Analysis on the Growth of Balance of Payment and Sectoral Growth in Bangladesh
Bangladesh characterised by high population density, low resource base, recurrent natural disasters and persistent socio-cultural instability has come a long way since its independence in 1971. The country has performed well especially in recent years, showing that a country can achieve significan human and social development at relatively low levels of income along with creating strong fundamentals and future growth. The integration of developing and least developed countries with the global economy increased sharply in the 1990s with change in their economic policies and lowering of barriers to trade and investment. Foreign direct investment (FDI) is expected to benefit poor countries such as Bangladesh in a number of ways. …show more content…
Balance of Payment:
The Balance of Payment slipped into a deficit for the first time in a decade resulting in heightened risks to Bangladesh’s external position. The government agreed a three-year reform programme with the International Monetary Fund (IMF) styled Memorandum of Economic and Financial Policies (MEFP) to access credit the IMF’s Extended Credit Facility (ECF) arrangement to stave-off the pressures on the BoP. The access to IMF funds requires reduction in aggregate demand by employing mechanisms such asdepreciation of currency and cut in import demand and supply of investible funds to the entrepreneurs. The central bank has already allowed the local currency to depreciate significantly against the foreign currencies and put in place contractionary monetary policy to restrict money supply to the private sector and import of goods and services.