New govt starts with healthy food stock

The Daily Star, 07 January 2009

Although the current foreign currency reserve can be a reason for a slight discomfort of the Awami League-led grand alliance government, it will very likely be nothing major as the new regime is starting with a pretty healthy food stock.

A Bangladesh Bank high official said there is no fear of pressure on the foreign currency reserve as the prospect of food production in the country is good and pressure on food import is low.

Yesterday the foreign currency reserve was 5.32 billion dollars, which is, according to the present import trend, equal to the import bill for two and a half months, while the international safe standard is equivalent to three months’ import bill.

Yesterday the food stock stood at 12.6 lakh metric tons, while in Bangladesh’s present context a stock of 8 to 10 lakh metric tons is considered a safe reserve.

One of the major election pledges of Awami League was to bring down essential commodity prices to a tolerable level, for which food stock and foreign currency reserve are two important indicators.

During the rule of the just dissolved caretaker government, the foreign currency reserve was between 5 to 6 billion dollars. Yesterday it was 5.32 billion, preceded by Monday’s reserve of 5.82 billion dollars. Within a day it fell by 500 million dollars.

Bangladesh Bank sources said it fell due to payment of an Asian Clearing Union (ACU) bill, which has to be paid every two months.

In the last three months of the current fiscal year, import growth was about 20 percent, and import was 6.32 billion dollars. On an average, import expenditure every month is 2.10 billion dollars. If that continues, Bangladesh can keep importing for the next two and a half months with the present foreign exchange reserve. However, in the last four months of the current fiscal, the opening of letters of credit (L/C) fell by about 47 percent for consumer goods including rice.

During the same period, import of consumer goods dropped by about 24 percent. On the other hand, this time production of Aus rice crossed the target. Agriculture ministry sources said production of Aman rice is also likely to cross the target.

The Bangladesh Bank official said there is no reason to be worried about the foreign exchange reserve. He also said other major sources of foreign currency earning — export, remittance, and foreign aid — are still at a satisfactory level.

According to finance ministry data, in the first five months of the current fiscal, growth of export earning was 26.85 percent while the amount was 6.54 billion dollars.

In October, although export earning was less, it was 867 million dollars, which rose to 1,300 million dollars in November.

Commitment of 1.37 billion dollars in foreign aid was also received in the first five months of the current fiscal, which is 50 percent higher than the commitment received during the corresponding period of the last fiscal.

In the fist five months of the current fiscal, Bangladesh also received 493 million dollars in foreign aid, which had been promised earlier.

Inflation during the rule of the caretaker government reached as high as 12 percent, with coarse rice selling for about Tk 35 a kilogram (kg).

However, in November, inflation on a point-to-point basis came down to 6.12 percent. Economists predict it will drop further in the future.

According to a Trading Corporation of Bangladesh (TCB) daily market report, coarse rice was sold for

Tk 27 to Tk 29 a kg yesterday, which had been Tk 32 to Tk 33 a kg a year ago.

Awami League pledged to bring down rice prices, although it did not specify how low it could come.

To achieve the goal the new government must ensure a good Boro rice production following a good Aman harvest, and must get the food to the poor people through different government channels.

A satisfactory level of food stock is there to get that done.