[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Worry about economic woes over now Finance minister tells economic reporters

Concern about the country's economic condition is now all over, claimed the finance minister on Sunday and presented before journalists a brief account of the latest macroeconomic developments. Mr Abul Hassan Mahmood Ali told the economic reporters that due to higher remittance inflow and an incre

thefinancialexpress.com.bd

Worry about economic woes over now Finance minister tells economic reporters
Finance minister tells economic reporters​

Apr 01, 2024 00:11

Updated :​

Apr 01, 2024 00:11

Concern about the country's economic condition is now all over, claimed the finance minister on Sunday and presented before journalists a brief account of the latest macroeconomic developments.

Mr Abul Hassan Mahmood Ali told the economic reporters that due to higher remittance inflow and an increase in export earnings, the dollar crisis eased significantly, leading to improvement in the country's overall the economic condition.

The finance minister was speaking at a pre-budget discussion with a delegation of the Economic Reporters Forum at his secretariat office in the capital, Dhaka.

The ERF team placed a number of recommendations with the minister for consideration as the budget for the next fiscal year is on the anvil with inputs drawn from various quarters concerned.

Mr Ali noted that some people were telling that the country was heading for an economic situation that Sri Lanka experienced-political upheavals triggered by an abrupt financial meltdown in the South Asian island nation.

However, he said, that apprehension proved to be "wrong".

The new economic pointsman of the Awami League government pointed out some developments in the positive direction on the financial front. He said a delegation of the Asian Infrastructure Investment Bank (AIIB) met him recently and assured him of extending financial support as much as needed.
On getting such assurance he feels that there is "nothing to feel concerned about".

"There is no crisis in the country," he said.

The minister thinks whatever needed people are getting those. But he agreed that there is some sort of dissatisfaction brewing over the commodity prices. "The country is running in line with the open-market-economy concept," he said.

Finance Division secretary Dr Khairuzzaman Mozumder said in the last one to two months the country's economy performed "very well". "Our export is rising continuously, remittance is also increasing. The exchange rate has become somewhat stable."

And the good news is the development partners are also telling that Bangladesh's economic condition is becoming stable, he said.

In its proposal, the ERF, the apex body of Dhaka-based economic reporters, advocated for reduction in duty on import of some basic commodities to help lessen the impacts of high inflationary pressure on the consumers.

Also, the forum suggested raising agri-subsidy, lowering import duty on cattle, poultry, and fish feeds, incentives for cottage, micro, small, and medium enterprises, providing subsidy to the exporters in different names like technology-upgrading fund or skills- development fund after Bangladesh's graduation from the least-developed-country club, and ensuring gas and power supply in the industrial units at any cost.

The ERF-delegation members also urged the minister for creation of trustworthy environment in the banking system, ensuring transparency and accountability in the energy sector, stopping gold smuggling, allowing offshore investment by Bangladeshi large businesses, not taking any new mega-infrastructures in next three years, and steps for employment generation, among others.​

 

[Saif]

Remittance drops even before Eid

Remittance dipped in March ahead of Eid-ul-Fitr, in a departure from the historical trend that saw inflows take a spike centring on the biggest festival in the country.

www.thedailystar.net

Remittance drops even before Eid

Remittance dipped in March ahead of Eid-ul-Fitr, in a departure from the historical trend that saw inflows take a spike centring on the biggest festival in the country.

In March, migrant workers sent home $1.99 billion, down 1.23 percent year-on-year, according to data from the Bangladesh Bank.

March's receipts were the lowest in 2024, raising concerns about whether the wheels have come off on the rebound seen in remittance inflows from October last year.

Last month's inflows take the total so far this fiscal year to $17.07 billion, up 6.5 percent year-on-year -- a modest growth given the manpower exports in recent times.

In 2023, a record 13.05 lakh workers went abroad for jobs, up 15 percent year-on-year, according to data from the Bureau of Manpower, Employment and Training.

BB Spokesman Md Mezbaul Haque, however, refused to say whether remittance has decreased last month. "There may be a slight increase or decrease," he said.

The reason for the unusual drop in remittance ahead of Eid is that the unofficial rate of the dollar is much higher than the one offered to remitters through the official channel.

Banks can offer the highest Tk 114.5 per dollar, including the Tk 2.5 government incentive, but some are offering up to Tk 120 per dollar, according to bankers. The official exchange rate is Tk 110.

In the last month, the highest amount of remittance came through Islami Bank: $492 million. This was followed by BRAC Bank ($125 million), Trust Bank ($114 million) and Social Islami Bank ($109 million), BB data showed.

On the other hand, some banks were not able to bring a single penny of remittance in March.

Banks are not offering that high rates now as the foreign exchange market is relatively liquid due to the growing trend of export earnings, said Mirza Elias Uddin Ahmed, managing director of Jamuna Bank.

"This may be the reason behind the dip. While remittance inflow of March was not at the expected level, the trend is not bad," he said.

Exports brought home $38.5 billion in the first eight months of the fiscal year, up 3.7 percent year-on-year, according to data from the Export Promotion Bureau.

Ahmed and Syed Mahbubur Rahman, the MD of Mutual Trust Bank, expressed hope that inflows will start picking up from this week centring on Eid.

Eid-ul-Fitr is expected to take place on April 11.

"We need much bigger inflows of dollars to stop the fall of foreign exchange reserves," said a senior official of the central bank on condition of anonymity.

On Wednesday, reserves stood at $19.45 billion, down by a staggering $533.82 million in a week, due to the BB's selling dollars to commercial banks.​

 

[Saif]

Digital currency: Is it the future of money?

CBDCs are a form of digital currency regulated by a country's central bank. They are similar to cryptocurrencies, but their value is fixed by the central bank.

www.thedailystar.net

Digital currency: Is it the future of money?
Experts suggest Bangladesh Bank should explore the prospects of digital currency in building a cashless societ

Participants pose for photos at a roundtable titled "Future of Money: Central Bank's Digital Currency", jointly organised by the PRI and The Daily Star at The Daily Star Centre in Dhaka yesterday. Photo: Rashed Shumon

The government should proactively explore how the adoption of a digital currency can add value to the economy while maintaining coherence with Bangladesh's social and political climate, experts said yesterday.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the widespread adoption of central bank digital currencies (CBDCs) represents a significant evolution in the monetary system.

CBDCs are a form of digital currency regulated by a country's central bank. They are similar to cryptocurrencies, but their value is fixed by the central bank.

"We have to show more excitement for a CBDC. It doesn't mean that we will do it now. We should identify its limitations and advantages so that we can do it better even if we are late in implementation compared to other countries," he said.

"We have taken a stand on cryptocurrencies by banning them… but for the CBDC we have to take decisions more proactively," he added.

"I am not sympathetic towards cryptocurrencies as they are not backed by central banks and vulnerability and volatility are associated with them," he said.

He said Bangladesh was in a state of inertia regarding the CBDC, adding that the country must strive to digitalise transactions no matter what, even if it does not adopt a digital currency.

He was speaking at a roundtable titled "Future of Money: Central Bank's Digital Currency", jointly organised by the PRI and The Daily Star at the Azimur Rahman Conference Hall at The Daily Star Centre yesterday.

"Our digital infrastructure has to develop more, and our digital outreach and inclusiveness must broaden so that the next generation can carry out digital transactions," he added.

He said the introduction of the CBDCs was being witnessed across the globe.

"We must look at what other central banks are doing. We must explore why India is moving fast for a CBDC while China is reluctant and the USA is not proactive," he said.

"There are some tacit reasons and if we could understand and analyse these reasons, we can devise our strategy," he said.

Mohammad Abdur Razzaque, research director at the PRI, presented the keynote at the roundtable.

He said the potential benefits of the CBDCs include improved transaction efficiency, reduced costs of printing money, enhanced security against counterfeiting, and the promotion of a cashless economy to combat financial crimes.

Former finance minister Mustafa Kamal had made a remark about conducting a feasibility study on the adoption of a CBDC. However, there are no notable updates regarding this issue, said Razzaque.

He said people mistakenly believe that the CBDCs are the same as existing cryptocurrencies. However, unlike cryptocurrencies, the CBDCs are backed by the country's financial system and are considered legal tender, he said.

Contrary to cryptocurrencies, the acceptance of CBDCs for transactions is mandatory, akin to traditional fiat money, which is a type of currency that is not backed by a precious metal, such as gold or silver.

Implementing the CBDCs will require a transaction record system, accessible service interface, reliable ledger, and secure storage solutions.

In a global survey conducted in 2020, 86 percent of central banks were actively exploring the CBDCs, a significant increase from the 65 percent reported in 2017.

In another study, the Bank for International Settlements said 15 retail and 9 wholesale CBDCs could be in operation by 2030.

Jamaica, Zimbabwe, Nigeria, and the Bahamas have officially launched CBDCs while numerous others are either researching, developing, or piloting similar programmes.

However, there are concerns about Bangladesh's digital preparedness which need to be addressed for successful implementation, Razzaque said.

"Bangladesh has marginally improved in global digital rankings, specific areas like network readiness, cybersecurity, and online services. However, digital literacy is still low, with over half of households unaware of the use of the internet and a significant portion lacking basic digital skills."

There are significant challenges in terms of cybersecurity, evidenced by past incidents like the Bangladesh Bank reserve heist.

Compromised databases and instances of hacks raise privacy concerns and security regarding the CBDCs while widespread internet usage amplifies worries about personal and financial data security.

The possible features for the CBDC design can be categorised into three main groups: instrument, system, and institutional features. It is crucial to adhere to the desired features to achieve the expected outcomes, Razzaque suggested.

He warned that any challenges impeding citizens' accessibility to the CBDC could exacerbate the digital divide.

He recommended setting realistic goals, with the existing cash-dependent economy in mind, for enhanced benefits. "It's crucial to recognise the additional benefits of a CBDC beyond simply promoting a cashless economy," Razzaque said.

Policymakers should also consider other critical functions of a CBDC, such as improving financial efficiency and transparency, facilitating and implementing a more effective monetary policy, providing social protection allowance more efficiently, and fostering the development of a digital financial ecosystem.

Formulating and updating digital infrastructure and institutional regulatory frameworks and improving mass digital literacy, fintech knowledge, addressing the digital divide, and data security are also important.

Jamaluddin Ahmed, board member of bKash, said Bangladesh first needs to shift from the current analogous bureaucratic system to a digital one to implement the CBDC.

"We are already lagging behind as Bangladesh is not among the 108 countries who are in the pilot stage for CBDC implementation," he said.

"We need to make gradual progress. It cannot happen overnight."

Ashikur Rahman, a senior economist of the PRI, suggested doing a meta-analysis on the lessons learned from global pilot studies.

"We can take lessons from China and India and start a pilot programme with a new design in Bangladesh," he said.

"We are still doing homework," he added.

Although the country's mobile financial services are faring well, a significant portion of transactions are still done in cash, said Mohammad Aminul Haque, additional managing director of Nagad.

"Although it will be difficult to eliminate cash, the country should optimise digital transactions to their fullest potential," he added, pointing out the lack of a skilled workforce.

Arif Rahman, manager of MicroSave Consulting, said the focus must be on increasing technology adoption among citizens by providing more user-friendly technology.

Tanjim Ferdous, in-charge of NGOs and Foreign Missions at The Daily Star, moderated the event.​

 

[Saif]

Forced bank mergers could be counterproductive

The government should come up with a clear guideline complying with the global best practices before compelling banks to merge, the World Bank has said.

www.thedailystar.net

Forced bank mergers could be counterproductive
Says WB, calls for proper evaluation of asset quality of weak banks

File photo

The government should come up with a clear guideline complying with the global best practices before compelling banks to merge, the World Bank has said.

"Forced bank mergers may be counterproductive without a thorough assessment of asset quality," the WB said in the latest edition of its Bangladesh Development Update, which was released yesterday.

An assessment of the asset quality of weak banks will be required such that the good banks are not weakened for taking on the bad banks.

"It's very important that an asset quality review is completed using international definitions to really understand what are the strengths and weaknesses of each bank so that good banks don't take on excess liabilities beyond what they are expecting," said Bernard Haven, senior economist of the WB.

A detailed guideline on mergers and acquisitions would allow banks a clear idea about the process involved, the report said.

The guidelines can be based on international best practices and provide alternative merger mechanisms for banks to choose from depending on the status of the banks or non-bank financial institutions deciding to merge.

"Rapidly implementing bank mergers before addressing these issues (proper assessment) may further undermine confidence in the sector, deterring intermediation capacity," the WB said.

The Washington-based multilateral lender went on to term the proposed merger of Exim Bank and Padma Bank a "forced merger without a thorough assessment of asset quality".
In addition, the government can take on comprehensive reform programmes for bringing down defaulted loans.

Non-performing loans (NPL) increased by 20.7 percent year-on-year in 2023. At the end of 2023, defaulted loans accounted for 9 percent of total outstanding loans, up from 8.2 percent a year earlier.

The ratio understates banking sector vulnerabilities due to lax regulatory definitions and reporting standards, repeated forbearance measures and weak regulatory enforcement, the WB said.

"The actual magnitude of the NPL problem is likely to be significantly higher due to the legacy of regulatory forbearance."

While the BB announced a bad loan resolution roadmap in February, which followed 2023 amendments to the Bank Company Act 1991, a strong political will is necessary to enforce the plan.

A legal framework is needed to manage the stock of distressed loans, it said.

"We have seen major steps towards addressing some of the vulnerabilities in the banking sector," Haven said, adding that full implementation of the roadmap will be critical.

Creating an efficient resolution framework for NPLs is urgently needed to maintain financial stability and revive private sector credit, the WB said.

Alongside NPL management, the recapitalisation of weak banks will be vital. Reforming and enhancing the governance and structure of state-owned banks is essential to ensure financial stability.

The WB also recommended removing the interest rate cap and flexing the foreign currency exchange rate.

Though the Bangladesh Bank took several initiatives in the last one and a half years to increase the foreign currency reserve and revive the vulnerable financial sectors, the initiatives were inadequate as those were taken belatedly, it said.

The WB cited the November 2023 decision of the Bangladesh Foreign Exchange Dealers Association to allow banks to purchase remittance inflows above the formal cap by providing additional incentive payments to further its point.

The BB also allowed deviations from the remittance exchange rate cap through verbal instructions to individual banks.

"This has resulted in the re-emergence of a de facto multiple exchange rate and the divergence of the interbank and kerb market exchange rates."

By mid-March 2024, the kerb market rate reached Tk 120.5 per dollar compared to the Tk 110 per dollar interbank exchange rate cap.

The exchange rate reforms are urgently needed to rebuild the external buffers.

"Implementing a sustainable exchange rate policy is key to stemming the significant depletion of foreign exchange reserves and restoring market confidence."

The BB's latest monetary policy indicated it is considering adopting a crawling peg system to move towards a more flexible exchange rate.

However, the timeline for implementation and a technical methodology have not been announced, the WB said.

"The crawling peg would need to be a market-clearing exchange rate mechanism that reduces the gap between the formal and informal exchange rates."

That would help rebuild external buffers by attracting remittances through formal channels, making informal channels less attractive and reducing the financial account deficit by expanding trade credit and other forms of external financing.

Delays in exchange rate reforms can result in the continued depletion of international reserves to critically low levels.

Failure to make timely adjustments could result in the persistence of arbitrage opportunities and reduced foreign currency inflows through official channels, thereby perpetuating import restrictions and input shortages.

"Inadequate supply of natural gas during the peak season and inability to import sufficient LNG due to foreign exchange shortages can disrupt industrial production and investment," the report added.

Faster and bolder fiscal, financial sector and monetary reforms can help Bangladesh maintain macroeconomic stability and reaccelerate growth, said Abdoulaye Seck, the WB's country director for Bangladesh and Bhutan.​

 

[Saif]

Policy reforms to help BD sustain strong growth

Breaking News, International News & Multimedia

thedailynewnation.com

Policy reforms to help BD sustain strong growth
3 Apr 2024, 12:00 am

Special Correspondent :

The World Bank (WB) had shown the economic growth rate 5.8 per cent in the fiscal year 2023 while it has forecasted that the economic growth for 2024 fiscal year will be 5.6 per cent.

Apart from it, bank mergers in Bangladesh need to be more cautious. The World Bank believes that banks should be merged based on asset quality and specific policies.

The global lending organisation is also opined that monetary policy should be tightened further to control the high inflation of Bangladesh.

Abdoulaye Seck, World Bank Country Director for Bangladesh and Bhutan came up with this while releasing the World Bank's twice-yearly-update on Bangladesh Development Update in the city on Tuesday.

According to the report, despite Strong Growth, South Asia Remains Vulnerable to Shocks, Bangladesh's economy made a strong turnaround from the COVID-19 pandemic, but the post-pandemic recovery continues to be disrupted by high inflation, a persistent balance of payments deficit, financial sector vulnerabilities, and global economic uncertainty.

The latest Bangladesh Development Update says that urgent monetary reform and a single exchange rate regime will be critical to improve foreign exchange reserves and ease inflation.

Greater exchange rate flexibility would help restore balance between demand and supply in the foreign exchange market.

Structural reforms will be key to diversify the economy and build resilience over the medium and long term, including measures to raise government revenues to support investments in infrastructure and human capital.

Persistent inflation eroded consumer purchasing power, while investment was dampened by tight liquidity conditions, rising interest rates, import restrictions, and increased input costs stemming from upward revisions in administered energy prices.

Private sector credit growth slowed further in FY24, reflecting a broader slowdown in investment.

The non-performing loan (NPL) ratio in the banking sector remains high and understates banking sector stress due to lax definitions and reporting standards, forbearance measures, and weak regulatory enforcement.

The Balance of Payments deficit moderated over the first half of FY24 driven by a surplus in the current account.

"Bangladesh's strong macro-economic fundamentals have helped the country overcome many past challenges," said Abdoulaye Seck.

He also said, "Faster and bolder fiscal, financial sector, and monetary reforms can help Bangladesh to maintain macroeconomic stability and re-accelerate growth."

The report's companion piece, the latest South Asia Development Update – Jobs for Resilience, also released on Tuesday, says South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.0% in 2024 and 6.1% in 2025.

Growth in South Asia is expected to be driven mainly by robust growth in India and Bangladesh, and recoveries in Pakistan and Sri Lanka.

But this strong outlook is deceptive, says the report. For most countries, growth is still below pre-pandemic levels and is reliant on public spending.

Persistent structural challenges threaten to undermine sustained growth, hindering the region's ability to create jobs and respond to climate shocks.

Private investment growth has slowed sharply in all South Asian countries and the region is not creating enough jobs to keep pace with its rapidly increasing working-age population.

"South Asia's growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon," said Martin Raiser, World Bank Vice President for South Asia.

"To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth."

South Asia's working-age population growth has exceeded that in other developing country regions. The share of the employed working-age population has been declining since 2000 and is low.

In 2023, the employment ratio for South Asia was 59%, compared to 70% in other emerging market and developing economy regions.

It is the only region where the share of working-age men who are employed fell over the past two decades, and the region with the lowest share of working-age women who are employed.

"South Asia is failing right now to fully capitalise on its demographic dividend. This is a missed opportunity," said Franziska Ohnsorge, World Bank Chief Economist for South Asia.​

 

[Saif]

Financial account deficit keeps widening

Bangladesh's financial account deficit is still widening, signaling that the pressure on the foreign exchange regime will continue in the upcoming days.

www.thedailystar.net

Financial account deficit keeps widening

Photo: Rajib Raihan

Bangladesh's financial account deficit is still widening, signaling that the pressure on the foreign exchange regime will continue in the upcoming days.

During July to February of this fiscal year, the financial account of the balance of payments (BoP) showed a deficit of $8.36 billion, up from a deficit of $2.32 billion in the same period in FY23, as per the latest data from the Bangladesh Bank.

The financial account covers claims or liabilities to non-residents concerning financial assets. Its components include foreign direct investment, medium and long-term loans, trade credit, net aid flows, portfolio investments, and reserve assets.

It stood at a deficit of $7.78 billion during the July to January period of FY24, BB data showed.

Industry insiders said that reduced short-term foreign borrowing by the private sector and declining balances in nostro accounts maintained by commercial banks with foreign banks were to blame for the growing deficit.

The financial account deficit persisted during July to February largely because the 'other investment (net)' segment of the BoP stood at $9.40 billion in the negative. It was $3.37 billion in the negative in the same period a year earlier.

In contrast, the gross flow of foreign direct investment rose only 1.55 percent to $3.14 billion. The net portfolio investment was $77 million in the negative during the period, up from $47 million in the negative in the same period last year.

Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told The Daily Star that payments outpaced income, which is why the financial account was still in negative territory.

She added that foreign loans to the private sector continue to fall, which indicates that investment is stagnant, which raises concerns about an impact on employment.

A recent World Bank report said that the current account deficit narrowed in FY23 and showed a surplus in the first seven months of FY24, driven by import suppression measures.

However, the financial account deficit persisted due to increasing outflows of trade credit and other short-term loans, it said.

The trade deficit, which takes place when the value of imports surpasses that of exports, narrowed to $4.62 billion during July to February this year. It stood at $13.35 billion in the same period of last year.

In the eight-month period, exports were up 3.76 percent year-on-year while imports dropped 15.36 percent.

Import payments have fallen mainly due to austerity measures put in place by the government and the central bank to stop the depletion of the forex reserves, which have fallen by 25 percent in the last year.

The current account balance returned to positive territory and climbed to $4.76 billion in the eight months of this fiscal year after standing at negative $3.45 billion in the same period of last fiscal year.

The country's overall balance was $4.43 billion in the negative in July to February of FY24, which was at $7.94 billion in the negative compared to the same period in the previous year, as per BB data.​

 

[Saif]

New budget to set 10 priorities to steady economy

The government plans to design a Tk 7,96,900 crore outlay in the new budget with a focus on tight spending policy as economic headwinds are expected to persist in the next fiscal year.

www.thedailystar.net

New budget to set 10 priorities to steady economy
Budget likely to be Tk 7,96,900cr

The government plans to design a Tk 7,96,900 crore outlay in the new budget with a focus on tight spending policy as economic headwinds are expected to persist in the next fiscal year.

The government set 10 priorities in the next budget and the battle against stubborn inflation comes on top.

It will also try to ensure that every village gets the facilities found in urban areas.

The draft outlays for the new budget were discussed yesterday at a meeting of the Fiscal Coordination Council, chaired by Finance Minister Abul Hassan Mahmood Ali.

This was the first meeting of the council since the new government assumed office after the January 7 parliamentary elections.

The draft budget is only 4.6 percent bigger than the original budget of the current fiscal year. The marginal increase would be because of the government's austerity measures.

Usually, budgets swell by 12 to 13 percent every year. The budget for the current fiscal year is Tk 7,61,785 crore, a 12.35 percent increase from the previous year.

A finance ministry official said, "A preliminary outline has been set. However, the figure could be changed slightly during finalisation before it is placed in parliament."

The development budget is likely to remain almost the same as that of the current year's budget.

As part of the government's tightening of the belt, the annual development programme (ADP) for the next fiscal year would see only a 0.76 percent or Tk 2,000 crore increase to Tk 2,65,000 crore.

A high official of the central bank told the meeting that the pressure on the economy would not ease in the first half of the next fiscal year. As a result, the government needs to continue the tight fiscal and monetary policy, said sources.

One of the priorities of the budget would be imposing slight contractionary policies, considering the global economic and domestic macroeconomic situations.

Another key priority is keeping the budget deficit to a containable level so that macroeconomic balance is ensured and inflation is reduced.

The budget would provide sufficient allocation for implementing the government's "My village-my town" vision.

Finishing fast-track projects on time; ensuring sufficient allocation for fighting climate-change impacts; ensuring food security; and expanding social safety net programmes, digital education, healthcare, and agricultural mechanisation are among the priorities of the budget.

At the fiscal coordination council meeting, the current economic situation, inflation, and foreign currency reserves were discussed, sources said.

The government aims to keep inflation at 6.5 percent in the next fiscal year.

The original inflation target for the current fiscal year, 6 percent, might be missed and the World Bank has said inflation would be at 9.6 percent this June. The government has revised the target to 7.5 percent.

The council yesterday assumed that the inflation target could be achieved by implementing tight monetary and fiscal policies and improving the supply chain.

It believed that it would not be possible to turn around the forex reserve situation unless the interest rates in foreign countries were cut.

A Bangladesh Bank official said the private sector would not be encouraged to take fresh loans from foreign sources if the interest rate does not go down.

The council also set a budget deficit target of 4.7 percent of the GDP. This year's budget deficit target is 5.2 percent.

While setting conditions for its $4.7 billion loan programme for Bangladesh, the International Monetary Fund set a limit of budget deficit to below 5 percent of the GDP to control higher inflation and ease forex pressure.

The government's overall revenue collection target is about Tk 5,00,000 crore this fiscal year and it would be Tk 5,40,000 crore next year.

The revenue growth target will be 4.5 percent higher than that of the current fiscal year.

The government aims to have its GDP growth at 6.75 percent next year. The economic growth goal is expected to be revised downwards to 6.5 percent from 7.5 percent.​

 

[Saif]

Achievements and expectations

BANGLADESH’S graduation to developing countries from least developed countries is only about 32 months away. During this transition...

www.newagebd.net

Achievements and expectations
Ferdaus Ara Begum | Published: 00:00, Apr 04,2024

— World Trade Organisation

BANGLADESH'S graduation to developing countries from least developed countries is only about 32 months away. During this transition period, active participation in the Multilateral Trading System under the World Trade Organisation is important to gain trade benefits and keep up its share in global trade. Reliant on a single product that too depends on imported materials, it is important to dig up details about its potential competencies and efficiently use domestic resources to sustain itself as a global player. The 13th Ministerial Conference held in Abu Dhabi from February 26–April 2 was one of the vital forums to raise related concerns. The Bangladesh delegation used its best source of power to play strongly to negotiate its issues throughout the whole run-up to the ministerial, although the achievements of LDCs were not up to the requirements.

More than 60 countries will have their elections in 2024. Our neighbouring country, India, tried to establish its case on Public Stock Holding and was not going to take any risk from its farmers, while the USA was not going to yield on a newly minted appellate body. It is difficult to get consensus among 166 member countries, but the WTO can still do a lot if it performs properly.


The Abu Dhabi Ministerial Declaration, adopted on March 2 and circulated on March 4, marked the 30th anniversary of the World Trade Organisation, emphasised meeting the objectives of the Marrakesh Agreement to address concerns of WTO members at different levels of economic development, and achieved important progress. It reaffirmed its commitment made in the 12th Ministerial Conference for necessary reforms in the functioning of WTO councils, committees, and negotiating groups to enhance its efficiencies, effectiveness, and facilitation of members' participation in WTO work.

It is, however, worrisome when dispute settlement mechanisms remain an unresolved concern for many years. This is a vicious cycle. Many more MCs may be required to address these unresolved issues. Meaning the stalemate in the two-tier WTO dispute settlement process continues. The MC13 could not lay out any concrete path forward for the restoration of the appellate mechanism; thus, the WTO reform has been made questionable. There were vast differences of opinion that it could not create any benefit.

One relief for Bangladesh, as per Trade Facilitation Article 20.2-3 (Understanding Rules and Regulations of Dispute Resolution Body), is a grace period of three years, and preferential tariff treatment for LDCs up to June 30, 2029, has been agreed. So for Bangladesh, the next 5 years are very crucial to complete preparation to face difficult situations after graduation.

The Abu Dhabi Ministerial Declaration has expressed its commitment to preserve and strengthen the ability of MTS, with the WTO at its core, to respond to the current trade challenges. It also places importance on transparency, including information sharing and promoting the resilience of global supply chains. Bangladesh has to take a lot of preparation in that respect; there are a number of pending time-bound issues and commitments under the TF agreement waiting for implementation by 2024, and information disclosure is one of them.

It is also true that, despite the commitment to strengthen the ability of MTS, a number of plurilateral and joint statement initiatives progressed and gained momentum. However, small gains, such as; investment facilitation for development, cannot be agreed upon to be included in the WTO rule book, which has the extensive support of about 123 members.

Similar is the case with domestic regulation of services. Two-thirds of global economic output and jobs are generated from services. Disciplines on services domestic regulation entered into force in February 2024 are committed to implementing these new disciplines. Bangladesh could not avail of any benefit from the service waiver. Services trade is increasing globally; we are lagging in confirmed data; goods exports were at $62 billion; the target for services was set at $10 billion in 2023–24; this means that services are contributing significantly to export trade. We also need transparency and information on the service trade as well as the goods trade.

The declaration also reiterated the development dimension in the work of the WTO and expressed a strong desire for the full integration of developing members and LDCs for their economic development using the MTS. It continued with their will to improve the application of special and different treatments in the Committee on Trade and Development.

The G-90 (75 per cent of WTO developing country members) document on Trade and Development identified 10 Agreement Specific S&DT Proposals (ASPs): giving importance to TRIMS policy support, GATT 1994 (Article XVIII-Retaliation), balance of payment, SPS and TBT issues most (longer time), subsidies and countervailing, customs valuation have specific importance in the context of Bangladesh, and need to work extensively for incremental benefits. These issues are mandated to be resolved by the year 2024.

The declaration recognises the role of trade and the transfer of technology and continues to work, in that respect, with other relevant international organisations. Article 66.1 on Implementation of the TRIPS other than Art. 3, 4, and 5 is extended until July 1, 2034, and Art. 66.2 entails technology transfer. Bangladesh is the largest manufacturer of medicines in the LDCs. Now that bi-similar and bio-tech drugs are gaining more attention and need larger molecules than chemical drugs, we have no alternative but to try for an extension of the TRIPS exemption. Reverse engineering of bio-similar products is difficult. Extensive R&D and the establishment of Technology Transfer Units in the important universities for industry-academic collaboration are vital to supporting the pharma sector after graduation.

Several supportive schemes, such as the Aid for Trade Initiative for developing countries technical assistance, the Enhanced Integrated Framework for trade-related capacity building by the United Nations Office for Project Services, and similar other available programmes, need to be utilised as much as possible for capacity building.

The Declaration put emphasis on the need for small economies and land-locked developing countries to implement the Trade Facilitation Agreement and the Sustainable Development Agenda and underscored the importance of trade and sustainable development in its three pillars, such as economic, social, and environmental issues. It also recognises the need for women's economic development.

The Declaration agreed on some specific issues. These are at different stages of negotiation and will come as decisions in the upcoming ministerial conferences. They are the work programmeme on small economies, WTO Smooth Transition Support Measures in favour of countries graduated from LDC status, strengthening regulatory cooperation to reduce technical barriers to trade, the precise, effective, and operational implementation of special and differential treatment provisions of the agreement on the application of sanitary and phytosanitary measures and the agreement on TBT, dispute settlement reforms, the work programmeme on e-commerce and TRIPS non-violation, and situation complaints. Bangladesh needs to closely follow the updates on the negotiations and contribute.

Fisheries subsidies (Article 8, Footnote 13) are an important concern for Bangladesh and developing countries, with an annual share of the global volume of marine capture production not exceeding 0.8 per cent. The notification of the additional information in this subparagraph may need to be made every four years. Bangladesh should advocate for extended time and should work carefully about the threshold limit. Specific data on marine catch is not available to qualify the case that Bangladesh's marine catch is below the threshold of 0.8 per cent. A small artisanal, exclusive economic zone would need exemption from actions based on Articles 3.1 and 10 of this Agreement.

The work programme on e-commerce, included in the declaration and adopted on March 2, 2024, has special importance to Bangladesh. Further discussions and examinations of additional empirical evidence will be needed to understand the scope, definition, and impact that a moratorium on customs duties on electronic transmissions might have on development and how to level the playing field for developing countries and LDC members to advance their digital industrialisation. The MC3 agreed to maintain the current practice of not imposing customs duties on electronic transmissions until the 14th session of the MC or March 31, 2026, whichever is earlier. Bangladesh is not very active in global e-commerce; however, the moratorium on duties has helped the country gradually take control of some issues. An extension of the e-commerce moratorium will work positively for the country, and by this time, strong preparation for investment by start-ups and large companies would be required. Country-to-country agreements may pave the way for the sector to flourish.

Over and above, Bangladesh needs to better prepare and negotiate trade benefits through the WTO mechanisms.

Ferdaus Ara Begum is chief executive officer of BUILD, a public-private dialogue platform that works for private-sector reforms.​