The government eventually stopped the devaluation of the dollar, stopped workers’ trips abroad, and delayed many imports.
This comes a day after the central bank tightened regulations on luxury and non-essential items such as sports equipment, washing machines, air conditioners and refrigerators.
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The twin measures are expected to protect foreign exchange reserves of less than $ 42 billion – to cover imports for five months.
“Times are difficult and we have to make tough decisions,” Finance Minister Ahmed Mustafa Kamal told reporters at a cabinet meeting on government procurement.
The effects of the Ukraine war, which has pushed up commodity prices on the world market, are being felt everywhere.
“We cannot say when the war in Ukraine will end. We have taken this step in light of the international situation. After all this, we have been living in luxury. We can postpone our luxury purchases for a month, two months or six months.”
Kamal said projects that do not impede strong economic growth are being delayed.
“We are reorganizing to manage the situation efficiently. This will make our economy stronger.”
According to economists, the government should have taken more proactive measures and should have taken action as soon as the reserve stock began.
After a brief hiatus for the global cholera epidemic in 2020, imports began to increase by 2021.
Exports were increasing and remittances were coming in, so the reserve was healthy enough to cover imports for six to eight months last year.
The situation changed in January after Russia invaded Ukraine. The reserves began to slow down the growth of remittances, which began in July last year, as well as inflation.
In February, imports fell by less than six months and have since worsened.
Meanwhile, the Taka price began to fall and the central bank was selling off the reserve dollar to stabilize the exchange rate.
“This was an important step and should have been taken very early,” said Debapria Bhatchatia, a special correspondent at the Center for Policy Dialogue.
Nepal, for example, imposed a seven-month ban on luxury and non-luxury goods last month.
The World Bank and the International Monetary Fund have ordered a six-month deposit.
Batacharia added: “I do not know how successful this decisive activity will be in maintaining foreign exchange reserves.
Earlier, on April 11, banks were ordered to impose at least a 25 percent margin on non-essential consumer goods at the opening of credit cards, but to no avail.
According to Zahid Hussein, chief economist at the W. Dhaka bureau, the government should have taken decisive action in the past.
“I have been urging the government to reduce its foreign exchange expenditure faster.
Hussein went on to suggest that the Central Bank control the exchange rate.
“The reserve is now at its lowest level. Normally, six months ‘income coverage is sufficient but eight to nine months’ coverage will be reliable in light of global inflation.”
The exchange rate adjustment should allow for further reduction.
“It will affect remittances and imports – it will help in both ways.”
Inflation will increase but this is important.
“Everyone who suffers from inflation will not be harmed. The budget should be given to them. Monetary policy cannot help them much.”