[🇧🇩] Monitoring Bangladesh's Economy

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Removing hurdles to investment in SEZs

An economic zone, by definition, is a special designated area within a country's national borders. It is created with its own set of applicable laws to encourage and enhance business and trade investment, and job creation. The primary reason behind setting up such a zone is the desire to attract fo

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Removing hurdles to investment in SEZs
Atiqul Kabir Tuhin
Published :
Nov 13, 2024 21:29
Updated :
Nov 13, 2024 21:29

An economic zone, by definition, is a special designated area within a country's national borders. It is created with its own set of applicable laws to encourage and enhance business and trade investment, and job creation. The primary reason behind setting up such a zone is the desire to attract foreign direct investment. Free zones have been popular and used for centuries to guarantee free storage and exchange along trade routes.

Modern economic zones, however, developed only in the late 1950s, initially in industrialised nations. Notable early examples include the SEZ at Shannon Airport in Clare, Ireland, and, in the 1970s, zones in Latin America and East Asia focused on labour-intensive manufacturing. China's first SEZ, the Shenzhen Special Economic Zone, was established in 1979 under Deng Xiaoping, attracting multinational investment and accelerating industrialisation in the region. These zones attracted investment from multinational corporations.

Inspired by the economic promise of SEZs, the former Awami League government launched an ambitious plan to establish 100 economic zones on 75,000 acres of land across the country by 2030. The government envisioned these zones would create 10 million jobs and generate USD 40 billion in goods and services. The vision was overly optimistic. To make matters worse, the plan was driven by political interests and corruption rather than economic viability and benefit to the people.

Consequently, despite much talk about establishing 100 economic zones, the deposed government, over a span of 15 years, made visible progress in only a few projects-such as Bangabandhu Shilpanagar in Chittagong, the Japanese Economic Zone in Narayanganj, and the Srihatta Economic Zone in Moulvibazar-while work on the vast majority remains stalled or never began.

One notable example of a misguided and whimsical approval of economic zone can be found in the Netrakona SEZ. Sajjadul Hasan, who served as the private secretary (PS) to Prime Minister Sheikh Hasina from 2015 to 2018, allegedly used his influence to secure government approval for an economic zone in his home district, Netrakona. In 2018, during a visit to Mymensingh, Prime Minister Hasina laid the foundation stone for the Netrakona SEZ, a 1.5 billion taka project. Nine years on, there has been little progress, with officials from the Bangladesh Economic Zones Authority (BEZA) now expressing doubts about its financial viability, citing political pressure as the reason for its initial approval. This is just one example among many. Reports indicate that former ministers, secretaries, and politicians have pushed through around 30 economically unviable economic zones, which has now become an albatross around the government's neck.

Speaking to the media, Ashik Chowdhury, Executive Chairman of the Bangladesh Economic Zones Authority (BEZA), recently stated that the authority will concentrate on a smaller number of government zones to better meet investors' demands. This recalibrated strategy, supported by the new leadership of two investment-promotion agencies-BEZA and the Bangladesh Investment Development Authority (BIDA)-will focus on developing a set of prioritised zones on a fast track with clearly defined timelines. Concentrating on fewer, high-potential zones offers a more sustainable approach to developing SEZs.

Apart from planned development of SEZs, Bangladesh has still a long way to go in increasing ease of doing business to attract a healthy flow of foreign investment. Vietnam's success in attracting foreign direct investment (FDI) stands in stark contrast to Bangladesh's performance. In the first eight months of this year, Vietnam secured $14 billion in FDI, while Bangladesh could not attract even a billion dollars. In Bangladesh, investors face a series of obstacles; chief among them is bureaucratic red tape. For example, in Vietnam, a new company can be up and running in just seven days; but in Bangladesh, the same process could drag on for seven months. The bureaucratic hurdles that plague businesses in Bangladesh must be addressed to create a more investor-friendly environment.

The launch of the One Stop Service (OSS) by BEZA and BIDA to support both local and foreign investors had raised high expectations about Bangladesh's investment climate. However, progress towards achieving these goals has fallen far short of expectations. While some advancements in enhancing its systems and processes has been made, OSS remains far from functioning as a true "one-stop service" for investors. Currently, investors require access to as many as 155 services across 44 institutions for tasks such as company registration, land acquisition, and utility services. Yet BIDA and BEZA can only expedite around 60 services from 23 institutions. For the remaining services, investors must still navigate cumbersome bureaucratic processes in various government offices, as the two regulatory bodies have yet to establish agreements with all service-providing agencies.

Regrettably, in many government offices, bribery remains the only way to move files from one desk to the next. For foreign investors, bribery and corruption presents an even more complex challenge, as they risk accountability in their home countries if found to have engaged in corrupt practices to establish a business abroad. Not only do they face dismissal but aso jail time. Addressing these issues with meaningful reform is critical if Bangladesh is to cultivate a truly welcoming and efficient investment environment.

Another major challenge for foreign investors is the frequency of policy changes in Bangladesh, which disrupt business operations. While policy adjustments can be necessary, in Bangladesh investors often allege that government resorts to policy flip-flop without even holding dialogue with private sector partners, leading to uncertainty and reducing profitability for investors.

According to a survey by the World Bank and Business Initiative Leading Development (BUILD), 83 per cent of businesses felt that new regulations released without prior consultation are a major barrier, while 67 per cent expressed frustration at rarely receiving feedback on whether their input has been considered in policy-making. Intergovernmental agencies also struggle to coordinate effectively, creating inconsistencies and uncertainty that harm investment competitiveness.

It is worth mentioning that foreign investors have long been demanding a consistent tax policy in Bangladesh. However, tax policy in Bangladesh changes almost every fiscal year, further complicating investors' decision-making and affecting business confidence.

So, while the interim government is planning to streamline SEZ projects, it must also address the underlying issues hindering foreign investment in Bangladesh. By implementing regulatory reforms, improving infrastructure, and ensuring political stability, the government can create a more attractive investment climate. Simply inviting foreign investors without addressing these fundamental issues is unlikely to yield any positive results.​

 

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Hastening pace of economic recovery

A sense of uncertainty centring Bangladesh's economic situation has been persisting for months. Policymakers and economists alike are now burning midnight oil to craft suitable measures to stabilise and revive a faltering economy. After assuming power, the interim government has initiated several

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Hastening pace of economic recovery
Mir Mostafizur Rahaman
Published :
Nov 13, 2024 21:26
Updated :
Nov 13, 2024 21:26

A sense of uncertainty centring Bangladesh's economic situation has been persisting for months. Policymakers and economists alike are now burning midnight oil to craft suitable measures to stabilise and revive a faltering economy.

After assuming power, the interim government has initiated several measures, but a significant boost appears to be elusive, and a few underlying issues are still hampering progress. The roots of the crisis lie undoubtedly in the immediate past style of governance, as a decade of cronyism, rampant money laundering, and large-scale bank embezzlement under the previous regime led to a systemic weakening of financial foundations.

Now, Bangladesh faces the urgent challenge of recovery, but achieving it will require more than reactive policy adjustments -- it will require a bold, coordinated strategy.

Economic experts believe it is high time to address fundamental challenges to growth and devise a pathway to sustainable recovery. However, one obstacle remains evident: much of the governmental machinery is caught up in distractions, focusing on trivial concerns rather than making decisive, strategic efforts to address the economy's most pressing needs. Rather than shuffling chairs on the deck, it's time to focus entirely on turning around the ship.

The current economic landscape presents a grim prospect for many in Bangladesh. Inflation has been steadily climbing, with the cost of essential goods rising month by month. This escalation hits the poor and middle class hardest, igniting fears about the future, as shrinking incomes and depleting savings erode their financial security. The plight of these households, whose purchasing power dwindles daily, reflects the larger contraction gripping the national economy. Without a clear, forceful response to inflation, the crisis may continue to deepen, and the gap between the affluent and the vulnerable will only widen.

The pro-people government, as it calls itself, could seize this opportunity to reduce colonial-style bureaucratic practices and allow people, having grass-root experiences to devise policies.

The Bangladesh Bank has attempted to counter inflation by raising policy interest rates. Yet, rather than easing inflation, this measure has stifled investment, which in turn has stymied business activity and eroded employment opportunities. The resulting atmosphere of economic contraction has deterred entrepreneurs and caused businesses to reduce hiring. Without a vibrant investment climate, Bangladesh risks a prolonged period of stagnation, unable to create the jobs needed for a young and growing workforce. Inflation management, though crucial, should not inadvertently crush the aspirations of small and medium enterprises, which are the backbone of the Bangladesh economy.

On a broader scale, the Annual Development Program (ADP) remains a key tool for economic stimulus, yet it has been mired in inefficiencies. The government has rightly trimmed the ADP to exclude politically motivated, non-essential projects inherited from the previous regime. While this streamlining will reduce the long-term debt burden, the pace of implementation has been slow, potentially derailing immediate recovery efforts. Trimming wasteful spending is sensible, but a delay in executing critical infrastructure projects could exacerbate the economy's sluggishness.

Bangladesh cannot afford complacency. The government should embrace a more holistic strategy that balances macroeconomic stability with micro-level interventions. Traditional bureaucratic approaches to combating inflation are simply insufficient; they do not address the root causes, including market syndicates and extortion practices that continue to disrupt fair competition. A more effective strategy might involve a bottom-up approach, engaging local businesses and communities to tackle price hikes through localised, demand-driven solutions.

At this critical juncture, a transformation in governance practices is also warranted. A more transparent, results-driven public sector approach, rather than top-down control, will better align policy with public need and increase accountability in executing development programs. Reconfiguring leadership structures within the government to promote merit over administrative hierarchy can empower those with the necessary expertise and local knowledge to lead recovery efforts.

Bangladesh stands at a crossroads. With inflation persisting and business activity waning, time is running out to implement the far-reaching changes needed to steer the country out of its economic malaise. Deploying the full force of government resources, both financial and human, toward a resilient recovery is not only prudent but essential.​

 

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Govt moves to cut budget size

The interim government is going to curtail its expenditure focusing on the budget for 2024-25 in order to keep fiscal pressure within its control, contain inflation and prevent foreign currency reserves from falling further.

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Govt moves to cut budget size

The interim government is going to curtail its expenditure focusing on the budget for 2024-25 in order to keep fiscal pressure within its control, contain inflation and prevent foreign currency reserves from falling further.

Through a circular, the finance ministry has put a stop to all types of spending for vehicle purchases, land acquisitions, and foreign tours.

Considering necessity, participation in programmes abroad can be allowed. But in that case, concerned officials would have to take permission from the Ministry of Finance.

The government has already initiated a process to prepare a revised budget, for which the circular was issued yesterday. By next January, the size of the revised budget will be finalised.

All budgetary allocations will be cancelled for new buildings except for those in the education, health and agriculture sectors, the circular said.

If over 70 percent of the construction of a building has been completed, the allocation can stay in effect.

The Ministry of Finance told all ministries that the revised budget must be limited to the proposed budget and demand for extra allocation would not be met.

It also ordered an end to fund allocations for unnecessary projects.

However, in case of foreign aid-funded projects, the government ordered to keep the same amount in domestic funds, wherever applicable, so that these projects do not face any problem in implementation.

The circular said electricity, fuel and lubricant allocations would be trimmed to around 80 percent of the existing budget.

Officials from the ministry said the World Bank and International Monetary Fund (IMF) had informed that rising inflation and erosion of foreign currency reserves cannot be tackled solely by a contractionary monetary policy.

Thomas Helbling, deputy director for the Asia Pacific Department of the IMF, earlier this month said fiscal policy should support monetary policy by tightening overall expenses.

"At the same time, they need to rebalance fiscal policy to maintain space to support the poor and support development," he added.

Inflation rose to 10.87 percent in October amid soaring food prices, especially of staples like rice and vegetables.

The foreign exchange reserves of Bangladesh dropped to $18.44 billion on November 13, according to Bangladesh Bank data.

Already, the high-ups of the interim government directed that all politically biased and prestige projects will have to be dropped.

The Ministry of Planning and line ministries are already working in tune with this.

The finance ministry will set the size of the revised budget by January on the basis of support received from development partners.

The national budget for FY25 was proposed to be Tk 797,000 crore.

However, implementation of the development budget has already slowed.

In the first three months of the current fiscal year, development budget expenditure amounted to Tk 13,215 crore, which was Tk 20,609 crore in the same period of the previous year.​

 

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Country not in financial crisis, but faces challenges: finance adviser

Finance Adviser Prof Dr Salehuddin Ahmed has said that the country is not in a financial crisis, but there are some political and economic challenges due to the internal and external factors

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Country not in financial crisis, but faces challenges: finance adviser

Finance Adviser Prof Dr Salehuddin Ahmed has said that the country is not in a financial crisis, but there are some political and economic challenges due to the internal and external factors.

He made the remarks while addressing a policy dialogue on "Financial and Economic Reforms in Bangladesh 2024" at Brac University in the capital today.

Brac Business School of the Brac University organised the seminar on its campus in Merul Badda in the city.

The event was addressed by Centre for Policy Dialogue (CPD) distinguished fellow Dr Debapriya Bhattacharya, Commissioner of Bangladesh Securities Exchange Commission (BSEC) Farzana Lalarukh, and Brac Bank CEO and Chairman of Association of Bankers Bangladesh (ABB) Selim RF Hussain.

Dr Salehuddin Ahmed said most of the institutions, specially, the state-owned companies, have been on the brink of collapse. There was no governance and accountability there.

"We're trying to bring good governance which is a big challenge," he said, adding, "But I'm not that much disappointed with the situation as Bangladeshis are very efficient and creative".

He said the government has been working to bring down inflation and create market stability by taking different measures like waving import duties.

"But there are so many factors -- from production to supply chain. The traders have to pay extortions at 16-17 points which push up the prices," he said.

He said due to the middlemen and extortions, for instance, the price of per kg of brinjal goes up to Tk 60 at kitchen market from Tk 10 at the production level due to such middle-interest groups and extortions. All the groups run the extortions in a mutual understanding.

"To stop this extortions and end the middle-interest groups' business, a political solution is needed," he said.

Criticising the previous regime's GDP calculations through wrong data and misinformation, the finance adviser said there was no accountability of the institutions.

He observed that there were many projects for which no feasibility study was conducted. Now it was found that the Indian Adani Group did not pay their taxes in implementing the project.

"We inherited all these and now we're repairing and reforming these with the support of people," he said.

He said this government may not be able to complete all the reforms, but leave a footprint so that the next government can follow and implement it.

Conveying special thanks and appreciation to the Brac University students and teachers for their role in the July-August mass uprising, Dr Debapriya Bhattacharya said that the previous regime has destroyed all the institutions which put the country in the challenges.

"The central bank which was supposed to oversee the banking sector actually helped the looters to loot the banks," he added.

He said the previous government had depicted a growth narrative where all the miss information and disinformation were used. The growth figure was a false figure.

He alleged that the previous Awami League regime politicised the data and information. There was no private investment, but there was GDP growth. The Tax-GDP ratio was not increased. They spent money to show the visible development

He said the previous government intentionally picked up two sectors -- financial sector and the energy sector to loot wealth.

He said an anti-reform and corrupt alliance was created among the corrupt politicians, corrupt businessmen and corrupt bureaucrats to loot the state-wealth.

BSEC Chairman Farzana Lalarukh said that the government has been working to implement reforms in the capital market.

"The first step in this regard is to rebuild the confidence of the investors. We're trying to do that," he added.

He said the BSEC will implement reforms to ensure accountability and transparency through a digital platform.​

 

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How Bangladesh is reviving its macroeconomy

Although the reforms have just started, some positive results are already visible.

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How Bangladesh is reviving its macroeconomy
economic reforms in Bangladesh 2024

VISUAL: SALMAN SAKIB SHAHRYAR

Bangladesh's economy has been on a downward trend since early 2022, marked by high inflation, dwindling foreign exchange reserves, depreciation of the taka, poor health of the banking sector, low and stagnant tax-to-GDP ratio, and falling public spending. GDP growth rate as well as growth in exports and investment rates have been falling too. This downslide is the outcome of poor economic management and endemic corruption, especially thefts in the banking sector and corrupt practices in public procurement.

The dwindling macroeconomy, combined with autocratic and corrupt political governance, rising income inequality and human rights violation, led to the inevitable demise of the previous government on August 5, 2024. An interim government was established, charged with the responsibility of stabilising the macroeconomy and reforming the country's political governance. The most immediate action of this government was to stop the theft-related bleeding of the banking sector by making wholesale changes in the affected banks' management. Second, it fully deregulated the interest rate policy and tightened domestic liquidity by increasing the Bangladesh Bank policy rate. Third, a broad-based fight against corruption, including efforts to recover stolen assets, was announced. Several other reforms now underway include revisiting public spending priorities to cut waste and leakages, reducing corruption and increasing tax collections through online tax filing, lowering duties on essential food imports to reduce inflationary pressure, and mobilising greater financial assistance from multilateral financial institutions.

Although the reforms have just started, some positive results are already visible. The outflow of theft-related bank resources has stopped, demand for credit has slowed, remittances have increased, and deposits are growing. October saw an encouraging recovery in exports. However, inflation remains stubbornly high, the government revenue inflows remain sluggish, and the forex reserves have declined to $18.4 billion as of November 14, down from $20.4 billion in July. This is partly explained by the increase in debt payments and a pickup in imports. Additionally, the expected capital flows from multilateral institutions has not yet materialised, pending the IMF review of the ongoing programme and the time lag in negotiating new BOP financing from the multilateral institutions.

The immediate challenge is to reduce inflation sustainably. And that requires a recovery of imports and manufacturing sector production. More generally, except for domestic resource mobilisation, the demand stabilisation measures are broadly on track. Policy attention now must shift to enhancing imports and augmenting domestic supply, which is intimately linked to the recovery of production, investment and exports.

The supply-side agenda is tough and involves both short-term (one to three years) and medium-term (three-plus years) reforms related to skills, technology, domestic investment, foreign direct investment (FDI), and export diversification. These encompass policy reforms in many areas. The most immediate reforms include:

Exchange rate management: Years of controlled exchange rate management have clearly demonstrated the futility of such a system. The sharp appreciation of the real effective exchange rate between 2011 and 2022 is a major contributor to the present balance of payment crisis. The exchange rate has been slowly liberalised since May 2024 through the unification of multiple exchange rates and adoption of a crawling peg. However, the utility of staying with a crawling peg system is dubious, and it is best to move to a fully flexible market-based exchange rate. The demand management policies in place will protect the rate from fluctuating wildly. A market-based exchange rate is the best way to provide incentives to exporters and remittance senders.

The Bangladesh Bank should also carefully review the outdated foreign currency regime that is riddled with exchange controls and other restrictive practices that impose high transaction costs for exporters and importers, while providing incentives for hundi transactions. Service exports can be boosted through a deregulated and exporter-friendly foreign currency regime.

Monetary policy: As noted, the monetary policy is basically on track. However, more work may be needed to carefully examine the working of the T-bill market. While, in principle, the T-bill market is open to the public, this has become an easy option for banks to make profit for themselves instead of doing lending operations.

Fiscal policy: This presents a huge challenge. Corruption combined with an ineffective tax system has severely constrained tax revenues in Bangladesh. Excessive reliance on indirect taxes has fed into inflation while contributing to income inequality. Similarly, due to weak revenue performance, the total government spending as a share of GDP is low by international standard. Yet, the effectiveness of this limited spending has been reduced by poor spending priorities and corruption. Public spending on health, education, water resources and social protection have been grossly inadequate, while most spending has concentrated on civil service salaries and benefits, subsidies, interest cost and large infrastructure projects. The quality of infrastructure spending has been poor owing to corruption in procurement, contributing to delays and cost overruns.

Clearly, overhauling both tax and expenditure systems is of the highest priority. This is not an easy task and will take several years of sustained effort. The interim government has started to reform both aspects. On the revenue side, it has rightly focused on overhauling the income tax system, where corruption is most endemic. The move to an online system is a smart policy step. But this alone will not yield the full benefits.

To provide incentives to tax filers, two related reforms are essential. First, the tax form must be simplified by doing away with the reconciliation of income, expenditure and wealth. This is a rent-seeking instrument for harassing tax filers and its revenue implications are dubious. Taxpayers enter negotiated settlements with the NBR staff, and the Treasury loses out. Eliminating this requirement would greatly simplify online tax filing and encourage many more filers to go online.

Second, tax audits must be automated based on pre-selected triggers and be highly selective, mostly focused on large taxpayers. Full documentation including income and wealth reconciliation become relevant during an audit review.

Regarding expenditure management, a top priority is to cut back on fossil fuel subsidies and large infrastructure projects and increase spending on health, education, water resources and social protection. In the present environment of high inflation, higher spending on social protection with a focus on the poor is essential.

Meaningful property tax: Local government institutions—i.e. city corporations and municipalities—are ineffective because of heavy resource constraints. Global experience shows that the best instrument for augmenting their finances is through the institution of a meaningful property tax system that is based on market value of properties and a meaningful tax rate. Substantial revenues can be collected from this reform that will ease the pressure on treasury transfers to these institutions.

State-owned enterprises (SoEs): SoEs are draining the scarce fiscal resources of the Treasury with poor financial performance. The total book value of SoE assets in FY2021 was estimated at 16 percent of GDP, yet the net fiscal transfers to these SoEs was in the range of two to three percent of GDP. I prepared a detailed report on how the financial performance of SoEs can be improved and shared this with the finance ministry in early 2024. The core reforms involve corporate governance and pricing policy. This is a low-hanging fruit, which the interim government may want to focus on.

Trade policy: A sharp reduction in trade taxes is essential to diversify and boost exports. Doing so will also reduce inflation. Government revenues must be raised through income taxation and VAT. The trade policy should focus on supporting the expansion of manufacturing exports and limited support for well-established import substitutes.

Investment climate: Reversing the downturn in private investment and attracting FDI will require sharp improvement in the investment climate. Establishing law and order, including protection of private property, is the topmost priority. Resolution of labour disputes is another priority. Restoring the confidence of the domestic private sector is essential to attract FDI. Easing of foreign currency regulations and imports, provision of uninterrupted power supply, and tax and trade policy reforms will all help improve the investment climate.

Dr Sadiq Ahmed is vice-chairman at the Policy Research Institute of Bangladesh (PRI).​

 

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Efficient cross-border trade a boon for LDC graduation: ICCB

With the increase in international trade of Bangladesh, efficient cross-border trade will have notable implications for the country’s status graduation from the least developed country (LDC) to a developing one, said Mahbubur Rahman, president of the International Chamber of Commerce Bangladesh

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Efficient cross-border trade a boon for LDC graduation: ICCB

With the increase in international trade of Bangladesh, efficient cross-border trade will have notable implications for the country's status graduation from the least developed country (LDC) to a developing one, said Mahbubur Rahman, president of the International Chamber of Commerce Bangladesh (ICCB).

"Therefore, understanding the foreign business partners is crucial," he told a workshop on "Trade Finance Legal Challenges and International Sanctions Regime & Requirements" on Saturday.

The ICCB, credit rating agency Moody's and ICC United Arab Emirates (UAE) jointly hosted the event at Renaissance Dhaka Gulshan Hotel in the capital.

Financing of international trade transactions plays a crucial role in facilitating global commerce, said Rahman.

However, the whole process operates within a complex legal framework shaped by regulatory requirements, including sanctions, presenting significant challenges for financial institutions and businesses dealing with international trade, he said.

"Therefore, financial institutions and businesses must navigate a labyrinth of sanctions imposed by various jurisdictions," he said.

"These sanctions can target specific countries, entities, or individuals, and often differ between regions, leading to complexities in ensuring compliance," Rahman said.

Banks are obligated to conduct thorough due diligence to prevent money laundering and terrorist financing, he said.

This involves verifying the identities of clients and understanding the nature of their business activities, which can be resource-intensive and legally complex, he added.

The ICCB president highlighted the recent trades in the global economic and political arena and added that the evolving geopolitical landscape has increased the compliance requirements for banks and businesses engaged in international trade.

To navigate these challenges, financial institutions and businesses should establish comprehensive policies follow regulatory requirements and educate employees on the latest developments in sanctions, laws and compliance obligations, he added.

ICCB Secretary General Ataur Rahman moderated the workshop.

Mohamed Daoud, director and industry practice lead for Moody's Financial Crime Compliance across the Middle East and India, and Vincent O'Brien, director of ICC-UAE, were present.​

 

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Accelerating revenue collection by NBR

There is no denying that Bangladesh’s economy has grown at a fast and more or less constant rate since the early 90s. Similarly, our dependence on foreign loans and grants for development budget had also reduced after, among others, the introduction of VAT.

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Accelerating revenue collection by NBR

There is no denying that Bangladesh's economy has grown at a fast and more or less constant rate since the early 90s. Similarly, our dependence on foreign loans and grants for development budget had also reduced after, among others, the introduction of VAT.

Various financial reforms and expanding and strengthening the private sector have contributed significantly to this growth. Exports have been diversified but still focus on garments and manpower. Currently, our GDP is at Tk 5 million crore with an average growth of 6 percent. Per capita income has also grown significantly, registering above $2,750.

This indicates that nationally, in spite of the economic growth, the number of taxpayers and revenue collection has not reached the desired level. The tax-GDP ratio is still below 7.5 percent compared to an average of 19 percent in the Asia Pacific and 34 percent in member countries of the Organisation for Economic Co-operation and Development.

There are about 10 million TIN holders in Bangladesh, of which only 3.4 million individuals and 34,000 corporates file tax returns covering all categories. The reasons for non-filing of tax returns need close scrutiny and monitoring. The possibility of TIN duplication cannot be ruled out either.

Of the total revenue collection of Tk 382,562 crore in fiscal 2023-24, the category-wise proportions of tax collection reveal that 13 percent came from individuals, 20 percent from corporates, 40 percent from VAT and 26 percent from other sources.

This indicates lower levels collection from corporate taxes. Many businessmen and entrepreneurs claim that they are paying huge revenue to the government exchequer. But the question is what the proportion between direct tax and indirect tax is.

It is well known that indirect taxes are added to product costs and recovered from consumers. So, there is no credit for it. It is a fact that our economy is currently passing through a challenging phase. The shortage of foreign currency has hampered imports, impacting production and exports while the cost of production has risen due to inflation. Businesses were also impacted by the recent mass movement.

In such a situation, it is very unlikely to collect significant revenue from businesses. However, minimising tax evasion and combating corruption are possibly the low hanging fruits to increase revenue collection.

In spite of various efforts over the years, adequate laws and regulations and pressure from the government, revenue collection could not be increased to the desired level.

People's apathy toward tax payments, tax evasion and corruption are the principal causes for this situation. On the other hand, in most cases corruption takes place principally by taxpayers in connivance with tax officials and consultants. The lack of transparency and accountability through reliable financial reporting is also responsible for this situation.

Credible and authentic financial statements are the basis of tax calculation. Unfortunately, many businesses are not reporting financial statements properly. Tax audit is the only way to mitigate this situation. It is important for the tax auditor to be different from statutory auditors. Similarly, there is no alternative to digitalisation to ensure transparency and accountability.

Besides, corruption has gone beyond tolerable levels so this must be controlled. Enforcement of law should be applied in a stringent way when tax evasion involving significant amounts is identified.

Finally, administrative and policy reforms for the National Board of Revenue are overdue. Also, genuine and regular taxpayers should be rewarded by minimising unnecessary harassment by way of arbitrary disallowances, simplifying the refund process and other similar incentives.

The author is a senior partner of Hoda Vasi Chowdhury & Co and former president of ICAB​

 

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Govt to speed up development spending to revive economy

The interim government is going to ask ministries to accelerate the implementation of ongoing development projects, Planning Adviser Prof Wahiduddin Mahmud said, as he believes this would help avert a further economic slowdown.

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Govt to speed up development spending to revive economy
Says planning adviser

The interim government is going to ask ministries to accelerate the implementation of ongoing development projects, Planning Adviser Prof Wahiduddin Mahmud said, as he believes this would help avert a further economic slowdown.

Citing how the economy is facing turbulence such as political turmoil, labour unrest, expensive loans deterring new investments and stubbornly high inflation, the adviser yesterday said that it was time for policy adjustments.

Emerging from the Executive Committee of the National Economic Council (Ecnec) meeting chaired by Chief Adviser Muhammad Yunus, the planning adviser revealed the decision.

This came a day after the government's Implementation Monitoring and Evaluation Division (IMED) reported at least 14-year low development spending in the July-October period of this fiscal year.

"It is time to shift our focus towards policy adjustments in project implementation," Mahmud told journalists.

While the government previously emphasised project selection and fighting corruption, he said the new directive prioritises the swift execution of ongoing projects by the end of the current fiscal year.

"A letter will be sent from the Planning Commission to all ministries and divisions in this regard," the adviser said.

Private sector is not going for fresh investment, and if the government expenditure also stagnates, it will cause economic downturn. — Wahiduddin Mahmud Planning adviser.

He said he would personally send demi official (DO) letters to advisers urging them to accelerate the execution of development projects.

Regarding the slow pace of project implementation, Mahmud cited instances of project directors fleeing sites after selling project materials. He mentioned the Matarbari project director as a specific example.

The adviser said the private sector has shown no interest in investment and interest rates have risen sharply. "Consequently, entrepreneurs are reluctant to undertake new ventures right now."

"The private sector is not investing and if the government expenditure too becomes stagnant, it will cause a further slowdown."

Usually, there is a project flow during the tenure of a political government as per the demand from the constituencies. But there are no such scopes for an interim government.

"We don't have constituencies and our time is brief. But obviously we do not have any tendency toward profiting from projects," he added.

He said the government plans to initiate innovative projects in human resources and education development.

"The economy is currently stagnant, with market instability and high inflation," Mahmud said. "Without expanding economic activities, job creation and wage growth will be impeded."

In October, overall inflation reached a three-month high of 10.87 percent due to rising food prices, especially for staples like rice and vegetables.

The adviser hinted at possible cuts to the annual development programme (ADP) allocation, similar to previous years.

However, he suggested that the education and health sectors might receive proportionally higher allocations, especially for educational equipment and scientific research materials.

The planning adviser also said if economic stability is restored, then private sector entrepreneurs would come in large numbers and stimulate growth.

The Ecnec yesterday approved five projects worth a total of Tk 5,915 crore, including one for improving the sewerage system of Chattogram with around Tk 5,152 crore.​

 

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Planning Advisor Wahiduddin fears chaos could trigger ‘economic recession'

Planning Advisor Wahiduddin Mahmud is wary of an economic recession if the government does not raise development spending in the wake of the political and labour unrest and new investments drying up due to the high bank loan interest rates. Speaking to the media after a meeting of the Executive Co

thefinancialexpress.com.bd

Planning Advisor Wahiduddin fears chaos could trigger ‘economic recession'
bdnews24.com
Published :
Nov 26, 2024 00:03
Updated :
Nov 26, 2024 00:04

Planning Advisor Wahiduddin Mahmud is wary of an economic recession if the government does not raise development spending in the wake of the political and labour unrest and new investments drying up due to the high bank loan interest rates.

Speaking to the media after a meeting of the Executive Committee of the National Economic Council, or ECNEC, on Monday, the advisor said, “Stagnation is being seen in the private sector production alongside in the garment sector because of the political uncertainty and chaos.”

“There is almost no investment in the private sector. The bank loan interest rates have also increased a lot, discouraging entrepreneurs from making new investments. In these circumstances, an economic meltdown is likely if the government does not raise development spending.”

Asked what the government would do in this situation, Wahiduddin said the interim administration is planning to initiate new projects at the earliest for the development of new “innovative and human resources.”

He said a letter would be sent to all advisors to this end upon consultation with the chief advisor, calling for speeding up the implementation of the projects.

The advisor promised that efforts to keep the projects 'corruption-free' would continue.

Asked what will happen to growth if there is no investment in the private sector, he said: “A significant amount of growth is possible even if there is no investment in the private sector for a year."

DEVELOPMENT BUDGET SHRINKING

Wahiduddin also disclosed the decision to cut the size of the Annual Development Programme, or ADP, taken by the deposed Awami League government.

"We had said at the beginning that every year the implementation remains less than the budget. This time, the development budget will be reduced for several reasons.”

"Many old projects and those that were proposed have been dropped. Many of them appeared politically motivated and not profitable compared to the cost."

Regarding the size of the reduced plan, he said: “We have yet to plan the size of the budget this year. The revised budget is usually presented in December."

When asked about the ADP implementation rate in the first four months of this year, which was the lowest in the past 15 years, the advisor said: “This is the previous government’s budget, not ours.”​

 

[Saif]

Lower revenue collection narrows fiscal space

Revenue collection in the first four months of the current fiscal year declined by 1 percent year-on-year, according to official data, which is likely to complicate the government’s plan to revive the economy by accelerating development spending.

www.thedailystar.net

Lower revenue collection narrows fiscal space
Economists say this may complicate govt’s economic revival plan

Revenue collection in the first four months of the current fiscal year declined by 1 percent year-on-year, according to official data, which is likely to complicate the government's plan to revive the economy by accelerating development spending.

Lower revenue mobilisation has resulted in a tight fiscal space, which, according to economists, might force the interim government to curtail the development budget instead of increasing public works spending to avert a further economic downturn.

They argue that the ongoing tight liquidity situation makes domestic borrowing difficult for the government, while foreign funding commitments remain lacklustre compared to previous years.

In the July-October period of fiscal year (FY) 2024-25, the National Board of Revenue (NBR) collected Tk 101,281 crore, falling short of its target for the first four months by Tk 30,831 crore.

During the previous Awami League government, the tax administration set a revenue collection target of Tk 480,000 crore for FY25.

Although a mass uprising ousted the government in early August, leading to the formation of the interim government, Finance Adviser Salehuddin Ahmed recently said that the FY25 revenue target would remain unchanged.

Amid economic stagnation, the government's project monitoring and evaluation agency recently reported that development expenditure hit a 14-year low.

This prompted Planning Adviser Dr Wahiduddin Mahmud to announce the government's "policy adjustments" by prioritising the execution of development projects to avert a further economic downturn.

Meanwhile, the ongoing political turmoil and economic uncertainty, which had already hamstrung revenue collection in July and August, have led policy analysts to question the unchanged collection target.

"The existing target is unrealistic," said MA Razzaque, research director at the Policy Research Institute (PRI) of Bangladesh. "It is unlikely to be achievable this year."

Apart from nationwide unrest in the July-August period, Razzaque pointed out that slow imports and tariff exemptions on essential goods amid the double-digit inflation contributed to lower tariff collection.

During the July-October period, the revenue administration saw a 0.84 percent single-month growth in October, and Razzaque expressed optimism about the overall collection.

"Amid the economic slowdown, the year-on-year revenue collection still seems optimistic as we earlier thought that it may dip drastically," he said.

Echoing similar sentiments, Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), said the revenue collection target for FY25 should be revised by December this year.

Besides, he believes the budget should be revised accordingly.

However, the foremost priority for the NBR should be implementing measures to reduce tax evasion to stop immediate losses, Khan said.

Regarding funding the government's expenditure, Razzaque sees limited options available.

"Tight liquidity restricts bank borrowing, while borrowing from the central bank could further fuel inflation," he said as he assessed the options. "Moreover, funding commitments from foreign donors remain lacklustre."

Bangladesh received only $27 million in commitments from its international development partners so far this year, compared to $2.8 billion in loan pledges a year ago, according to the Economic Relations Division (ERD).

Razzaque suggested the NBR speed up customs activities, streamline port operations and expand the tax net. He also advocated for revenue reform measures through automation.

He said the focus should not solely be on achieving revenue growth but rather on ensuring implementation of ongoing reforms.

In the first four months of FY25, value-added tax declined year-on-year, while income tax and customs duties witnessed slight growth.

Duty collection from international trade increased by 0.84 percent to Tk 32,671 crore as political turmoil led to a decrease in imports.

Meanwhile, income tax receipts increased by 1.78 percent to Tk 101,281 crore. The collection of value-added tax, the largest revenue source, fell by 4.87 percent to Tk 36,729 crore.​

 

[Saif]

Looming recession!

Against the backdrop of no fresh investment by private entrepreneurs and extremely low execution of annual development programmes (ADPs), it is only natural that a country slides into recession. None other than Planning Adviser Prof Wahiduddin Mahmud is wary of a looming economic slowdown. He has g

thefinancialexpress.com.bd

Looming recession!
FE
Published :
Nov 28, 2024 00:09
Updated :
Nov 28, 2024 00:10

Against the backdrop of no fresh investment by private entrepreneurs and extremely low execution of annual development programmes (ADPs), it is only natural that a country slides into recession. None other than Planning Adviser Prof Wahiduddin Mahmud is wary of a looming economic slowdown. He has given reasons for unfolding such an undesirable economic scenario. Prof Mahmud explains that in the absence of private investment and almost stagnant development expenditure in the public sector, the economy is destined to fall into recession unless the situation gets improved on both fronts. The July-October record low development spending in 14 years, as revealed by the Implementation, Monitoring and Evaluation Division (IMED), corroborates the view. Sure enough, political turmoil, labour unrest, expensive loans that hold back new investment and stubbornly high inflation hardly create the right ambience for economic growth. Already, industries have been forced to run below capacity on account of power and gas crisis and businesses have made their discontent known. Even if factories and industries could run in full gear, the drastic slump in domestic consumer demand would have been a severe disincentive to capacity production, particularly for those productive units not involved with exporting their products.

So far as new investment--domestic or foreign---is concerned, it cannot happen without political stability and other entrepreneurial ecosystems put together to create a desirable destination. The interim government has to repair the malfunctional system first and then make way for an enabling investment environment. A period of little over three months is too short a period even for reevaluation of the randomly finalised projects by the previous regime. Granted that not all the projects the previous government undertook for execution are viable but at least there are some about which there is no dispute. Why not select those for reevaluation of costs and execution on a priority basis in order to get over the deplorable state of development spending?

In fact, the planning adviser has himself felt the urgency of continuing with the ongoing projects. He is in favour of 'policy adjustments in project implementation'. A new directive now emphasises swift execution of ongoing projects by the end of the current fiscal year. The planning adviser will request, through demi official (DO) letters, his cabinet colleagues to accelerate execution of projects under their ministries. That is the least the planning adviser could do. But time is running out fast. There are not even two full quarters of the current fiscal year. Yet if the project execution can be speeded up, the situation can more or less be salvaged.

However, this short-term measure is no substitute for injection of blood into the economy. Although the planning adviser has hinted at increasing allocation for health and education--- especially for educational equipment and scientific research materials, investments there will hardly address the emergency. There is need for creation of a large number of employments in order to augment economic momentum and reining in inflation. In this process, people's purchasing power increases and consumerism gets fuelled. If demand for consumer goods rises at home, the economy is sure to revive. Boosting exports may give a false sense of economic growth as those benefit only the exporters turning them richer and even increasing revenue earning for the government. However, if the general masses are deprived of economic prosperity, gaping inequality is created exposing the hollowness of social progress.​

 

[Saif]

Economy recovering, but challenges remian: MCCI

Bangladesh’s economy has been gradually recovering from the recent political instability in the first quarter of the 2024-25 financial year, but, several challenges such as high inflation, reduced export activity, shortfall in revenue collection, diminished job opportunities and sluggish...

www.newagebd.net

Economy recovering, but challenges remian: MCCI
Staff Correspondent 28 November, 2024, 22:19

Bangladesh’s economy has been gradually recovering from the recent political instability in the first quarter of the 2024-25 financial year, but, several challenges such as high inflation, reduced export activity, shortfall in revenue collection, diminished job opportunities and sluggish investment climate need to be addressed, said the Metropolitan Chamber of Commerce and Industry, Dhaka.

The political instability, sparked by the anti-discrimination students’ movement, which began in the first week of July 2024 led to a change in government and has resulted in an ongoing transition period, it said.

The MCCI in its ‘Review of Economic Situation in Bangladesh July-September 2024’ said that one of the most pressing concerns was restoring law and order.

The general inflation rate, although slightly reduced from 10.49 per cent in August to 9.92 per cent in September, remains alarmingly high with prices of many essentials still at an elevated level, it said.

Food inflation slightly decreased to 10.40 per cent in September from 11.36 per cent in August. Meanwhile, non-food inflation marginally dropped to 9.50 per cent from 9.74 per cent.

People in rural areas were the worst hit of price shocks in September, according to the economic review.

It also said that between the June-end of FY24 and September-end of FY25, the taka depreciated by 1.67 per cent against the US dollar.

Foreign exchange reserves also saw a decline. The Bangladesh Bank’s gross foreign exchange reserves fell to $24.86 billion at the end of September 2024 from $26.91 billion in September 2023.

When adjusted to the balance of payments and international investment position manual, 6th edition, reserves stood at $19.74 billion, down from $21.06 billion a year earlier.

The National Board of Revenue’s tax revenue collection decreased by 6.07 per cent to Tk 70,902.90 crore in July-September of FY25 compared with that of Tk 75,487.70 crore in the same period of FY24. The revenue authority fell short by 26.53 per cent of its strategic target of Tk 96,499.90 crore.

The annual development programme implementation rate in July-September of FY25 was sluggish at 4.75 per cent, which was also the lowest in at least 15 years.

According to experts, the low implementation rate was due to a number of factors, including political turmoil, cautious spending, project review by the interim government initiated by the previous government, among others, the review observed.

According to the Implementation Monitoring and Evaluation Division data, 56 ministries and divisions spent Tk 13,215 crore or 4.75 per cent of the total ADP of Tk 2,78,289 crore during July-September of FY25.

Data on the industrial sectors’ growth for the first quarter of FY25 were not yet available in the review, however, the sector registered a lower growth of 3.98 per cent in Q4 of FY24, compared with that of 6.25 per cent in the previous quarter.

Investment in the private sector remained sluggish. Private sector credit growth registered a lower growth of 9.20 per cent during the period between September 2024 and September 2023, compared with a higher growth of 9.69 per cent during the period between September 2023 and September2022.

The net inflows of foreign direct investment in July-September of FY25 decreased year-on-year by 15.01 per cent to $300 million from $353 million.

The services sector exhibited lower growth of 3.67 per cent in Q4 of FY24, compared with that of 3.81 per cent in the previous quarter.​

 

[Saif]

MNCs favour predictable govt fiscal policy

The need to facilitate multinational corporations (MNCs) by ensuring a predictable and supportive operational environment is becoming increasingly urgent. A recent meeting between MNC representatives and the Chief Adviser highlighted several pressing concerns that warrant immediate government atten

thefinancialexpress.com.bd

MNCs favour predictable govt fiscal policy
FE
Published :
Nov 28, 2024 23:56
Updated :
Nov 28, 2024 23:56

The need to facilitate multinational corporations (MNCs) by ensuring a predictable and supportive operational environment is becoming increasingly urgent. A recent meeting between MNC representatives and the Chief Adviser highlighted several pressing concerns that warrant immediate government attention. More than a dozen MNC representatives emphasised the importance of predictability in fiscal policies and the need to improve the overall ease of doing business. Their calls for action underline persistent challenges, including a lack of sufficient consistency in government policies and barriers that hinder seamless business operations. Among the core issues raised, the demand for predictability in licensing and taxation stood out prominently. The MNC representatives also advocated for streamlining procedures through a more effective one-stop service at the Bangladesh Investment Development Authority (BIDA) and improving the country's credit rating to attract foreign direct investment (FDI). While these concerns are interconnected and geared to fostering a business-friendly environment, predictability in government policies emerged as the cornerstone for enabling sustainable operations. Predictability is crucial for businesses to plan effectively. Stable and transparent policies empower firms to devise long-term strategies for production, marketing, and expansion. Frequent policy shifts, on the other hand, create uncertainty, making it nearly impossible for businesses to develop coherent operational plans. Such unpredictability not only hampers business performance but also erodes investor confidence.

The need to enhance the services of BIDA through an effective one-stop service is long awaited. Establishing such a service can significantly reduce bureaucratic delays and inefficiencies, making it easier for businesses to navigate regulatory requirements. This step would not only streamline operations for existing investors but also enhance Bangladesh's appeal to prospective investors, particularly in an increasingly competitive global market. Equally important is improving the country's credit rating. A higher credit rating signals a stable economic environment and boosts investor confidence, encouraging FDI. Addressing this issue requires coordinated efforts devoted to strengthening macroeconomic fundamentals, reducing political risks, and demonstrating consistent policy implementation. This task has become particularly urgent in view of the latest downgrading of credit rating for Bangladesh by the Moody's.

The meeting also dwelt on other critical factors affecting business operations in the country. Deteriorating law and order, which disrupts supply chains, was a significant concern. A stable security environment is essential for maintaining efficient operations, particularly in industries reliant on robust logistics and distribution networks. Energy security was another major issue raised. Frequent energy shortages have long been a bottleneck for both local and foreign firms, affecting productivity and operational costs. The MNC representatives urged the government to prioritise energy infrastructure development to ensure reliable and affordable access to power, a key enabler of industrial growth. A fair and equitable business environment was also a subject during the discussions. The MNCs voiced their concerns over what they perceived as discriminatory practices in determining tax burdens and market shares. Such disparities, they argued, create an uneven playing field, deterring foreign investors and undermining healthy competition.

The concerns raised by the MNCs underscore the urgent need for policy consistency and supportive business environment that will not only ease their business operations but also catalyse broader economic growth of the country.​

 

[Saif]

Fiscal pressure to persist despite foreign loans

The interim government has made progress in mobilising more external loans from multilateral lenders but that will not reduce pressure on fiscal management due to lower than the expected domestic...

www.newagebd.net

Fiscal pressure to persist despite foreign loans
Shakhawat Hossain 29 November, 2024, 23:51

The interim government has made progress in mobilising more external loans from multilateral lenders but that will not reduce pressure on fiscal management due to lower than the expected domestic revenue generation, said economists.

Finance Division officials have calculated that around $2.5 billion loan as budget support is expected to be released in the next month by the International Monetary Fund, World Bank and Asian Development Bank.

The budget support will power the on-going government efforts in tackling the dollar shortage.

But the increased flow of external loans will not reduce pressure on fiscal management as the domestic revenue generation still remains 1 per cent negative in the first four months of the current financial year of 2024–25 marked by the regime change on August 5 amid a student-led mass uprising.

In a bid to get $500 million as budget support from the World Bank, the interim government, which has succeeded the Awami League regime, is likely to announce the separation of the policy department of the National Board of Revenue from its executive department soon.

The separation has been a long pending issue between the Washington-based lender and the government since 2003.

The separation of the policy department of the NBR from its executive department was even approved in 2008 by the then caretaker government.

But the implementation of the decision had remained pending, said revenue board chairman Abdur Rahman Khan.

Former World Bank Dhaka office chief economist Zahid Hossain observes though that the separation would not guarantee higher revenue generation immediately.

Emphasising a meaningful separation he observes that engagement of skilled policymakers is imperative for fruitful outcomes in implementation of policy and checking corruption.

Bangladesh is losing $355 million in tax annually because of corporate tax abuse and offshore tax abuse, according to a report titled ‘State of tax justice 2024’ released by the Tax Justice Network in the current month.

The amount is 21.4 per cent of the country’s total health expenditure, states the report of the United Kingdom-based global network.

With an overall revenue generation target of Tk 4,80,000 crore for FY24–25, and against the target for the first four months, the revenue board has managed to collect around Tk 1,01,281 crore, facing a shortfall of Tk 30,831 crore.

Economists said that the government’s reliance on borrowing from the banking sector would increase against the backdrop of lower than the expected revenue, and the situation might even lead it to mobilise more loans from the multilateral lenders.

Fiscal management would remain a big challenge for the interim government due to the sloppy condition of the economy, said Research and Policy Integration for Development chairman Mohammad Abdur Razzaque.

Blaming the previous regime’s reckless decision and management for the overall messy condition, he said that it was imperative for the government to reduce its expenditure.

The projected loan from the banking sector in FY24–25 budget is Tk 1,37,500 crore, while Tk 90,700 crore has been projected to get from the foreign sources to meet the budget deficit of 4.6 per cent.

Finance Division officials said that the interim government had successfully negotiated in increasing the World Bank’s budget support to $500 million from initially projected $250 million.

The manila-based ADB is going to release $600 million in the next month from initially agreed $300 million, they said.

The officials said that the IMF had given positive signals to the extra loan sought by the interim government in addition to the availability of the half-yearly tranche under the ongoing $4.7 billion loan programme since 2023.

The immediate past political government took the loan to tackle the severe shortage of dollars.

An IMF mission will arrive in the capital next week to negotiate over the extra loans and review the current loan programme.

Finance secretary Khairuzzman Mozumder said that they were expecting to receive $1 billion loan as extra support from the IMF.

The forex reserve hovering around $18.5 billion (as per Sixth Edition of the IMF’s Balance of Payments and International Investment Position Manual standards) in November will improve with the release of the budget support from the multilateral lenders, said finance division officials.​

 

[Saif]

Taskforce may recommend deferring BD graduation

Bangladesh's graduation to a middle-income country is deemed premature now and the economic-reform taskforce may recommend delay in the status change that would forfeit its trade and aid benefits. Dr KAS Murshid, the team leader of the taskforce tasked by the post-uprising government to reframe

thefinancialexpress.com.bd

Taskforce may recommend deferring BD graduation
Economy taskforce thinks haste may do long-term harm
Doulot Akter Mala
Published :
Nov 30, 2024 00:24
Updated :
Nov 30, 2024 00:24

Bangladesh's graduation to a middle-income country is deemed premature now and the economic-reform taskforce may recommend delay in the status change that would forfeit its trade and aid benefits.

Dr KAS Murshid, the team leader of the taskforce tasked by the post-uprising government to reframe economic strategies, justifies deferment of the country's graduation from the LDC club in the current context as he thinks haste could do more harm than good.

A former director-general of Bangladesh Institute of Development Studies (BIDS), Dr Murshid heads the 12-member taskforce the interim government formed in September, after the August-5th changeover, to work out strategies for the government to help attain anti-discriminatory sustainable development.

The taskforce on 'Re-strategising the economy and mobilising resources for equitable and sustainable development' is likely to submit its first report by the end of December 2024. Its findings are aimed at achieving desired results in the next two years to 2026.

In an exclusive interview with The Financial Express, Dr Murshid talks on the entire spectrum of economic challenges facing the country which the taskforce is tasked to address for a breakthrough in keeping with the changed contexts brought forth by the student-people uprising.

Bangladesh is set to graduate from LDC (least-developed country) status in 2026. His opinion was sought if the country is prepared for this transition.

Dr Murshid's answer was straight: Honestly, no - not under the present circumstances. If you had asked me a few months ago, I would have said yes! Our economic circumstances have changed, as you are aware. Now, I feel compelled to stress that Bangladesh should delay its graduation. While remaining in the LDC category with our current economic size is indeed embarrassing, especially as the only country in Asia (except Afghanistan and a few Island States) left in this group, rushing into middle-income status could be detrimental to our economy. The benefits of tariff preferences and external support are critical for us right now.

FE: What are the primary economic challenges Bangladesh is currently facing?

Dr Murshid: Debt repayment and foreign-exchange reserves remain the major concern. Our debt burden is visible and growing, and repayment challenges are looming. While our repayment history has been strong, the current economic pressures make it uncertain if this can continue.

We also face a severe foreign- exchange crisis, with insufficient reserves and limited growth in foreign -exchange sources. A quick wayout cannot be found - we will need to be patient and disciplined.

To another question as to how the geopolitical landscape affects Bangladesh's access to external funding, he said, "Geopolitics plays a crucial role. Earlier, we had hopes of receiving major resource flows from development partners in the face of significant geopolitical re-alignments. However, with the change in US politics, this support may diminish - although I do not think there will be any major shift in US policy towards Bangladesh.

That said, multilateral development banks like the World Bank and the ADB are likely to extend some support. Bangladesh must actively explore bilateral and multilateral funding sources to navigate this period along with a greater role of the EU and Japan.

FE: Do you think recent interest-rate hike can tame inflation?

Dr Murshid: The 9/6 administered interest-rate system has caused significant damage to the economy. It failed to bring investments and stifled the financial system. Interest rates must be market-driven to ensure sustainability and inflation control. Whether the current interest rate is close to the market-equilibrium rate or whether it is too high is a matter of investigation. The Bangladesh Bank should tweak this number to balance supply-demand changes.

The interest rate, however, is just one tool to tame inflation. In addition, fiscal policy will have to play its due role - which it currently does not. At the heart of the matter, however, are supply/supply-chain issues and foreign-exchange shortages which the Bangladesh Bank cannot solve itself.

FE: What are the aspects the government should focus to contain inflation, generate employment?

Dr Murshid: Micro, small, and medium enterprises are crucial to our economic fabric. Their problem isn't interest rates but access to finance. We must leverage technology, simplify processes, and reduce entry barriers to support this dynamic sector.

High costs and corruption in licensing and registration processes are major barriers to investment. Moving to a paperless, digital system is essential to reduce these hurdles. The least we can do is reduce the governance burden that the private sector, especially CSMEs, faces to stimulate the supply side.

FE: Energy pricing is a contentious issue. What reforms do you suggest?

Dr Murshid: Our energy-pricing policies are arbitrary and lack a rational framework. We need a long-term strategy to align domestic energy prices with global trends gradually over time. This will attract investment and promote energy efficiency.

Energy pricing in Bangladesh is highly segmented and controlled by lobbies, which is unacceptable. While global energy markets are ruled by a cartel - which I think is a shame-- we have no choice but to accept the broad world market-price paradigm in our pricing policy, as I already said.

Do you foresee any political risks to the taskforce's recommendations?

Dr Murshid: Unfortunately, yes. Policy stability is a significant concern. If a new political party takes over, there's a risk of policy reversals, which could deter investment and disrupt ongoing reforms. That's why it's essential to establish legally binding mechanisms to ensure continuity.

Asked how he proposes ensuring transparency and accountability in implementing reforms, the economic-rejig-taskforce chief said, "We need a robust feedback and monitoring system. For example, citizen monitoring boards can be established, with dashboards providing real-time updates on project progress. Publicly accessible platforms that can incorporate a "hall of fame and shame," for example, can encourage accountability among officials.

FE: In conclusion, what is your message to policymakers and stakeholders?

Dr Murshid: Transitioning to middle-income status is a significant milestone, but it must be achieved sustainably. Rushing into it without addressing our structural challenges could lead to long-term damage. We need to focus on prudent policy-making, targeted investments, and institutional reforms to secure our economic future.

Our broad economic-development strategy should be to imitate the success of the Asian Tigers and explore/exploit partnerships with lead countries like Japan, South Korea, and China.​

 

[Saif]

Bangladesh stock market: Analysing the challenges ahead

The Bangladesh stock (equity) market has experienced significant fluctuations since the 2010 market crash, reflecting a challenging macroeconomic and political environment. Analysing the post-crash period from 2011 onwards provides insights into the volatility and recovery patterns of the market.

www.thedailystar.net

Bangladesh stock market: Analysing the challenges ahead

FILE VISUAL: STAR

The Bangladesh stock (equity) market has experienced significant fluctuations since the 2010 market crash, reflecting a challenging macroeconomic and political environment. Analysing the post-crash period from 2011 onwards provides insights into the volatility and recovery patterns of the market.

In 2011, the market experienced a dramatic loss of 32.2 percent (total return), driven by a sharp capital loss of 36.6 percent following the speculative bubble that burst in late 2010. This was compounded by high inflation (10.7 percent), leading to a substantial negative real return of 42.9 percent. Investor confidence remained low in 2012, with a further decline in market returns (by 16.1 percent) and inflation staying elevated (8.7 percent), resulting in another negative real return of 24.9 percent.

However, the market began to stabilise from 2013 onwards. Although capital gains were modest at 4 percent, dividend yields provided some cushion, and total market return rose to 7.8 percent. With inflation beginning to taper (7.5 percent), the real return turned positive at 0.3 percent, signalling a tentative recovery. From 2014 to 2017, the market gradually improved, with total returns averaging around 15 percent per year. The highest total return during this period was 26.7 percent in 2017, despite inflation averaging around 5-7 percent, leading to consistent positive real returns.

A major setback occurred in 2018 when the market saw a loss of 10.8 percent (total return), coupled with inflation at 5.7 percent, resulting in a negative real return of 16.4 percent. This trend continued into 2019 as the market struggled to recover, with a further 13.1 percent decline in total return. The market showed a sharp recovery in 2020 and 2021, with total returns of 24.4 percent and 29.1 percent, respectively, as post-pandemic optimism boosted performance. However, high inflation and corporate-led corruption have led to a decline in 2022 and 2023, and in 2024 YTD, the market is down by 16.2 percent (capital loss), facing significant headwinds like macro instability, high inflation, and weak investor sentiment.

The overall post-crash analysis shows a pattern of recovery but is marked by periods of volatility, inflationary pressure, and ongoing political and economic risks.

The Bangladesh stock market typically rebounds after 2-3 consecutive years of correction, as historical patterns suggest. Based on past trends, one might expect a recovery in or by 2025. However, the current situation presents unique challenges, as the market's trajectory is increasingly intertwined with the country's macroeconomic conditions and political landscape. Given these dynamics, the projection for the next two years remains cautious. The Bangladesh stock market is poised to encounter substantial headwinds due to a confluence of macroeconomic and political uncertainties, which could significantly impact its performance. Below is a detailed analysis of the key challenges expected to shape market outcomes in the coming years. To provide a more comprehensive understanding, the article includes historical context that sheds light on the underlying causes of anxiety among minority investors in Bangladesh's stock market, ensuring these issues are neither overlooked nor ignored.

Bangladesh's stock market is under strain as high interest rates on government bonds (11-13 percent) pull institutional investors toward safer, risk-free returns, weakening liquidity and investor confidence. Rising inflation, projected to hover around 10 percent for at least the next two years, exacerbates economic instability by eroding consumer purchasing power and corporate profitability while also increasing borrowing costs. Additionally, declining foreign exchange (FX) reserves, driven by reduced export competitiveness, supply chain disruptions, and rising business costs, further undermine economic stability. The weakening taka adds to the strain, raising import prices, feeding inflation, and deterring foreign investment due to the risk of currency losses. Compounding these challenges is Bangladesh's rising foreign debt burden, which is becoming increasingly expensive to service due to the taka's depreciation, diverting resources away from critical development projects and infrastructure investments. Without effective fiscal management, investor confidence and stock market growth are likely to remain subdued.

High global interest rates, particularly in the US, are drawing investment flows away from emerging markets like Bangladesh. With US bonds offering safer, more attractive returns, foreign investors are less likely to invest in Bangladesh's stock market, exacerbating capital outflows. Additionally, capital flight driven by export-import manipulation and corruption in large project financing, involving major corporations like S Alam Group, Summit Group, and BEXIMCO Group, continues to deplete foreign exchange reserves. Hopes of recovering these siphoned funds are unrealistic, as they are often held in tax havens with little incentive to cooperate. This capital flight and lack of international legal recourse further weaken the country's economic stability and stock market performance.

Bangladesh's stock market faces significant challenges due to weak regulatory leadership, institutional failures, and unresolved margin loan issues. The Bangladesh Securities and Exchange Commission (BSEC) remains under scrutiny. Compounding these concerns, the Investment Corporation of Bangladesh (ICB), once a major stabilising force in the market, is now struggling under a portfolio of junk stocks and questionable investments.

Years of mismanagement and corruption, including dubious investments have left ICB in a weakened financial state, severely limiting its ability to intervene in market downturns. Moreover, the persistent issue of margin loans continues to burden financial institutions. Merchant banks and brokerage firms, plagued by bad debts from margin loans extended during previous market bubbles, are unable to provide fresh loans, stifling market liquidity. The total outstanding margin loans, including interest, have reached Tk 250 billion ($2 billion), with a significant portion in negative equity. Despite efforts to address these issues, powerful individuals with political and social connections have manipulated the system, obtaining unauthorised loans and evading accountability. Without decisive action from the BSEC and a comprehensive cleanup of financial institutions' balance sheets, Bangladesh's stock market will remain vulnerable, limiting its growth potential and undermining investor confidence.

Bangladesh's stock market is grappling with a significant lack of "smart capital," as wealthy investors and corporations either move funds abroad or hold back investments due to uncertainty. This absence of new, well-capitalised investors leaves the market dependent on a small group of players, increasing the risk of manipulation and volatility. Foreign investors, too, are deterred by poor transparency, particularly under the previous leadership of the BSEC, further stalling capital inflows. Additionally, tax policies provide little incentive for companies to list on the stock exchanges, with the tax differential between listed and non-listed firms being too narrow to justify the costs of going public. As a result, many well-established companies avoid the stock market, depriving it of the quality listings needed for growth and stability. Combined with the regulatory failures that allow debt-ridden companies to remain listed, these factors prevent the market from attracting both local and international long-term investors, ultimately stifling its development. Without reforms, the Bangladesh stock market will struggle to achieve sustainable growth and liquidity.

Given these challenges, a conservative investment strategy focusing on government bonds is advisable. Allocating 60-70 percent of funds to government bonds ensures capital preservation in uncertain times. Until a stable government is established and market conditions improve, focusing on low-risk investments is a prudent approach. It's important to remember that in a stormy sea, keeping your ship steady is far more vital than rushing toward the horizon. In such dangerous waters, ensuring your vessel stays afloat matters more than chasing quick profits.​

 

[Saif]

Bangladesh on track for next IMF loans

Bangladesh is on track to meet all 12 conditions set by the International Monetary Fund (IMF) to qualify for the fourth tranche of a $4.7 billion loan programme, only missing the revenue collection target.

www.thedailystar.net

Bangladesh on track for next IMF loans
Meets all conditions except for revenue target

Bangladesh is on track to meet all 12 conditions set by the International Monetary Fund (IMF) to qualify for the fourth tranche of a $4.7 billion loan programme, only missing the revenue collection target.

This comes as an IMF mission, led by mission chief Chris Papadakis, is set to visit Bangladesh from December 3 to 17 to review the country's performance and compliance with structural reform conditions.

The team will meet with Finance Adviser Salehuddin Ahmed on December 3, finance ministry officials told The Daily Star.

During their stay, the IMF team will also hold meetings with officials from the Bangladesh Bank, the finance ministry, the power and energy ministry, the National Board of Revenue, and the Bangladesh Bureau of Statistics.

There are seven performance criteria for which the IMF has set specific floor or ceiling figures to be achieved by June 2024.

These conditions include net international reserves, budget deficit, accumulation of external payment arrears, reserve money, tax revenue, priority social spending, and capital investment undertaken by the government.

According to a finance division official, the government has met six of these conditions but failed to achieve the revenue collection target.

As per the IMF target, the government was supposed to collect Tk 394,530 crore in taxes by June.

Data from the Finance Division showed that the government collected Tk 369,209 crore by June, meaning it fell Tk 25,321 crore short of the IMF target.

Another major condition set by the IMF was to increase the country's net international reserves, which was fulfilled after the IMF lowered the required threshold in May this year upon request by the then government.

The initial target was $20.11 billion by June 30. However, the IMF lowered it to $14.79 billion later in May. As of June 30, Bangladesh had $16.7 billion net international reserves.

Bangladesh failed to fulfil this target for each previous instalment of the loan package.

The IMF's loan programme contains two types of conditions: seven linked to performance criteria and the remaining related to structural benchmarks.

Officials said Bangladesh was scheduled to meet five structural reform conditions out of 27 by June.

The IMF team will assess whether Bangladesh met these five conditions and will also review other structural reform conditions to be met at different times from September this year to December next year.

One of the structural reform conditions was the publication of an updated medium-term debt management strategy, covering FY25 to FY27. The finance ministry has already published it.

According to the publication, it is crucial for Bangladesh to move towards a unified debt management framework gradually to enhance the country's public debt management.

"Under this framework, all aspects of public debt management, from the issuance of treasury securities to the oversight of national savings certificates and external borrowing, among others, should be conducted under the Finance Division through an autonomous unit," it said.

Capacity development of the debt management unit in this regard will help to ensure better implementation of the debt strategy and maintain public debt on a sustainable trajectory, it added.

An official from the finance ministry said the report was formulated at the end of the previous government's tenure. The interim government or the next elected government may introduce changes.

Finance ministry officials said that other macroeconomic challenges, including inflation, subsidy reductions and reforms in revenue collection, would be discussed during the IMF team's visit.

The interim government will also share updates on steps taken to generate authentic statistics.

The total arrears of the government subsidy in the power, fertiliser, and energy sectors amounted to approximately Tk 60,000 crore at the end of June. Discussions with the IMF mission will prioritise how subsidies in these sectors can be reduced, according to the officials.

On top of the ongoing $4.7 billion programme, the government has already sought an additional $3 billion loan from the IMF.

An official from the Bangladesh Bank said this will be discussed in detail with the visiting IMF mission. To avail of that loan, the government, however, will be required to meet additional conditions set by the IMF.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the IMF's upper management is positive about providing additional loans.

"But specific conditions must be fulfilled by the government," he said.

These conditions could relate to the banking sector, tax policy, subsidy reductions, exchange rate management and more, he added.

Hussain said it is still unclear whether the new loan will be incorporated into the existing loan package or offered in a different form.

In the face of mounting pressure on its foreign reserves, Bangladesh sought IMF assistance at the end of 2022. The multilateral lender approved $4.7 billion in January 2023. Of that, the government has already received $2.3 billion in three tranches.​

 

[Saif]

White paper on Bangladesh's economy likely on December 1

The white paper on the country’s economy will be submitted today highlighting how political driven data created the ‘villainous’ development narrative by the ousted Awami League regime.

www.newagebd.net

White paper on Bangladesh's economy likely on December 1
Staff Correspondent 01 December, 2024, 00:25

The white paper on the country’s economy will be submitted today highlighting how political driven data created the ‘villainous’ development narrative by the ousted Awami League regime.

Out of 23 topics — such as macro-economy, structural section, social sector planning, instable market, policy outlook, health, education and employment— ‘the villain of development narrative because of political driven data is very crucial’, said Debapriya Bhattacharya on Saturday.

Debapriya, head of the 12-memebr committee on formulating the much-talked-about paper, said they were going to meet the chief adviser at around 12:00pm.

Debapriya, also a distinguished fellow of the local think-tank Centre for Policy Dialogue, has already said that they would make the report public on Monday.

The interim government that assumed power on August 8, three days after deposed prime minister Shekh Hasina fled to India on August 5 amid a mas uprising, appointed the full committee on August 28 and asked it to submit the report in 90 days.

The members of the committee are professor AK Enamul Haque, dean, Faculty of Business and Economics, East West University, Ferdaus Ara Begum, chief executive officer of Business Initiative Leading Development, Imran Matin, executive director, BRAC Institute of Governance and Development at BRAC University, Kazi Iqbal, senior research fellow at Bangladesh Institute of Development Studies, M Tamim, a professor of Bangladesh University of Engineering and Technology, a former special assistant to the chief adviser (2008), Mohammad Abu Eusuf, a professor of the Department of Development Studies at the University of Dhaka, professor Mustafizur Rahman, a distinguished fellow at Centre for Policy Dialogue, Selim Raihan, a professor at the Department of Economics of the University of Dhaka and executive director, South Asian Network on Economic Modelling (SANEM), Sharmind Neelormi, a professor at the Department of Economics at Jahangirnagar University, Tasneem Arefa Siddiqui, a former professor of the Department of Political Science at the University of Dhaka and founding chair, Refugee and Migratory Movements Research Unit, and Zahid Hossain, a former lead economist at the World Bank.

A committee member while describing the concept of white paper said it is utilised by a new regime to fix new policies.​

 

[Saif]

Remittance rises 14% in November

The amount of remittance sent home in November by Bangladeshis living abroad rose 14 percent year-on-year to $2.20 billion, showed Bangladesh Bank latest data.

www.thedailystar.net

Remittance rises 14% in November
The amount of remittance sent home in November by Bangladeshis living abroad rose 14 percent year-on-year to $2.20 billion, showed Bangladesh Bank latest data.

Industry insiders said Bangladeshi expatriates have been continuously increasing the amount of remittance they have been sending to the country since August.

This upward trend of remittance inflow will create a breathing space and reduce pressure on foreign exchange reserves, they added.

However, November's inflow is 8.16 percent lower than that in October.

The upward trend of remittance inflow will create a breathing space and reduce pressure on forex reserves

Year-on-year, the inflow of remittance fell 3.2 percent in July and then increased 39 percent in August, 80 percent in September and 21 percent in October, data showed.

During the July-November period of this fiscal year, remittance earnings stood at $11.13 billion, up from $8.80 billion in the same period of last fiscal year, as per the central bank data.

In the first five months of this fiscal year, remittance inflow increased by 26.4 percent from the same period of last fiscal year.

Bankers said remittance inflow would increase further in the coming days, since Bangladeshi expatriates' capacity to send money has increased due to falling commodity prices on the global market.

In November, Islami Bank Bangladesh received the highest $360 million in remittance, Agrani Bank $288 million, Janata Bank $264 million, Rupali Bank $153 million, BRAC Bank $187 million and Sonali Bank $117 million, the BB data showed.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, recently told this newspaper that the continuous rise in remittance inflow was good news for the country.

However, he said the forex earnings were not enough considering the country's foreign payment obligations.

Remittance inflow and export earnings will have to increase further to mitigate the ongoing pressure on foreign exchange reserves, he said.

The economist recommended that the government focus on exporting skilled manpower to increase remittance earnings.

He also said authorities should find new markets and take initiatives to tackle hundi, an illegal and informal remittance instrument.

The country's foreign exchange reserves stood at $18.73 billion as of November 27, down from $19.51 billion on the same day last year, BB data showed.​

 

[Saif]

Debt payment burden to intensify further

A spike in the already-increasing debt servicing burden is imminent as the country’s debt to gross domestic product (GDP) ratio remains far from growth-reducing thresholds, according to the white paper on the state of the economy.

www.thedailystar.net

Debt payment burden to intensify further

Karnaphuli tunnel, built at a cost of around Tk 10,700 crore, has been earning less than its required maintenance expenses. Of the construction cost, the Exim Bank of China gave $705.80 million or Tk 5,913 crore with 2 percent interest and 0.20 percent service charge, while the Bangladesh government funded the rest. Photo: Star/file

A spike in the already-increasing debt servicing burden is imminent as the country's debt to gross domestic product (GDP) ratio remains far from growth-reducing thresholds, according to the white paper on the state of the economy.

The paper said debt distress can arise even at "low" levels when debt servicing competes for domestic and foreign currency amid a liquidity shortage.

"Inattention in policy and practice to value for money in decisions to borrow from domestic and external sources has been the Achilles heel of public debt management in Bangladesh in the last decade and a half," the paper said.

According to the paper, by the end of June this year, the total debt is estimated to have reached 41.3 percent of the GDP, up from 35.6 percent just two years ago.

The bulk of the $166.7 billion equivalent public and publicly guaranteed (PPG) debt at the end of FY23 was domestic debt denominated in local currency, which accounted for 55.6 percent of the PPG debt stock. In FY23, interest and amortisation on domestic debt totalled $19.4 billion, or 11.7 percent of the GDP.

According to the white paper, treasury bonds and bills, a majority of which are owned by banks, make up nearly half of the nation's debt. Less than one-fifth is owned by the Bangladesh Bank (BB), with non-bank financial institutions holding the remaining shares.

Around 23 percent of the total domestic debt is made up of National Saving Certificates (NSCs).

It said the trends in debt intensity appear much less comfortable, especially on metrics not contaminated by data fog.

According to the paper, external debt was 44.4 percent of the PPG debt stock and 17.7 percent of the GDP in FY23 compared to 15.1 percent in FY21.

External PPG debt is predominantly owed by the central government to multilateral and bilateral lenders, accounting for 52 percent and 34 percent respectively at the end of FY23.

The rest are short-term, sovereign bonds held by non-resident Bangladeshis and guaranteed state-owned enterprises' debt.

Private sector external debt stood at 5 percent of the GDP in FY23 and declined by another 7.5 percent by the end of June this year relative to the same point in time in 2023.

Total interest and amortisation related to external debt in FY23 amounted to $3.9 billion, or 0.9 percent of the GDP.

Regarding the reason for growing public debt, the white paper decried an overall sense of comfort among policymakers and multilateral institutions on the intensity of public debt.

This is rooted in two sets of facts.

First, including guarantees, PPG debt is lower in Bangladesh than in India, China, Thailand, and Vietnam, recent increases notwithstanding. Second, as before, a joint debt sustainability analysis (DSA) by the International Monetary Fund (IMF) and World Bank (WB) in June 2024 assessed that there was a "low risk of external and public debt distress".

The IMF-WB analysis found a baseline with 7 percent long-term average economic growth, primary budget deficits averaging 2.6 percent of the GDP, 5-6 percent inflation and stable exchange rates, it explained. The paper said such a happy conjunction of macroeconomic conditions is increasingly looking farfetched going into 2025.

Growth projections for the current year have already been drastically revised down to between 4 and 5 percent and the timing of projected recovery is highly uncertain, the white paper pointed out.

All other variables have moved in directions incongruent with the baseline. These include contingent liability, financial market, natural disaster and export shock.

However, the paper said the IMF-WB debt sustainability analysis is beginning to gather a reputation of often underestimating economic downturns, leading to delayed debt relief and hurriedly designed increases in austerity measures.

It also said it is not very assuring that a decline of long-term growth to 6.5 percent does not change external and overall debt risk ratings.

Fogs in the integrity of GDP data suggest maybe even 6.5 percent is no more than an upside risk and certainly not a downside risk as tagged in the Digital Security Act.

Bangladesh may never have exceeded 5 to 5.5 percent annual growth except in the volatile decade of the 70s, the white paper committee believes.

The reported rise in the extent of indebtedness could be understated and the favourability of debt dynamics overstated because of significantly rising upward bias in GDP growth and perhaps even the level of nominal GDP estimates.

Moreover, there is a limit to the extent to which favourable debt dynamics can reduce indebtedness in the face of large primary deficits or below the line adjustments, the latter often making a big difference.

Key factors weighing on Bangladesh's debt vulnerability are its growing exposure to foreign currency-denominated non-concessional debt for mega-projects, elevated refinancing risks, and low fiscal and external buffers.

Given doubts about the veracity of data on real GDP growth and nominal GDP levels, the external debt to foreign exchange earnings metric has better credibility.

It has also gained more currency as Bangladesh struggled to manage the recent crunch in foreign exchange liquidity, the white paper mentioned.

But the white paper committee suggested transformative debt management reforms would be needed to make a credible case for renegotiations supported by global lenders such as the IMF and the WB.​