Russia's aggression in Ukraine will affect Bangladesh's economy

 On the cold morning of February 24, the residents of Kiev were supposed to stand for morning prayers or to get up early to go to work. But people have had to flee Kiev, even from their homeland, to seek refuge in Poland.

What a cruel repetition of history! Hitler's forces invaded Kiev on such a dawn in 1941, almost 61 years ago, during World War II. The military language of all the dictators and imperialists of the world seems to be the same. The history of fleeing in the face of war and aggression also seems to come back.
In the First and Second World Wars, people fled from Europe to the Middle East. The bloody history of the homeless people of Palestine is 75 years old. Vietnamese people had to flee their homes in the sixties. People fled from Bangladesh to India in 1971. Jessore Road is like a recurring history of the world. People from various countries in the Middle East have fled to Europe since 2003. Baghdad and Damascus, two of the richest cities in human history, have not been safe for ordinary people in the last two decades. At the end of this cycle, a new history of the people of Europe began to run in different directions.

 

Russia's aggression on Ukraine has raised fears that the rights and sovereignty of the weaker neighbors on various continents will be curtailed. Bangladesh is not free from this fear. From the two shores of the Atlantic to the two shores of the Pacific Ocean, from west to east, the advent of geopolitics and trade war, Damama, is only raising new concerns.

Authoritarian poles can intensify the level of policy and coercion to expand monopoly power over small countries rather than multilateral equality. That is why in the case of small countries' infrastructure development plans, future military strategies, economic security, inclusive transparent governance, human rights and sustainable democracy have become more important than ever before.

Countries like Bangladesh have to follow a logical and well thought out path so that the superpowers do not find the slightest flaw in their influence or policy infiltration!

In addition to the long-term concerns, this war of Russian aggression on Ukraine is going to create some new problems for both the government and the people of Bangladesh. Although the Bangladesh government has a good foreign exchange reserve, it has a huge deficit in local currency revenue. In other words, the government was already lost in the search for money, the situation may get worse in the future.

1.

The country's current budget of 6 lakh 3 thousand crore taka 2 lakh 14 thousand crore taka is facing a deficit (35 percent). Meanwhile, as the very high revenue target of Tk 3 lakh 30 thousand crore will not be met, the total deficit will reach around Tk 2.5 lakh crore. In the last fiscal year 2020-21, the revenue deficit was Tk 41,000 crore.
A new stagnation in the economy could work as commodity prices skyrocket after soaring inflation.

As the price of construction materials has gone up by 20 to 30 percent, the pace of implementation of annual development projects or ADPs has slowed down. As a result, reduction in VAT and duties from these sectors has affected the revenue. As a result of the war, the stagnation will increase, which may further reduce the government's revenue. And the reduction in revenue means an increase in the tendency and need for foreign loans, including savings loans, bank loans, as the government's public administration costs, development costs, subsidies and other expenditures are not reduced.

2.

We have seen that only three (Bullet Train, Expressway, Subway) mega projects costing Rs 530 crore have been spent on feasibility study. The slow and inefficient expenditure of the government in implementing the projects is so uncontrollable that the cost of 34 projects has increased by Tk 59,410 crore. Expenditure has been increased to Tk 30,447.82 crore by revising the Health, Population and Nutrition Sector Program.

This amount is more than the construction cost of Padma bridge. It is possible to build at least two Padma bridges with the money that is increasing as a result of revising 34 development projects of the government. The tenth meeting of the Executive Committee of the National Economic Council (ECNEC) for the fiscal year 2021-22 (22-02-2022) approved the increase in these expenditures.

According to the main baskets of the newspaper, the average inflation in food and non-food items has been found to be 15 to 19 percent. The problem is that the current inflation is so high that even this increase may not work. Prices of construction materials have risen by 20 to 30 percent. Added to this is the growing influence of international markets due to the Ukraine war. As a result, the government will have to increase the cost of development projects. In other words, the local currency for providing money, that is, the government's cry for money will increase. Doing so will put pressure on its foreign exchange spending, which could lead to a rapid decline in reserves. On the other hand, in order to maintain the value of money, the government has to release more dollars in the market, or allow money to depreciate.

3.
The government has subsidized the power and energy sector to the tune of Tk 60,000 crore in the last 11 years. In the last one year alone, it has subsidized Rs 11,000 crore, which is more than the direct agricultural subsidy (Rs 9,500 crore). Although not required, the government has renewed 5 (Summit Narayanganj, KPCL-2 and 3, Orion Meghnaghat, Dutch-Bangla Power) quick rentals in the last few months. As a result of the Ukraine aggression, rising oil and gas prices, increased collective subsidies in the power sector, along with the cost of capacity charges. This will start the bloodshed of the government unless it stops renewing unnecessary agreements in the interest of the people of choice.

4.

A joint European-US embargo on Russia may not be a problem for the first unit of the Rooppur nuclear power plant, since everything, including the reactor, has been reached. But there may be problems in opening and operating the power plant. However, the main problem will be the work of the second unit. The 'Bangabandhu Satellite-2' project may also be ruined due to the new ban on chip exports to Russia.

5.

As a result of the war, the prices of wheat and maize will increase. As a result, the import price of common food and cow feed will increase and the overall food import cost will increase. Due to the ban on the use of 'airspace' in some parts of the world, shipping and freight at sea may increase again, which may further aggravate the ongoing edible oil crisis in Bangladesh. All in all, further increase in the price of food and edible oil, including oil and gas, raw materials for construction materials, will create more volatile situation in the government's revenue and public life.

Although the war is local, its curse is global. In this situation, the government has to create a platform to reduce tariffs to reduce the price of goods by curbing the expenditure. Reducing tariffs will further reduce revenue and increase the budget deficit, so on the one hand it is necessary to bring efficiency in project implementation, on the other hand it is necessary to stop both increase in expenditure and waste. Otherwise high inflation, high fuel prices, tougher international supply situation could create unwanted horrors in the economy. Saints beware!