there is a possibility to get refined oil or processed gas using these countries. We have to stoke or save various raw materials to keep up the industrial production for uncertain days of international instability.
Finally, t's a great moment of history to build or active regional economic interest organizations. Bangladesh, once pioneered the SAARC and should enforce it to create a more important economic block to keep the small nation's economic interest in the time of international conflicts. Recently, the African Union is getting wheat from Russia and doesn't care what the West might say! The AU nations may have different support in UN voting on the same Russia-Ukraine war, but they all are united on the AU platform to defend their economic rights from the conflicting world! Whereas almost all South Asian countries stand with Russia, but can't get the same benefit like India gets. So naturally, we small nations should make economic block irresistible for different support in international issues. As Russia wants to expand energy business and industrialization in South Asia with enhancing Chinese interest and friendly cooperation with India, then it is our duty and scope as a small nation to make or go under economically beneficial block or union or some sort of consumer conglomerate.
There are more things or points in my consideration as economic leadership to support any prudent macroeconomic management. However, someone might say, Bangladesh cannot do such economic leadership as the largest RMG market is in the West. If the RMG consumer can build buyer organizations, then RMG selling countries can also make selling organizations like OPEC or other organizations. The West has removed our GST benefits, we are no longer upon their charity and someday we have to stand firmly with our labor and quality and that day has come up on their crisis days of war.
In conclusion, I firmly believe, the willingness to lead will give birth to a thousand reasons to bring economic leadership. Now Bangladesh needs such an influential world-stage economic leadership.
Author
Md. Mehedi Hasan
B.S.S. & M.S.S. in Economics, Comilla University
Researcher & Founding President of Bangladesh United Students of Economics (BUSE)
Life Member of Bangladesh Economic Association (BEA)
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