Twin deficits in Bangladesh

The twin deficits hypothesis says that when a government runs up debt (that is, budget is continuously in deficit), the country also runs up debts to foreigners (that is, the current account deficit widens) — see here for detail.  Of course, this being a macroeconomic concept, there are many caveats.  Like everything else in the discipline, whether the hypothesis holds depends on a lot of things.

Does it hold for today’s Bangladesh?  The popular story around the country’s current economic woes goes like this — government is buying expensive electricity from the rental power suppliers and selling to the households cheaply at a subsidised price, widening the budget deficit; meanwhile, the power suppliers are buying expensive fuel from overseas, which is driving up imports, and pushing the current account into deficit.

Can we see this in the data?

Answers over the fold, but first some gripe.  CEIC has stopped publishing whole bunch of things from Bangladesh.  This means I have to troll through pdf versions of Bangladesh Bank or government publications.  Not fun.

On boycotting Indian products

Prominent Bangla blogger Himu has started a campaign to boycott Indian products on 1 March to protest BSF atrocities.  I have no idea how the campaign is faring in the ‘real world’, but in my (limited) observation of the cyberspace — blogs and facebook — the idea definitely resonates with most Bangladeshis. 

I personally wish the campaign success.  If nothing else, it will be a worthwhile symbolic act.  And symbols are important.

The thing is, I am not sure boycotting Indian products will have much more benefit beyond symbolism.  In fact, if this is actually successful, the result will probably be more harm than good.  That doesn’t, however, mean there is no place for civic activism.  There is.  And people like Himu can play a big role in leading that activism beyond symbols.