Ensuring economic stability is paramount

We are concerned about the sluggish business environment that has persisted in the country for the past several months now. According to a report, in the October-December period of 2024, most listed companies experienced a decline in profits compared to the same period in the previous year. This decline is primarily due to rising borrowing costs, high inflation, and other economic stresses. Out of 213 listed firms, 97 reported higher profits, while 116 saw a drop. While 18 of the profit-making companies recovered from previous losses, 32 of the loss-making firms reported fresh losses. During this period, GDP growth slowed, and consumer spending shrank. These factors, combined with persisting political uncertainties, have exacerbated the situation.

Pharmaceuticals, and DESCO are in a comparatively better position due to their diverse portfolios and vast market base, small and medium-sized businesses are still struggling to recover. Many have adopted a wait-and-see approach to business expansion due to political uncertainties and volatile law and order, while high interest rates and inflation have further increased the cost of doing business. According to Bangladesh Bank, the weighted average interest rate in the banking sector rose from 6.60 percent in October 2023 to 10.23 percent by December 2024—a 55 percent increase. And despite relatively stable foreign exchange reserves, driven by record remittance inflows and growing exports, private sector investment remains sluggish. Meanwhile, persistent high inflation has eroded people's purchasing power, and the recent increase in value-added tax (VAT) may worsen the situation.

Since taking office, the interim government has introduced several initiatives to stabilise the economy. But clearly, more needs to be done to ensure macroeconomic stability. To this end, controlling inflation remains a major challenge. According to the Bangladesh Bureau of Statistics, the country's inflation fell to 9.94 percent in January from 10.89 percent in December, but further measures are needed ahead of Ramadan when inflation typically rises. Besides, the government must prioritise improving political stability and law and order to support business growth. Political parties also have a major role to play in this regard. They must refrain from actions and statements that could destabilise the country.

Finally, the government must engage in dialogue with the business community to address their concerns and grievances. Our economy has been going through a difficult phase for quite some time now. Only coordinated, well-thought-out measures can help it recover.

Source: The Daily Star.