Emergency cabinet committee needed for macro risks: PRI

The government should form an emergency-level cabinet committee to closely monitor the country’s macroeconomic situation, as pressure is building across several key sectors, said Sadiq Ahmed, vice-chairman of the Policy Research Institute (PRI) of Bangladesh.

“There is no room for complacency. The government must respond with urgency,” he said at an event in Dhaka yesterday.

Speaking at the “Monthly Macroeconomic Insights” programme organised by PRI in partnership with Australia’s Department of Foreign Affairs and Trade, Ahmed warned that the country’s macroeconomic stability could face new shocks due to rising global energy prices.

“An emergency-level cabinet committee should be formed to monitor the macroeconomic situation from all directions, especially given the severe fiscal constraints, turmoil in the banking sector, and pressures in the external sector,” he said.

Ahmed said global energy prices have risen sharply in recent days, with oil prices climbing to more than $90 per barrel from about $65 earlier.

Liquefied natural gas prices have also jumped by about 70 percent, while shipping costs are rising as well, he added.

Even if the war in Iran ends within a few days, the energy sector will still face a major cost shock, said Sadiq Ahmed, vice-chairman of PRI

Bangladesh currently has limited arrangements to import liquefied natural gas beyond its deal with Qatar, Ahmed said. Importing LNG from the United States could be an option, but it would take time and cost more.

“The immediate impact is that the country’s energy balance will come under pressure very quickly,” he said.

Even if the war in Iran ends within a few days, the energy sector will still face a major cost shock, Ahmed said. The sector is already under strain, with arrears to independent power producers standing at about $700 million, which could further pressure the country’s balance of payments.

Given these challenges, the government must address the short-term economic risks on an emergency basis, he added.

“Long-term policy debates and political discussions can come later. The immediate priority should be managing the crisis to prevent deeper economic troubles,” Ahmed said.

FISCAL CONSTRAINTS AND STRUCTURAL CHALLENGES

Ahmed also raised concerns about the government’s fiscal space to implement new initiatives.

Programmes such as the farmers’ card and family card show that many people have been left out of development, he said. However, expanding jobs, health services, education, and social safety nets will require significant fiscal resources.

He said the government is already borrowing to cover routine expenditures, including salaries, interest payments, and subsidies, raising questions about how additional programmes will be financed.

Ahmed added that the country must revive economic growth and increase spending on health. He also called for greater tax contributions from wealthier groups and broader structural reforms to strengthen the economy.

At the event, M Masrur Reaz, chairman of Policy Exchange Bangladesh, said the ongoing conflict poses three major risks for the country, particularly for the balance of payments and foreign exchange stability.

First, rising energy prices and possible supply disruptions could affect the whole economy, including transport, power generation, agriculture, and global shipping, he said.

Second, export competitiveness may weaken as shipping costs rise and logistics become more uncertain. A prolonged conflict could also reduce demand in key markets in Europe and North America.

Third, the conflict could also create risks for remittances and overseas employment, he added.

Speaking as the chief guest, Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said Bangladesh’s economy is facing multiple global and domestic pressures.

He said the country has not fully recovered from shocks caused by the Covid-19 pandemic and the Russia-Ukraine War, while policy uncertainties linked to Donald Trump have added further volatility.

Hatem criticised Bangladesh’s agreement with the United States, calling it unequal and unethical, and suggested that it should be reviewed.

He also warned that the overvalued taka -- by about 34 percent -- is hurting exporters, with exports declining for seven consecutive months, the longest downturn in decades.

Hatem added that despite the deferral of LDC graduation, the government has not presented a clear roadmap for the post-LDC period. He also criticised the tax system for taxing firms on sales instead of profits, saying it discourages investment.

At the event, Ashikur Rahman, principal economist of PRI, delivered the keynote presentation, while Zaidi Sattar, chairman of PRI, chaired the session.