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Economy facing challenge as lending, investment grind to halt

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Planning Adviser Dr. Wahiduddin Mahmud pointed out that many development projects were politically motivated. “Several projects were either poorly implemented or, upon further scrutiny, would not be carried out as planned,” photo collected

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Private sector investment has hit a low, as many industrial and bank owners are not present in their respective areas. Consequently, the resumption of activities in private industries and efforts to get the banking system back on track for lending have been moving slowly in recent times.

UNB

Publisted at 9:37 AM, Mon Oct 21st, 2024

The economy of the country is experiencing a challenging period, with public and private investments coming to a near standstill over the past few months.

Private sector investment has hit a low, as many industrial and bank owners are not present in their respective areas. Consequently, the resumption of activities in private industries and efforts to get the banking system back on track for lending have been moving slowly in recent times.

Planning Adviser to the Interim Government Dr. Wahiduddin Mahmud, in a recent briefing after an ECNEC meeting, acknowledged the slow pace of production in industries and lending activities in the banking sector.

“Private sector investment is a driving force for the economy. If this sector faces hindrances, the whole economy is affected,” he said.

However, Dr. Mahmud noted that it is normal to experience obstacles in investment after a significant political transition.

“Investment in the private sector is currently lower,” he added.

Regarding public sector investment, which is executed through the development budget, Dr. Mahmud explained that the interim government is re-evaluating the development projects approved by the previous Awami League government.

The Awami League-led National Economic Council (NEC) approved the Annual Development Programme (ADP) for the fiscal year 2024-2025, with a total outlay of Tk 265,000 crore. This included 1,321 projects, comprising 1,133 investment projects, 21 survey projects, 87 technical assistance projects, and 80 projects from autonomous bodies and corporations.

Dr. Mahmud pointed out that many development projects were politically motivated. “Several projects were either poorly implemented or, upon further scrutiny, would not be carried out as planned,” he said.

As a result, the interim government is amending ongoing projects, a time-consuming process. If a project is deemed unnecessary or of low priority, the government is halting further allocations once it reaches a self-sufficient stage.

Dr. Mahmud also cautioned that if both private sector investment and public sector expenditure slow down, the overall money flow in the economy will be affected. He added that rural businesses are reporting sluggish trade due to reduced investments from both sectors.

Among the top 10 sectors in terms of ADP allocation, the transport and communication sector received the highest allocation of Tk 70,687.75 crore (26.67%), followed by the power and energy sector with Tk 40,752 crore (15.38%), and the education sector with Tk 31,529 crore (11.36%). Other key sectors include housing and community facilities, health, local government and rural development, agriculture, environment, industry, and science and technology. The total allocation for these top 10 sectors amounts to Tk 242,093 crore, representing 90.25% of the total ADP.

In a bid to curb inflation, Bangladesh Bank has raised its key policy rate (repo rate) by 50 basis points, bringing it to 9.50%.

According to the Bangladesh Bureau of Statistics (BBS), the general point-to-point inflation rate dropped to 9.92% in September from 10.49% in August 2024. Both food and non-food inflation also showed a downward trend during this period.

Food inflation declined to 10.40% in September from 11.36% in August, while non-food inflation fell to 9.50% in September from 9.74% in August.

Inflation in both urban and rural areas also decreased last month. In rural areas, inflation dropped to 10.15% in September from 10.95% in August. In urban areas, it fell to 9.83% in September from 10.01% in August.

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