[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks

Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit. Highlighting the contributions of Bangladesh’s sixty thousand expatriates to the economies of bo

thefinancialexpress.com.bd

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks
Published :
May 17, 2024 23:51
Updated :
May 17, 2024 23:53

Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit.

Highlighting the contributions of Bangladesh's sixty thousand expatriates to the economies of both Bangladesh and Spain, the Foreign Minister suggested that the two countries may consider concluding a bilateral instrument for legal migration of professionals and skilled workers from Bangladesh to Spain.

Hasan also underscored the ample opportunity of emboldening cultural exchange and cooperation between the two friendly countries, according to a UNB report.

The issues were discussed when Ambassador of Spain to Bangladesh Gabriel Sistiaga Ochoa de Chinchetru had his maiden courtesy meeting with the Foreign Minister on Thursday.

Hasan congratulated Gabriel Chinchetru for his appointment as the Ambassador of Spain to Bangladesh and hoped that bilateral relations between our two friendly countries would be further strengthened during his tour of duty in Dhaka.

The Foreign Minister expressed satisfaction over the excellent bilateral relations between Bangladesh and Spain and thanked Spain for being the second largest destination of Bangladesh's merchandise exports as well as the second largest host of Bangladesh Diaspora in the European Union (EU).

The Spanish Ambassador stated that concluding a bilateral instrument on migration and mobility between Bangladesh and Spain in line with the spirit of EU's Pact on Migration and Asylum would be beneficial for both the countries.

He also assured to expand business and investment as well as cultural ties between the two countries, according to the Ministry of Foreign Affairs.

The Ambassador also met Foreign Secretary Masud Bin Momen.

They discussed the potential to broaden cooperation and harness mutual capacities in areas like bilateral commodity trade as well as orderly and skilled migration and mobility from Bangladesh to Spain.​

 

[Saif]

IMF satisfaction: Respite or disquiet for Bangladesh?

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment

en.prothomalo.com

IMF satisfaction: Respite or disquiet for Bangladesh?
Farid Khan
Published: 18 May 2024, 10: 14

The post-Covid global recession and spiralling costs of fuel import triggered by the Russia-Ukraine war, put considerable strain on Bangladesh's foreign currency reserves. Having no other alternative, Bangladesh turned to the International Monetary Fund (IMF), seeking a loan.

In January 2023 IMF pledged to lend Bangladesh USD 4.7 billion on certain conditions, including that subsidy on the energy sector be lifted.

IMF gave Bangladesh directives to increase the foreign currency reserves, to increase the tax-GDP ratio by 0.5 per cent within June 2023, and to move to a formula-based price adjustment mechanism by December 2023 to fix the cost of fuel oil.

Also, in its first review in December 2023, IMF advised Bangladesh to take up a contractionary monetary policy to control the prevailing high inflation rate in the country and to follow a flexible exchange rate policy.

With the January 2024 election ahead, the government refrained from fulfilling those conditions. However, in order to avail the next tranche of the loan, this month it has left the interest rate entirely to the market and so increased the policy interest rate by 50 basis points to 8.5 per cent.

After taking up a flexible exchange rate policy, the exchange rate of the dollar was hiked by Tk 7 to the highest the country has ever seen, at Tk 117, under the crawling peg exchange rate system.

Also, a formula-based energy price adjustment mechanism was implemented for petroleum products. The donor agency IMF is satisfied with these financial reforms carried out by the government.

And the end of the second review this month, the IMF mission chief Chris Papageorgiou apprised the media of its satisfaction, saying there needs to be more reforms in the banking sector and emphasis must be placed on tax and revenue collection. He also stressed the need on curbing subsidies in order for the economy to turn around.

The matter that must be given due consideration is how much respite will this satisfaction of IMF offer the country, and how must relief will these reforms give the people for whom the loan has been taken.

Ever since this loan was taken from the IMF, the country has seen one record after the other. There has been a record in the hike of energy prices, the dollar rate has hit a record high, the reserves have hit a record low. And above all, the people are floundering under the record hike in the prices of essentials. IMF's satisfaction has offered the people no respite. It has simply served to increase their distress further.

On the eve of receiving the loan, in January 2023 Bangladesh's central bank authorities said that fighting against inflation was Bangladesh Bank's top priority and that they aimed to bring down inflation to 6 per cent that year. That aim was not met. The prices of essential continue to increase in leaps and bounds.

Even by taking the path shown by IMF and following their prescription, the projected inflation rate could not be achieved. On the contrary, it has increased. They reason for this increase, the say, is the global contractionary financial policies, high commodity and food prices in the international market, and internal weaknesses.

Inflation is increasing steadily for these reasons and foreign currency reserves are dwindling. This is increasing pressure on the economy and macroeconomic challenges are growing more complex.

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment.

A handful of Latin American countries took up this strategy to determine exchange rates, but many of them later moved away from this system.

On one hand there is the post-pandemic weak economy and the war-hit global market. On the other hand there is forecast of economic recession and fear of an extreme food shortage. Under such circumstances, serious thought must be given to whether the unknown and uncertain path shown by IMF will lead the country's economy to happier climes or pose as a risk.

IMF has greeted this daring decision taken by the government for financial reforms. Liberalising the interest rates and taking up a contractionary monetary policy will help in relieving the pressure of inflation caused by reforming the exchange rate.

It is clear that there are all apprehensions that financial reforms will create new pressures, adding salt to the wound of the people squirming under the pressure inflation. Reforms in the exchange rate have pushed the price of the dollar up by 6 per cent, which in simple math translates directly into a 6 per cent rise in the prices of import-dependent. By the same formula, the import costs of fuel oil will increase proportionately, leading to increased import expenditure.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

The increase in dollar rates means costs on foreign loans will go up. This multidimensional effect of increased dollar rates will put added pressure on foreign exchange reserves, and these reforms will push inflation up further.

Also, in post-war times, the economic depression in western countries can have an effect on Bangladesh's export revenue in the coming days. Meanwhile, the Middle East is in a state of unrest due to the Israeli aggression in Palestine, which may have a negative impact on remittance. These factors may lead to a drastic drop in foreign exchange reserves and the writing is already on the wall.

At a juncture where the country's financial sector is already unstable and fragile, leaving the interest rate to the market may make this sector even more unstable.

If interest rates go up, loan expenditure in the private sector and investment costs will go up. This creates apprehensions that investments may decrease in the market. That may lead to increased capital flight, and many workers may lose their jobs.

There are strong misgivings that these multidimensional contractionary financial policies will ultimately dash to the ground all hopes of a fall in inflation and a durable foreign sector.

There is no doubt that we are bound to a larger extent to follow the IMF recommendations or directives for financial reforms. But there are questions regarding the logic in the timing selected to implement these reforms. This is questioning the capacity and sovereignty of our financial sector.

We are in a flurry to meet the IMF conditions, but are we able to uphold the interests of the people of Bangladesh? Past experience has left a bitter taste in our mouths.

In the past, IMF has never been able to be anyone's real friend or guardian. A study of Oxfam reveals that in countries that have been transformed into high debt-ridden countries due to IMF loans, it becomes impossible to repay the loans at the same as time as investing in the education, health, social welfare and development sectors.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

How can this challenge be tackled? That's a million dollar question. But if domestic revenue is increased, stern austerity measures are put in place, corruption is clamped down upon and good governance is established, it will at least put some wind in the sails.

* Farid Khan is a professor at the department of economics, Rajshahi University.​

 

[Saif]

Bangladesh financial sector in red zone: Oli Ahmed

Liberal Democratic Party (LDP) President Oli Ahmed on Saturday voiced concern over the country’s “deteriorating” economic condition, saying that Bangladesh's financial sector has now entered the red zone. Speaking at a press conference at his party’s Moghbazar office, he al

thefinancialexpress.com.bd

Bangladesh financial sector in red zone: Oli Ahmed
UNB
Published :
May 18, 2024 23:44
Updated :
May 18, 2024 23:46

Liberal Democratic Party (LDP) President Oli Ahmed on Saturday voiced concern over the country's "deteriorating" economic condition, saying that Bangladesh's financial sector has now entered the red zone.

Speaking at a press conference at his party's Moghbazar office, he also warned that if the prevailing economic situation persists, it could deeply harm the country's progress and development and undermine the social and economic stability of the nation.

"The Bangladesh bank reserves are now alarmingly declining amid a visible liquidity crisis of local currency. There is stagnation in business with inflation surpassing 10 per cent. The local currency has depreciated by 38-51 per cent over the last two years, and cash flow within banks has also decreased… Bangladesh's financial sector has entered the red zone, indicating a significant economic risk," Oli observed.

The veteran politician said feared that the country's economy may seriously collapse anytime as it is now going through a unstable situation. "We think if this situation continues for long, the country will suffer further, leading to inevitable chaos. It might even go beyond control."

He also attributed the current state of the country to the government's failure in running the country. "The present government has been ruling the country in the Baksal style for the past 15 years. I will tell them, for the sake of Allah, stop it and give the people a chance to form the government through their votes."

The LDP leader called upon Prime Minister Sheikh Hasina to come out of her misconception that the country will not function without her.

Oli, a former minister, depicted a sorry state of the country by highlighting the issues of the growing unemployment rate, foreign debt, defaulted loans, corruption, irregularities in commodity prices, the spread of drugs, mismanagement of roads, the poor condition of the education system, and oppression of opposition leaders and activists, including implicating them in different cases and jailing them in false cases.

He alleged that the government is whimsically enacting new laws to stay in power illegally by repressing and suppressing its opponents and the common people. "Justice must be ensured in the country. Otherwise, peace will never return to the country, and the uncomfortable situation will never end."

In such a situation, he called upon people from all walks of life, including farmers, workers, youth, and students, to get united with fresh vigour for the establishment of democracy and justice in the country.

Oli said their party, together with BNP, will soon announce fresh programmes to unseat the current government from power. "All unite and prepare to oust this Baksal regime through united efforts."

He slammed the Indian government as he thinks it is directly and indirectly responsible for destroying democracy in Bangladesh and establishing dictatorship in the country.

"We have no negative attitude towards the people of India. It is our hope that the Indian government will focus on establishing friendship between the people of Bangladesh and the people of India, refraining from associating with any particular person or party," Oli said.​

 

[Saif]

NSC sales plunge amid high inflation in Bangladesh

The net sales of national savings certificates plummeted in the July-March period...

www.newagebd.net

NSC sales plunge amid high inflation in Bangladesh
Staff Correspondent 21 May, 2024, 22:08

A file photo shows clients receiving services at a branch of a state-owned bank in the capital Dhaka. The net sales of national savings certificates plummeted in the July-March period. | New Age photo
The net sales of national savings certificates plummeted in the July-March period.

Bankers said that the sales of the instruments plunged, as people were living off their savings amid soaring commodity prices

According to Bangladesh Bank data, the net NSC sales were Tk 12,545 crore negative in the July-March period of the financial year 2023-24, compared with a negative Tk 4,161 crore in the same period in the previous year.

In March alone, the net sales figure plummeted to a negative Tk 3,653 crore, against negative Tk 652 crore recorded in the same month of the previous year.

This negative trend in net sales occurs when the repayment of the principal amount exceeds the sales, leading to a net outflow of funds from the government's exchequer or through loans taken from the banking system.

Bankers said that people were living off their savings due to acute and prolonged inflationary pressures in the country.

They said that many individuals lacked extra funds for savings and investments due to rising living costs.

Bangladesh's overall inflation rate reached 9.74 per cent in April, remaining over 9 per cent since March 2023.

To read the rest of the news, please click on the link above.​

 

[Saif]

Per capita income increased to US$2784 in FY 2023-24: BBS

The per capita income of Bangladesh stands at US$2784 in the current fiscal year, slightly higher than the previous fiscal year. Bangladesh Bureau of Statistics (BBS) released the periodic data on Monday. The end of the current fiscal year is just a few days away. The BBS prepared this projection

thefinancialexpress.com.bd

Per capita income increased to US$2784 in FY 2023-24: BBS
UNB
Published :
May 21, 2024 19:52
Updated :
May 21, 2024 21:35

The per capita income of Bangladesh stands at US$2784 in the current fiscal year, slightly higher than the previous fiscal year.

Bangladesh Bureau of Statistics (BBS) released the periodic data on Monday. The end of the current fiscal year is just a few days away. The BBS prepared this projection from an existing trend of the economic situation.

BBS says that by the end of FY 2023-24, the provisional GDP growth will stand at 5.82 per cent, which was 5.78 per cent in the previous FY2022-23.

At present the per capita income in terms of taka is Tk 0.361 million, which in the last financial year was Tk 0.273 million. The amount of per capita income in the local currency increased due to the devaluation of taka.​

 

[Saif]

Why is it taking so long to stabilise the economy?

Bangladesh’s macroeconomic imbalances have emerged from inflationary pressure; the balance of payments pressure; and fiscal pressure

www.thedailystar.net

Why is it taking so long to stabilise the economy?

VISUAL: SHAIKH SULTANA JAHAN BADHON

Bangladesh's economy showed remarkable signs of swift recovery from the adverse effects of Covid-19, but this progress was cut short by the advent of serious macroeconomic imbalances in April 2022. These imbalances are reflected in high inflation, depleting foreign exchange reserves, pressure on the exchange rate, shrinking capital inflows, and pressure on the budget. To address the stabilisation issues, the government entered a four-year programme with the International Monetary Fund (IMF). Implementation of the second year of the programme is currently underway.

To read the rest of the news, please click on the link above.​

 

[Saif]

How sharp depreciation of taka affects Bangladesh’s GDP per capita

The rapid depreciation of the taka against the US dollar has had a noticeable impact on the country's economic growth, as evidenced by the recent GDP data published by the Bangladesh Bureau of Statistics (BBS)

www.thedailystar.net

How sharp depreciation of taka affects Bangladesh's GDP per capita

The rapid depreciation of the taka against the US dollar has had a noticeable impact on the country's economic growth, as evidenced by the recent GDP data published by the Bangladesh Bureau of Statistics (BBS).

Per capita GDP in taka terms has shown a steady growth from the fiscal year of 2020-21 to 2023-24, rising from Tk 208,751 to Tk 294,191. It was Tk 262,868, meaning it rose 12 percent in the current financial year.

Per capita GDP in dollar terms, however, has not followed the same trend.

In 2021-22, per capita GDP in dollars rose to $2,687 from $2,462 in FY21. However, it fell to $2,643 in FY23 before slightly recovering to $2,675 in the current financial year, up 1.2 percent year-on-year.

To read the rest of the news, please click on the link above.​

 

[Saif]

Forex reserves rise by $180 million in a week

Reserves hit $18.61 billion on May 21, up from $18.43 billion on May 15

www.thedailystar.net

Forex reserves rise by $180 million in a week
Reserves hit $18.61 billion on May 21, up from $18.43 billion on May 15

Bangladesh's foreign currency reserves have risen to $18.61 billion on May 21, an increase of $180 million from a week ago, central bank figures showed.

It was $18.43 billion on May 15, according to a central bank calculation based on the International Monetary Fund's Balance of Payment Manual 6.

The Bangladesh Bank began calculating forex reserves in line with the new method in July last year as per suggestions of the lender, which approved a $4.7 billion loan in January that year.

Tuesday's reserves were far lower than the $41 billion the country reported in August 2021. Since then, import payments have risen faster than remittance earnings and exports, bringing the reserves to the current level.

To read the rest of the news, please click on the link above.​