[🇧🇩] Monitoring Bangladesh's Economy

How we are missing out on higher remittances

VISUAL: NAZIFA RAIDAH

Migrant workers from Bangladesh are disadvantaged in many ways compared to their counterparts from other countries. To cite one disadvantage: as per a February report by The Business Standard, an aspiring Bangladeshi migrant worker bound for Malaysia pays between $4,000 and $4,500 for employment in the manufacturing or construction industries. But for the same opportunities, Indonesian workers pay between $340 and $742. This is despite the Bangladesh government setting a maximum Tk 78,990 (less than $1,000) migration cost for workers travelling to Malaysia. The cost of migration is equally exorbitant for Bangladeshi workers travelling to other countries in search of livelihood. In fact, a 2020 International Organization for Migration (IOM) report suggested that the migration cost of Bangladeshi workers is considered one of the highest in the world.

This is attributed mostly to the corruption in the system that has enabled syndicates to be formed among recruitment agencies, in addition to ineffective migration diplomacy, and limited efforts from the concerned authorities to ensure the wellbeing and rights of the migrant workers.

While the remittances sent by the migrant workers are valued highly, we have not taken effective measures over the years to map international market demand for skilled labour and accordingly upskill aspiring migrant workers, which would have translated into higher remittance for us.

we must understand that in a fast-changing landscape, where quality of work is becoming increasingly important for employers, new avenues are opening up for the skilled workforce. So, being content with pushing more unskilled workers into the global labour market is no longer an option.

Even at a time when our volatile forex reserve remains a major economic concern and despite the growth in the number of migrant workers—around 1.3 million workers migrated abroad in 2023, a 15 percent increase from 1.13 million in 2022, thanks to Saudi and Malaysian markets opening up—we have not been able to tap the full potential of the expanding job market abroad, both in terms of revenue volume and skilled worker migration.

The remittance inflow in 2023 remained stagnant at the $21 billion mark, despite more workers migrating abroad. In 2022, remittance inflow was $21.28 billion and in 2021 it stood at $21.74 billion. Given the 15 percent year-on-year increase in worker migration in 2023, the mere 2.54 percent year-on-year increase in remittance in 2023 is a telling tale of wasted opportunities and the inability of formal banking channels to woo customers.

A study of government data by the Refugee and Migratory Movements Research Unit (RMMRU) revealed that of the workers who migrated in 2022, a staggering 78.64 percent were less skilled. In 2021, it stood at 75.24 percent. While there was some improvement in 2023, with an increased number of skilled and semi-skilled worker migration, less skilled workers still made up more than half of the entire pie, at 50.28 percent, according to the Bureau of Manpower, Employment and Training (BMET).

This is mostly due to our lack of demand mapping, planning, and political will to tap into the skilled labour market. Bangladesh has always eyed the less skilled market with its lower barrier to entry, entertaining demand from traditional markets needing low-paid unskilled, less skilled workers. But we must understand that in a fast-changing landscape, where quality of work is becoming increasingly important for employers, new avenues are opening up for the skilled workforce. So, being content with pushing more unskilled workers into the global labour market is no longer an option.

Our Asian peers are quickly upskilling their workforce to capture the new markets and their workers are earning higher wages, while in Bangladesh, we are patting ourselves on the back for sending about 1.3 million workers abroad, without a plan on how to tap into the new markets and enable our workers to find better-paying jobs, in turn us getting higher remittance.

We must study the global labour market patterns to identify new destinations for Bangladeshi workers, and the skill sets required to make sure our workers succeed there. Better coordination, cooperation, and oversight among the government and private sector actors are critical to improving the living conditions of our workforce abroad and driving forex earnings.

However, for this to happen, we would need to overhaul our overseas employment system which is lethargic by nature and mired in corruption. There is no way that notorious syndicates are given free reign to do as they wish—exploiting unsuspecting and powerless migrant workers—without the system benefitting from their illegal gains.

The transformative push in the labour migration landscape of our country would also mean that the Bangladeshi missions abroad would have to make efforts to identify potential industries for foreign worker recruitment in the countries where they are located and the skills that would be required to fill those requirements. The concerned officials would have to engage in robust migration diplomacy to negotiate good deals for our workers—both in terms of wages and living conditions.

It is true that in Bangladesh we lack adequate technical training centres and polytechnic institutes. So the focus should be on building additional capabilities while fully utilising the existing facilities.

It is high time the government came out of its complacency mindset and transformed the overseas employment sector to make the most of the new opportunities opening up for Bangladesh. While demand for unskilled and less skilled workers will sustain in the traditional markets for some more years, if we do not compete for the new markets in need of a semi-skilled and skilled workforce, our Asian peers will win them over, leaving us little room to manoeuvre.

Do we have the vision and political will to accelerate change and make the most of the opportunities that are about to unfold?

Tasneem Tayeb is a columnist for The Daily Star.​

Bangladesh's gross forex reserve dips to $19.89b
Staff Correspondent 18 April, 2024, 22:33


A file photo of Bangladesh Bank headquarters in Dhaka.

The gross foreign exchange reserves in Bangladesh, according to the International Monetary Fund guidelines, dropped to $19.89 billion again on Wednesday.

According to Bangladesh Bank data, the foreign exchange reserves reached the current level on the day from $19.91 billion on March 31 and $21.86 billion on December 28, 2023.

However, according to Bangladesh Bank's conventional valuation, the foreign exchange reserves were reported as $25.3 billion on that day.

The reserves had dropped to $19.13 billion on December 6, 2023, but rebounded to $21.74 billion on January 4 after receiving $689 million in loans from the International Monetary Fund and $400 million from the Asian Development Bank.

The reserves, however, started declining again thereafter.

This decline in Bangladesh's foreign exchange reserves is primarily due to a significant dollar shortage in the market.

The shortage has compelled the central bank to continue selling dollars to banks from its reserves.

The reserves significantly depleted as import payments of $1.29 billion were made to the Asian Clearing Union for January and February.

The Asian Clearing Union is a payment settlement forum whereby the participants settle payments for intra-regional transactions through participating central banks on a net multilateral basis.

Payment obligations of transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are settled through the ACU payment system.

Apart from the payment obligations to ACU, the ongoing sales of foreign currency to the country's banks by the central bank contributed to the reduction in the country's foreign exchange reserves.

The central bank has been selling dollars to commercial banks, with more than $30 billion sold over the past 32 months.

This included $9.7 billion allocated to banks in July-February of the financial year 2023-24, $13.5 billion in FY23 and $7.62 billion in FY22.

The country's financial sector is facing a severe dollar shortage.

To address this, the government and the central bank have implemented measures to restrict imports, especially luxury and non-essential items.

Due to a liquidity crisis in the market and a sharp rise in government treasury bonds, banks are providing about $2 billion to the central bank in exchange for local currency.

The dollar rate has been set at Tk 110 a dollar by the Association of Bankers, Bangladesh, and the Bangladesh Foreign Exchange Dealers' Association.

According to IMF guidelines, the net reserve is below $17 billion.

The Bangladesh Bank follows the IMF's BPM6 for calculating gross and net international reserves.​

IMF's 3rd loan tranche on track despite repeated failure to hit reserve goal

3rd tranche of IMF loan

Bangladesh has repeatedly failed to retain foreign currency reserves in line with the goals set under the International Monetary Fund's $4.7 billion loan since the programme was launched in January last year.

The minimum net international reserves (NIR) will also remain below the threshold when an IMF mission visits Dhaka next week to review the progress of the programme before releasing around $681 million in the third tranche in May.

Despite the shortfall, driven by lower-than-expected remittance and export receipts and foreign direct investments, the country managed to secure the first two instalments of the multi-year loan.

And Bangladesh Bank Governor Abdur Rouf Talukder told reporters that the country will receive the third instalment on time as well.

In 2022, Bangladesh turned to the global lender after its forex reserves plunged to a critically low level amid higher import bills, leading to a sharp depreciation of the taka and an unprecedented level of inflation, hurting the poor and derailing the economic growth trajectory.

Initially, the government was given a target to keep a minimum NIR of $26.81 billion for December 2023. Later, it was revised downward to $17.78 billion since the reserve situation showed no signs of major improvements. Still, the country fell short of the target by $58 million.

The goal for NIR was $23.74 billion for June last year. However, the country had a reserve of $19.56 billion. Bangladesh also failed to meet the condition of the tax revenue at that time.

A central banker said this time the reserve shortfall will be comparatively low.

The NIR is defined as reserves assets minus reserve liabilities. Reserves liabilities are all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives and all credit outstanding from the IMF.

Officials at the finance ministry and the BB said except for the reserve-related criteria, all other conditions have been met.

During its visit, the IMF mission will review the government's performance against the targets set for December 2023.

Out of six quantitative targets set for the third tranche, the government has met five targets.

For December last year, the goal for tax revenue was set at Tk 143,640 crore. The government has already met the target.

According to the finance ministry, Tk 1,62,164 crore was collected in tax revenue in the first six months of the current fiscal year.

Another loan condition is that the budget deficit must not surpass Tk 90,520 crore. In December, the deficit stood at Tk 8,338 crore.

As per another target, the reserve money had to be within Tk 400,400 crore in December and it stood at Tk 372,715 crore in the last month of the year.

Besides, two of the loan conditions are that the government's social spending and capital investment had to be more than Tk 50,000 crore as of December.

The government spent around Tk 200,000 crore from the budget between July and December of 2023-24 and about Tk 100,000 crore was spent in these two segments, a finance ministry official said, adding that the government also met the condition on external payment arrears.

Apart from the quantitative and indicative targets, there are some structural conditions set by the IMF. The official said the structural conditions associated with the third tranche of the loan have been achieved.

As part of the structural conditions, the government adopted a periodic formula-based price adjustment mechanism for petroleum products in March and has adjusted it twice.

The Bangladesh Bureau of Statistics has begun publishing quarterly data on the gross domestic product (GDP) and released the economic growth figure for the first two quarters of FY24.

Besides, the parliament passed the Bank Companies (Amendment) Act and the Finance Companies Act and the laws have already been implemented, in line with the IMF recommendations.

Levi's now in Dhaka

Refayet Ullah Mirdha

Renowned American clothing company Levi Strauss & Co has opened a store in Dhaka offering its range of products under the third franchise deal secured by local conglomerate DBL Group following similar contracts with Nike and Puma.

Levi's is one of the world's biggest fashion retailers. Its products are sold in more than 110 countries through approximately 3,000 stores.

The 2,270 square feet store on Banani Road 11 opened on April 1, aiming to draw the rising middle-income population with an assortment of imported denim jeans, t-shirts, polo shirts, and formal and casual woven shirts for men and women.

Levi's will continue its expansion across key markets in Asia, with plans to open another store in Chattogram, said PR Newswire in a statement on April 17.

The company's focus are dynamic markets undergoing swift urbanisation, said Amisha Jain, senior vice president and managing director of South Asia-Middle East and Africa at Levi Strauss & Co.

"With a population exceeding 160 million, Bangladesh presents significant opportunities for retail expansion," she said.

The DBL plans to open Levi's stores in other parts of Dhaka, such as Dhanmondi, soon and eventually in Chattogram, said a senior official of the group asking not to be named.

"The response from consumers is good," said the official, adding that the country's economy has been growing and the purchasing power of consumers was also improving, enabling them to afford branded products.

Annual sales of clothes in Bangladesh are estimated to amount to over $15 billion.

Per capita consumption of apparels has been rising with a rise in income, for which the presence of international brands is also increasing gradually.

Three growth drivers, including farmers, remitters and garment workers, pushed the country's GDP to more than $460 billion in 2022. The nation is also set to graduate from least developed country (LDC) status in 2026.

Bangladesh's real GDP growth is projected to remain relatively subdued at 5.6 percent in FY24, compared to the average annual growth rate of 6.6 percent over the decade preceding the COVID-19 pandemic, according to World Bank (WB).

Persistent inflation is expected to weigh on private consumption growth, and shortages of energy and imported inputs combined with rising interest rates and financial sector vulnerabilities are expected to dampen investor sentiment.

Growth is expected to increase gradually over the medium-term as monetary, exchange rate, and financial sector policy adjustments are implemented, the WB said.

Stocks slip below 5,700 points after 35 months

Star Business Report

Stocks in Bangladesh suffered a massive setback yesterday with the benchmark index of the Dhaka Stock Exchange (DSE) falling below 5,700 points for the first time in 35 months as nervous investors sold their scrips.

This led to the price erosion of large-cap stocks, bringing down the benchmark index of the country's premier bourse by 77.08 points, or 1.33 percent, to 5,686 points, its lowest level since May 9, 2021.

Beacon Pharmaceuticals, the British American Tobacco Bangladesh Company, Renata, Olympic Industries, BRAC Bank, LafargeHolcim Bangladesh, Mercantile Bank and Pubali Bank were among the large-cap scrips that suffered the biggest losses.

Beacon Pharmaceuticals was the top dragger of the index, claiming 5 points, followed by British American Tobacco Bangladesh with 4 points, according to LankaBangla Securities.

The market dropped as investors panicked seeing the continuous fall of market indices, said a top official of a leading stock brokerage.

Foreign investors are still selling shares, so blue-chip stocks are falling even though these stocks are already traded at a very low price.

And as these stocks have been falling for the past few days, some brokerage houses are selling them by executing forced sales, he added.

If brokerage houses and merchant banks lend funds to investors to buy stocks and the stock price falls massively, then the brokers first call the investors to repay their loans or otherwise sell their shares in what is called forced sales.

The DSES, the index that represents shariah-compliant companies, shed 1.26 percent to close at 1,246 points yesterday while the DS30, which comprises blue-chip stocks, plunged 1.13 percent to 2,014 points.

However, daily turnover, which indicates the volume of shares traded during the session, increased 8.29 percent to Tk 522 crore compared to the previous trading session.

Almost all sectors closed in negative territory, with the non-bank financial institution, paper and printing and mutual fund sectors shedding the most, as per the daily market update of UCB Stock Brokerage.

The pharmaceuticals sector dominated the turnover chart, accounting for 18.98 percent of the total.

Of the issues traded at the DSE, the values of 29 increased, 342 decreased, and 24 did not see any price swing.

Asiatic Laboratories took pole position on the top gainers' chart with a rise of 9.96 percent followed by Dutch-Bangla Bank with 7.20 percent, Heidelberg Cement Bangladesh with 6.19 percent, Salvo Chemical Industry with 5.11 percent and IFAD Autos with 4.50 percent.

Best Holdings, HR Textile, Sikder Insurance Company, Shyampur Sugar Mills and First Janata Bank Mutual Fund also featured on the gainers' list.

Meanwhile, EXIM Bank 1st Mutual Fund shed the most, losing 6.81 percent, followed by IFIL Islamic Mutual Fund-1.

The two were followed by SEML FBLSL Growth Fund, Capitec Grameen Bank Growth Fund, Khulna Printing and Packaging, IDLC Finance, Apex Ternary, and Prime Bank 1st ICB AMCL Mutual Fund.

The Chittagong Stock Exchange saw a similar trend as the Caspi, the main index of the port city bourse, fell by 215 points, or 1.30 percent, to close at 16,244.52 points.

Rajesh Saha, chief executive officer of CAL securities, blamed the country's market situation for the abrupt ups and downs of stocks.

"Outsiders control the stock market in our country. Keeping them in the market, we can't expect a better situation. What is happening in the market, that's a normal thing. The market will not be well until we take back control of the market from outsiders," he said.

"Such things will happen until the market is structured. Look at our neighbouring countries, where markets are structured. Investors do not fear to invest there because no one can dare to earn in the wrong way," Saha added.

He also put forward a slew of suggestions to develop the market.

"We have to bring IPOs to the market in a proper way. So, we have to bring the companies under proper regulations. If any company breaches any rules, the regulatory body has to slap stiff punishments on them," Saha said.

"But in our market, we clearly understand what is happening and what will happen in such a situation. The shares we bought we are now selling out of fear," he added.

Saha pointed out that in developed countries, it is seen that there are some companies which are financially sound.

"So, investors pass their money to those companies if they get any indication of a bad situation. But we have no such places or companies in our market," he said.

"In our country, people see earning is tough through traditional ways. So, they choose poor stocks and try to chalk up more earnings. Our regulatory body knows well how to tackle the market and what needs to be done for the market's wellbeing," Saha added.​

Towards a trillion-dollar economy
What Bangladesh needs to do to shift gears


VISUAL: AZMIN AZRAN

In 2024, Bangladesh's economy has a firm footing. But what about the future? Will we continue to rely on the ready-made garments (RMG) industry for employment and export earnings, and depend on expatriate remittances to fuel a lopsided economy? This question came to my mind as I watched millions of RMG workers return to their factories, ploughing through traffic jams, clogged roads, and dilapidated infrastructure, with concern in their minds about their future job prospects.

And what about those with a graduate degree, who need help finding employment in their preferred profession? Or those who have bagged a low-paying job in a temporary gig—like my own nephew, who has an MBA and is an accountant, but is struggling pay his bills with a minimum wage job in a travel agency?

Bangladesh needs to embrace digital technology to modernise its economy and expand opportunities for people from all walks of life. We are already approaching the quarter-century mark of the 21st century, but the economy is stuck in a rut. It reminds me of the sculpture "The Struggle," based on painter Zainul Abedin's "Sangram," where two bullocks with the driver try to pull a cart laden with logs out of the mud while the wheels are stuck.

On April 2, The New York Times ran a long story which lauded Bangladesh's growth model of the last half a century. It gave leaders credit for lifting up millions of poor people and praised the success of turning farmers into textile workers. But the article also cautioned that changes in trade, supply chains, and technology are making our journey into the next quarter of the century perilous. I am sure this precaution applies to other nations, too. On April 1, in an opinion piece for The Wall Street Journal, Robert B Zoellick, former president of the World Bank, lashed out at Biden and Trump, the two presumptive candidates for the US presidency. He attacked them for their inability to see the writing on the walls, and rather than preparing the US for the challenges of the 21st century, taking it back to the 20th.

Earlier this year, the World Economic Forum (WEF) released its Future of Growth framework, which advised that with "the pressing need to rekindle global economic growth, we must move to innovative, inclusive, sustainable and resilient growth."

So, what is the takeaway for Bangladesh from these warnings coming from different corners?

Manufacturing, which should still form the base of our economy in the coming decades, must be more productive and will, in any case, require fewer workers to make garments, leather goods, and IT products. We will depend on innovation in artificial intelligence, quantum computing and general-purpose technologies.

To compete in the world, we can no longer rely on the two bread-and-butter sectors of our economy—the RMG sector for jobs and foreign exchange, and the external jobs market for further employment and remittances. Remarkably, we have a very educated young labour pool ready to tackle the challenges, but we need to remove the hurdles they face: nepotism, crony capitalism, and the stagnant services sector, which is only worsened by short-term profit motives.

The question, now, is this: what will spur the economy to reach the trillion-dollar target and the middle-income status? The answer lies within ourselves.

In an article on her Substack titled "Visiting the Future," Susan Crawford, a law professor at Harvard University, wrote in an admiring tone about the climate adaptation of Bangladesh after visiting the country. "They, too, are living in a future that hasn't quite reached everyone in the US yet. Extreme heat, salty water, destructive sea level rise and storms are all facts of life in Bangladesh," she wrote. "The country, in one of the most densely populated and lowest-elevation regions on the planet, was among the first to recognise the need to adapt to the climate changes that are already baked into our world." In her opinion, the country is ahead of the US on the climate curve, and she concluded very optimistically that "being there felt like visiting the future."

How can this country and its leaders, then, miss the cue on the world's economic future? We must marshal our resources and exploit the broad global economic trend. But we also need to support the economy's evolution from agriculture to manufacturing, and now to services, to reflect changes in our growing domestic demand. Our exports need to take advantage of economies of scale with a diverse array of manufacturing and services.

My friend, Prof Rahul Roy of Boston University's School of Medicine, just returned from a trip to Kolkata. I was curious to know how West Bengal was doing amidst the "chaos" in India. He simply said, "Fine." But he then added that West Bengal, like the rest of India, is moving towards rapid industrialisation. "Bangladesh needs to change direction to diversify and broaden its domestic market," he said. "As you know, the IT sector in India contributes only 15 percent to the GDP [actually, it is only 13 percent]. So, while you guys [Bangladesh] are going gung ho about AI and all that, the industrial sector needs to move away from its over-reliance on garments."

Prof Rashed Al Mahmud Titumir of Dhaka University agrees. In a recent article in The Daily Star, he outlines that the necessary conditions for our transition from the present stagnation are industrialisation, diversification, competitiveness, and technological catch-up through structural transformation to enhance the capabilities of our amazingly resilient labour force. Someday, a new cadre of leadership will tap into this opportunity with the spirit of embracing science, technology, innovation, and opportunity.

As I was finishing up this article, I came across a message from Prof Rehman Sobhan: "We are taking development forward, but there are gaps and continuing weaknesses of our institutions. This is a very central element," he said at the launching event in Dhaka of the book Fifty Years of Bangladesh: Economy, Politics, Society and Culture, that he co-authored. I am glad that he and I see eye to eye on some matters.

Dr Abdullah Shibli is an economist and works for Change Healthcare, Inc, an information technology company. He also serves as senior research fellow at the US-based International Sustainable Development Institute (ISDI).​

Labour intensive digital economy is growing
AFSAN CHOWDHURY
Published :
Apr 08, 2024 22:10
Updated :
Apr 15, 2024 21:32




Graduate employment is highly stressed in Bangladesh with the middle class unable to cope with the nature of changing market demands and its contingent labour market. The World Bank says the rate of unemployment is roughly 4.7 per cent but it's based on official statistics which is rarely reliable. It could be more or less but field level data by researchers show more hidden employment than is thought of.

Barring the hardcore unemployed including the disabled, it's best to say we don't know accurately and research doesn't throw up high rates. The problem is in the sushil white collar sector or the graduate desk bound jobs.

Many new urban employment sectors are emerging which are less known. One sector that is almost invisible is the global digital sector involved in both legal - freelancing -and non-legal employment led by gaming and betting.

Former Planning Minister MA Mannan had said that Bangladesh's economy was increasing due to the contribution of the freelancers. This was stated by him at a meeting, titled "City Bank BFDS Conference", organized by Bangladesh Freelancer Development Society (BFDS). "Our remittances are growing with the money earned by freelancers," Mr Mannan remarked. Freelancers will get 4 per cent cash assistance against the money brought home and it has been helped by the availability of the internet.

The size of the freelancer market is important. BFDS Chair Dr Tanjiba Rahman said the global market size of freelancers is about $1.5 trillion. There are over 10 lakh Bangladeshis working in this market, both online and offline. In fact, it's the global market segment that has withstood all pressures caused by the various conflicts around the world and the Covid pandemic as well.

With a 26 per cent growth rate, it's a very healthy situation. Of the 1.0 million freelancers, 0.65 million are in the field of IT.

Almost 75 per cent of freelancers are doing it as a part-time job. Freelancing in Bangladesh serves as a very good antidote to the current pay scale in our country relating to the educated.

Although the GOB is now promoting this sector, it has no role in the development of this sector. In fact, like all the major successful sectors such as external migration and RMG it can't claim any credit for its birth, growth and development. They have expanded due to opportunities taken advantage of by the entrepreneurs themselves, individual and collective.

While the RMG sector was the product of the initiatives of the better off investors, both external migration and digital freelancing belong to the rural and urban middle class respectively. It has been on for several decades and its only now being recognized by the GOB as dollar shortage has become an issue and freelancing has gained importance due to that.

Many problems and obstacles are there which the formal regulatory agencies can tackle and agencies can help. These include better policing of the internet scam including those aimed at the freelancers, training initiatives and help the freelancers with better capacity to negotiate and deal with new and regular clients. Lack of English language skills remains a major issue. However, as with the migration sector, the interest is more about incoming dollars and less about the sustainability of the sector as a whole by supporting the workers there.

The informal and non-legal digital sector is of course a shadowy world. The rise and explosive growth of the internet gaming and betting sector has largely gone unnoticed in the media but its growth is phenomenal and is the largest internal economic sector drawing particularly the young.

"The total value of bets placed through sports betting is estimated at around 8.5 billion taka per year. As of today, the most popular sports in Bangladesh are cricket, football, athletics, cycling, swimming, and other sports that are played in South Asia. The most popular sporting event in Bangladesh is the cricket match between Bangladesh and India. Each year, more than 10 million Bangladeshi people view cricket matches on television, which is the highest number of viewers of any event in the country."

No estimate is possible but that millions of bettors are involved is a fact. The issue is, most don't guarantee regular payments but like all gambling outfits offer uncertainty and insecure income. On top of that a significant percentage of the outfits operate outside the law. However, the gambling market size is so huge that international betters are hiring locally for even external employment.

Most of the gambling networks are controlled from outside Bangladesh and the locals are not English friendly. As a result a new sector has grown up where youth are hired and taken abroad to work in betting help centres who can communicate with Bangladeshi clients.

Given the internet penetration in Bangladesh, this can only grow. Unlike the freelancers their work is only of one kind and the system of payment is also not transparent. Their linkages with the other sectors including drugs and sex work sites are also common knowledge.

The fact remains that the formal institutional economy is weak in Bangladesh and given the global competitive scenario, the chances of becoming competitive is not high. The formal sector and the state agencies are unable to develop a framework that ensures higher employment. Plus the education system is not employment friendly. That has led to this situation where informal employment arrangements by individuals and groups score much better than state agencies.

Since nothing suggests that the capacity of the GOB to be a major player in employment generation is about to happen quickly, the support and capacity development will be fulfilled by the private sector. They do exist but much more needs to be done to meet the growing demand of the internet-based private sector labour intensive economy.​

Aziz Mohammad Bhai buys 27 lakh new shares of Olympic Industries
He now holds 17 percent or Tk 499 crore worth of shares of the company

Aziz Mohammad Bhai, chairman of Olympic Industries, has completed purchasing 27 lakh new shares of the company at prevailing market price through the Dhaka Stock Exchange (DSE).

With the purchase, he now holds 17 percent shares of the company at the end of June 2023.

The value of the 3.37 crore shares he presently owns stands at Tk 499 crore, according to a posting of Olympic Industries on the DSE website today.

Of the 19.99 crore shares of the company, directors and sponsors now hold 44.66 percent shares, foreign shareholders 23.96 percent, general investors 11.51 percent and institutional investors 19.87 percent as on June 30 of 2023.

The largest biscuit maker in Bangladesh made a profit of Tk 155.6 crore in the 2022-23 fiscal year ending on June 30, up 29 percent year-on-year, according to the company's annual report for 2023.

The share price of Olympic has been experiencing a falling trend. In the last one year, its highest price was Tk 176.8 on April 26 of 2023 and the lowest Tk 141.2 on November 27 same year.

Today, Olympic shares ended the day at Tk 148, down 0.54 percent from the previous day.

The stock investors feel encouraged when an owner purchases shares of a company amid a price falling trend, said Mohammad Emran Hasan, managing director and chief executive officer of Investit Asset Management.

"When a sponsor purchases shares of his/her own company, it means the person has confidence in the company's stocks and it gives confidence to the small investors."

The investors who have available cash should invest ideal money on the stock market during a falling trend, because within a few months the prices will rise again, he said.​

Bangladesh govt's debt servicing for foreign loan soars
Interest payment crosses $1 billion mark for the first time



Bangladesh's foreign debt servicing surged by 49 percent, driven by a spiralling interest payment that crossed the $1 billion mark for the first time. This increase is due to the country's rising borrowing from high-interest sources.

In the July-March period of the fiscal year 2023-24, the government paid $1.05 billion in interest, which is 117 percent higher than the $485 million it paid during the same period a year ago. This data was released by the Economic Relations Division (ERD) yesterday.

During the same period, the repayment of the principal amount of foreign loans rose by 22 percent year on year to $1.5 billion.

Overall, debt servicing soared by 49 percent to $2.57 billion in the July-March period of FY24, compared to the same period a year ago.

The pressure on loan servicing is rising with the government's increased borrowing to finance large infrastructure projects. These projects include the Dhaka Metro Rail, Matarbari Coal Power Plant, and Rooppur Nuclear Power Plant, funded by bilateral and multilateral sources.

As of December 2023, the external debt of the Bangladesh government stood at $79.6 billion. This figure was approximately over 13.7 percent of the nation's Gross Domestic Product in the fiscal year 2022-23.

In recent years, the government has borrowed a good amount of money from multilateral agencies. This was done to help the economy navigate the crisis caused by the coronavirus pandemic and the global economic turmoil following the Russia-Ukraine war.

Officials have stated that loans taken from foreign sources now have a shorter grace period. Additionally, interest rates are now tied to the global reference rate -- the Secured Overnight Financing Rate (SOFR). This rate replaced the London Interbank Offered Rate (Libor) last year.

In recent periods, the SOFR rate has seen an increase.

Official data revealed that Bangladesh paid $935 million in interest payments in FY23, nearly double the $491 million paid a year ago.

The latest data from the Economic Relations Division (ERD) showed that the overall commitment from foreign lenders grew by 135 percent year on year to $7.2 billion in the July-March period of FY24. However, disbursement only increased by 5 percent year on year to $5.6 billion in the nine months leading up to the end of March 24.​

3rd Loan Tranche: IMF team to focus on four key areas
Forex reserves, inflation, banking sector, revenue reforms to come up for talks



During its visit to Dhaka, the International Monetary Fund's review mission will focus on Bangladesh's foreign exchange reserves, inflation rate, banking sector, and revenue reforms.

The 10-member IMF mission is scheduled to reach Dhaka today, and from tomorrow, it will begin to hold meetings with the finance division, Bangladesh Bank, the National Board of Revenue, and other government bodies.

The mission will stay in Dhaka until May 8. The IMF has already sent more than 100 questions to the government officials.

Since the IMF approved the $4.7 billion loan for Bangladesh in January last year, the multilateral lender has so far released $1.16 billion in two tranches.

Bangladesh sought the loan amid a crisis of forex reserves.

However, the reserves have not improved since the loan programme commenced. The country's gross forex reserves have been around $20 billion in recent months, as per an IMF calculation.

One of IMF's major conditions for the loan is that Bangladesh maintain a certain net international reserves (NIR). Bangladesh failed to meet it in the first review, and is going to fail this time again.

Besides, inflation has been over nine percent since March last year.

During a press briefing on the sidelines of the Spring Meetings of the World Bank Group and IMF in Washington, DC on April 18, IMF's Asia and Pacific Director Krishna Srinivasan said Bangladesh's reserve position has not improved much.

Referring to Bangladesh's elections, he said, when elections take place, there's always some uncertainty about prospects. This affected part of the financial account, he added.

"But also, I think it's important for Bangladesh to transition to a more flexible exchange rate regime. That will be important to build external resilience and build buffers and build reserves. So, I think that is the area where engagement and dialogue continues in terms of allowing the exchange rate to be more flexible so that reserves can be built up, so that, in a sense, will be a key priority for the country going forward," he said.

For macroeconomic stability, the visiting IMF mission will discuss matters related to fuel, power and energy subsidies, public debt, upcoming budget, and performance of the state-owned enterprises.

For over a decade, Bangladesh's revenue collection has been around eight to nine percent of the GDP. The IMF loan programme has several reform proposals for the revenue sector.

Also, several reform proposals for the banking sector and their progress including implementation of the bank company act will be discussed during the IMF mission's visit.​

IMF suggests raising power, gas and fertiliser prices



The International Monetary Fund yesterday recommended reducing government subsidies by hiking prices of power, gas and fertiliser, and spending the saved money on society safety net programmes.

The visiting IMF mission, during a meeting with finance ministry officials, also recommended the inclusion of more poor people in the programmes and better monthly allowances for them.

The mission, led by Chris Papageorgiou, held a series of meetings with the officials of the Finance Division and the Financial Institutions Division yesterday. It also discussed the government's macroeconomic framework, implementation of laws related to the banking sector and financial institutions, classified loans, and Bangladesh Bank's move to merge banks.

Finance ministry officials said the government has decided to gradually hike the prices of power and gas over the next three years to the level of their production costs.

The measures would be implemented so that the government does not have to subsidise the sectors, said an official. The official, however, said the government has no plans now to increase fertiliser prices.

The IMF mission during a meeting with the Finance Division was told that the government would continue subsidising the agriculture sector.

After entering into the IMF's $4.7 billion loan programme in January last year, the government hiked the prices of electricity and gas several times. It had increased the price of urea fertiliser by 5 percent in August 2022, after 11 years.

Since the 2022-23 fiscal year, the government's subsidy on electricity, gas and fertiliser nearly doubled.

In the current fiscal year, subsidy allocation is Tk 84,542 crore and it could be about the same next year, Finance Division officials told the IMF mission.

The IMF wanted to know whether the government had any plans to increase allowance for the poor under social safety net programmes and what the government was planning next regarding the programmes.

Officials told the mission that they were going to increase the number of beneficiaries by around five lakh but there were no plans to improve the allowances due to fund constraints.

About 58 lakh elderly people are getting Tk 600 per month in the current fiscal year. Their number will be increased by two lakh in the next fiscal year.

All eligible senior citizens are getting the benefit in 262 upazilas. All eligible individuals in the remaining 233 upazilas will be brought under the scheme gradually.

The officials said about 2.5 percent of the GDP would be allocated for society safety net programmes next fiscal year.

The finance ministry issued two circulars to bring all safety net programmes under a new structure to reduce waste, misuse, and corruption.

The IMF mission, during its meeting with the Financial Institutions Division officials, said it supported the policy of merging banks and laid importance on following international best practices while implementing the move. It said India took a similar move and it yielded good results.

The IMF mission recommended reducing state-owned banks' classified loans to 10 percent from over 20 percent and wanted to know what action the government was taking against wilful loan defaulters, meeting sources said.

The officials told the mission that commercial banks would send lists of wilful defaulters to the central bank and the central bank would take action as per the bank company law.

During another meeting, the Finance Division presented the country's macroeconomic projection before the IMF mission, sources said.

The officials told the IMF mission that they revised the GDP growth to 6.5 percent from 7.5 percent for the current fiscal year. The inflation target was revised to 8 percent from 6.5 percent.

The next fiscal year's GDP growth target is 6.75 percent and the inflation target is 6.5 percent, they said.

The IMF said the targets were challenging and laid importance on introducing market-based interest and exchange rates.

The IMF mission is in Dhaka for its second review of the $4.7 billion loan programme before releasing the third tranche. Since it approved the loan in January last year, the multilateral lender has released $1.16 billion in two tranches. The release of the third tranche would depend on the outcome of this visit.​

Expectations for a good budget

How do you define a good budget? Should it be all-inclusive? Should it be too large? Or should it only focus on the possible future of the nation and allocate more to education and healthcare?

One may also argue for creating more space for the people belonging to the bottom of the pyramid by expanding the social safety net.

With a lot of historic pinches on our revenue earnings as well as earnings from external sources, we all possibly agree on applying a bit more caution while delineating the fund deployment or allocation strategy through budget formulation and management of resources.

Senior citizens and development partners are already talking about maintaining austerity in government expenditures. In a country facing a revenue shortfall, there is no doubt that an all-out drive should be given to revenue generation.

However, as many agencies have recommended, given inflationary pressure, the ceiling for tax-free individual income should be increased. This, on the face of it, may deprive the government from some tax revenue but this can easily be made up by efficient taxation and management and relooking at the tax exemption parameters.

First, the collection should be improved through the adoption of various means followed in similar countries. Second, some sectors have been getting tax exemptions for many years. There should no doubt be an end to that. There must be a sunset clause to end such tax exemption.

This will also help the government to prepare for its graduation from the least-developed country category which is due in 2026. Following graduation, such discretionary tax exemption will not be possible.

The tax structure should also be made progressive and reliant more on direct tax rather than indirect tax, which impacts the poorer section largely.

The other part of the budget is expenditure. Given high inflation, the budget for fiscal year 2024-25 should be contractionary. This calls for prioritising projects that are critically important and employment-creating. Policy-makers should pick only a few high-impact projects and smaller or less important projects should get less attention.

The operational cost should be kept to a minimum by looking more diligently at the wastage side of it. Next comes the mostly politically motivated block allocation. Though I don't have a correct recipe, the time has possibly come to rethink the use of public offices or resources for personal wealth-building or siphoning off money abroad.

Enough allocation must be kept for social safety net programmes for the downtrodden people.

Choosing the right projects with well-trained project managers and getting those revalidated by the expert groups have been discussed for a long time. We need to walk the talk now. It is for the greater interest of public good and better utilisation of hard-earned public money.

The budget for the next fiscal year comes at a critical juncture as the government has targeted higher economic growth. On the other hand, the economy is faced with several challenges, including high inflation, low revenue collection, the volatile exchange rate, and declining forex reserves.

Therefore, the budgetary measures should show the way to overcome these challenges. It is not the time to experiment with too many avenues or to be too hung up on growth phobia.

Like the corporate bodies, the government may also try to follow the norm -- earn money, spend money and spend more money to generate investment and thereby employment. Any penny saved should go for future nation-building through education and healthcare.

The author is an economic analyst.​

Bangladesh enjoys better economic stability than Pakistan: Shehbaz Sharif
FE ONLINE DESK
Published :
Apr 27, 2024 11:19
Updated :
Apr 27, 2024 11:19



Commenting on Bangladesh's economic growth, Pakistan Prime Minister Shehbaz Sharif has said although the then 'West Pakistan' once considered 'East Pakistan' as a burden, independent Bangladesh has made tremendous strides in industrial growth.

According to Shehbaz Sharif, Bangladesh now enjoys better economic stability than his own country.

During recent interactive session with the business leaders of Pakistan, Sharif recalled, "I was quite young when... we were told that it's a burden on our shoulders...Today you all know where that 'burden' has reached (in terms of economic growth)."

"And we feel ashamed when we look towards them," he added.​

Banks asked to increase forex inflow
Bangladesh Bank today sat with five leading private commercial banks



Bangladesh Bank has asked managing directors of different banks to find out ways to raise foreign currency inflow to give a boost to the country depleting forex reserves.

They were also ordered to bring foreign currencies through banks' offshore banking units as the central bank has recently relaxed the rules for such units.

Bangladesh Bank Governor Abdur Rouf Talukder made the call in a meeting with the managing directors of five leading private commercial banks— Brac, City, Eastern, Mutual Trust and Dutch-Bangla—at the BB headquarters in Dhaka today.

Bangladesh has huge payments to make in the days to come, but its forex reserves continue to fall, as it stood at $19.97 billion as on April 24, down from $23.3 billion in July 26 of last year, BB data showed.

Meanwhile, the Offshore Banking Act 2024 passed in parliament on March 5 has barred the government to charge any tax on the profits that foreigners make in the offshore banking units of Bangladeshi banks.​

Rationalise tariff to protect local industry
Entrepreneurs demand



Entrepreneurs yesterday emphasised the need to follow Bangladesh's tariff policy when imposing duties on imported goods.

They raised the issue at a seminar, titled "Role of Bangladesh Trade and Tariff Commission in protecting interests of local industries".

The event was organised by the Chittagong Chamber of Commerce and Industry (CCCI) at the World Trade Centre in the port city.

Omar Hazzaz, president of the CCCI, chaired the event while Ahmed Munirus Saleheen, chairman of the Bangladesh Trade and Tariff Commission, spoke as chief guest.

Shish Haider Chowdhury, a member of the commission, presented a paper while Customs Commissioner Faizur Rahman spoke as special guest.

Speakers also highlighted the need to protect local industries and also requested the commission to rationalise tariffs so that local industries can do better.​

IMF Loan: Govt may miss two key targets set for fourth tranche

The government is likely to ask the International Monetary Fund (IMF) to revise down two key targets related to Net International Reserves (NIR) and tax revenue collection, set for June this year for the release of the fourth tranche of its $4.7 billion loan, finance ministry officials said.

An eight-member IMF mission, led by Chris Papageorgiou, has been in Dhaka since April 24 for the second review of the loan programme before releasing the third tranche worth $681 million, expected in June.

The mission held a series of meetings with key government bodies, including the finance ministry, Bangladesh Bank and National Board of Revenue (NBR) over the last few days, and is now assessing Bangladesh's progress related to the conditions set for the third tranche.

The meetings also discussed the key conditions for the fourth and fifth tranches, officials said.

The fourth tranche is expected in December this year.

Yesterday, the IMF mission held a meeting with government officials and came up with a mid-term review on the outcome of the meetings held in the past few days.

Already, finance ministry and Bangladesh Bank officials communicated with the IMF mission that the government may fail to meet the NIR and revenue collection targets set for the fourth tranche on time.

For the third tranche, Bangladesh has met all but one conditions related to NIR set for December last year. The revised NIR target was $17.78 billion in December, but the country fell short by $58 million.

For the fourth tranche, the IMF set the NIR target for June this year at $20.1 billion.

As its loan condition, IMF considers NIR by deducting about $3 billion from the gross reserves. So, if Bangladesh is to meet the $20.1 billion NIR condition, its gross reserves have to cross $23 billion in June.

However, the reserve situation has not improved much since the commencement of the loan programme January last year. The country's gross forex reserves have been around $20 billion in recent months, as per an IMF calculation. It was $19.97 billion on April 24.

The government had expected the reserve to improve after the January 7 election, but it did not.

The central bank blames it on the huge deficit of financial account of balance of payment, which crossed $8 billion in the first eight months of the current fiscal year.

According to the IMF assessment, the reason behind the deficit in the financial account is that the exchange rate is not market-based. As a result, export proceeds are not coming to the country while remittances are coming through unofficial channels.

A finance ministry official said even if IMF revised down the NIR condition, it could put various conditions to make the exchange rate market-oriented.

Meanwhile, although Bangladesh has met the floor tax revenue collection target for the third tranche, it may fail to meet the target of collecting Tk 3,94,530 crore by June set for the fourth tranche, finance ministry sources said.

To meet the June target, 20.39 percent growth in tax revenue collection is required. However, in the first seven months of the current fiscal year, tax revenue collection growth was 12 percent.

As per the finance ministry estimate, highest Tk 3,80,000 crore could be collected by the end of June.

For the $4.7 billion loan, the IMF has set two types of conditions -- six performance conditions and several structural conditions.

For the next tranches, the government has been discussing structural conditions with IMF.

A finance ministry official said IMF may set a condition for the government to reduce its spending on subsidy.

The government has already introduced an automated pricing formula for fuel as it no longer subsidises the sector.

However, as the government still provides subsidy for electricity and gas, the IMF may set conditions to follow a timeline for gradually reducing subsidy for these two items.

Already, IMF has collected data on government spending in subsidy for electricity and gas.

The global lender has also put several conditions for NBR to increase revenue collection.

Under one condition, NBR has to finalise its medium- and long-term revenue strategies covering indirect and direct taxes and accompanying implementation framework by September this year.

Another condition is requirement of e-return filing and online payment for tax years starting after June 30, 2024, for all large corporations and any corporation that claims any tax performance (such as an exemption, lower tax rate, or tax holiday) by the end of June 2025.

Also, IMF may put a condition to reduce default loan including setting a ceiling on the percentage of classified loan.​