[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Business activities yet to come back on track

Flash floods across parts of the country, the lingering effects of recent nationwide political upheaval, and persistent inflationary pressure have prevented business activities from getting back on track, according to businesspeople.

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Business activities yet to come back on track

Although the unrest stemming from nationwide protests is fading and shopping centres have opened their doors, customer footfall has not picked up. Recent floods, alongside persistently high inflation, have also impacted consumer behaviour. As such, shopping centres and malls remain relatively desolate. The photos were taken in Farmgate yesterday. Photo: Prabir Das

Flash floods across parts of the country, the lingering effects of recent nationwide political upheaval, and persistent inflationary pressure have prevented business activities from getting back on track, according to businesspeople.

As uncertainty and fear are still clouding people's minds, they are not interested in shopping, businesspeople said.

However, they believed business activities would gradually return to normalcy, saying that there was no alternative but to wait for better days.

"The months-long political unrest stemming from the student movement, coupled with recent floods, caused sales and demand to drop to inadequate levels. So, businesses are enduring a difficult time," said Tapan Sengupta, deputy managing director of BSRM, a leading steel manufacturer.

He said that sales of construction materials usually decline in the rainy season, with demand for steel significantly reduced during the monsoon months.

"However, various elements have emerged and hampered business in nearly all sectors."

Since demand from clients and dealers has declined substantially, BSRM has only been partially running its production units in order to avoid a stockpile of goods, he informed.

Sales will not improve until consumer confidence is restored, and development projects are resumed, he opined.

Rupali Chowdhury, managing director of Berger Paints Bangladesh, said domestic consumption of fast-moving consumer goods and construction materials has declined significantly since last year.

"The recent unrest added to this, which is unfavourable for business growth," she said.

Consumers are uninterested in spending money on non-essential products in the current situation, she noted.

Chowdhury, also a former president of the Foreign Investors' Chamber of Commerce and Industry (FICCI), said all multinational companies were facing the same situation.

"The economy is not in a positive state due to the political changeover and recent flash floods while people are yet to mentally recover from recent turmoil," Chowdhury said.

"So, businesses are passing a transitional period. As a result, business activities have been hindered."

Arfanul Hoque, director (retail) at the Bata Shoe Company (Bangladesh) Ltd, said footfall at their outlets slowed since the start of this year.

He said high inflationary pressure is a fundamental reason for the decline in sales.

Inflation hit 11.66 percent in July this year, the highest in at least 13 years, while food inflation soared to at least a 10-year high of 14.1 percent, according to the Bangladesh Bureau of Statistics.

"Later, unrest and flash floods exacerbated the situation," he said.

However, Hoque believes the situation will gradually improve as the political situation becomes more stable.

Mohammed Amirul Haque, managing director of Premier Cement Mills PLC, said the business situation had been beyond anyone's control since mid-July.

"Demand declined significantly due to the monsoon season and also because customers are yet to regain confidence. In this situation, we are running the manufacturing units partially," he said.

"Despite having no control over the situation, we are trying to do our best to handle the challenges," Haque added.

He also stressed the need for policy support from the interim government.

MA Jabbar, managing director of DBL Group, said factories in Mymensingh's Bhaluka area and Gazipur's Kashimpur locality are contending with an acute gas and power supply crisis.

"In this situation, we are running the factories with diesel to ensure power, which increases the cost of production," he said.

Although demand is slow at the moment, manufacturers may be unable to ensure adequate supply as production is being hampered due to the gas crisis, he added.

Jabbar said such issues had become a new headache for investors, adding that they would think several times before expanding their businesses or making fresh investments.

Khourshed Alam, director of sales and marketing at Akij Ceramics Ltd, said the business situation is yet to come back on track as the overall condition is not suitable for customers.

"There were no sales between July 15 and August 15 due to the student movement. Recently, flash floods also impacted businesses," he added.

Alam hopes that business activities will come back on track within one-and-a-half months.​

 

[Saif]

Fall of a titan: Looking for the economic tinderbox

Despite the youth-driven upheaval, the key drivers of the economy remain very much intact and ready to take the economy to new heights.

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Fall of a titan: Looking for the economic tinderbox

Inflation must be tamed in the shortest possible time, or else it will remain a keg in the economic tinderbox. FILE PHOTO: AMRAN HOSSAIN

Just when the Hasina regime was imbued with an aura of invincibility, the ground finally shifted on August 5, 2024, and the 15-year-old regime collapsed like a house of cards. This regime change, and the process that led to it, will be recorded in blood-letters, once again, in the annals of Bangladesh history. To the nation's advantage and to restore stability, we had someone of the stature of Nobel laureate Dr Muhammad Yunus, widely respected nationally and internationally, who was unanimously offered the high task of leading the nation onwards.

Bangladesh is no stranger to national student movements and violent transitions. A peaceful transfer of state power has eluded this country for much of its 53-year existence. But it was for the first time that a student movement toppled an apparently powerful government. Political analysts around the world will now have to sift through their books to ascertain the theoretical underpinnings that best fit the latest transformative developments. Suffice it to say that the end of a long-running progressively authoritarian regime was inevitable, albeit unpredictable. The nagging question was when… and how?

Since early July, Bangladesh has gone through what can aptly be called a youth-driven mass uprising that toppled a regime that had lost touch with the people. But, for such a movement to change a regime that appeared fully ensconced in the saddle of government, there has to be some lethal and explosive spark that removes the ground from underneath the holders of state power. I am no political scientist, but I would like to argue that in a situation where one political party and its cronies share much of the wealth creation that has indeed happened over the past decade and a half, then it is the exclusion of the vast swath of the population (an overwhelming majority), not connected with the ruling elites or their henchmen, that presents a classic case for a political explosion to unravel.

It is true that, as a consequence of the Covid pandemic and subsequent Russo-Ukraine war, the economy was treading a rough terrain, putting a damper on the notion of a fairytale economy of Bangladesh. To make matters worse, there was an inexcusable mishandling of the internal and external challenges afflicting the economy that triggered something of an "economic tinderbox," a concoction of Lutfey Siddiqi, a talented professor of Bangladeshi origin at London School of Economics (LSE). Was there an "economic tinderbox?" The answer, in my view, is yes and no. To be objective, one needs to take a closer look.

Most certainly, inflation, a rise in the general price level, remains a ticking time bomb. Ordinary citizens are suffering from serious diminution of their purchasing power from double-digit inflation that has stubbornly persisted for over 18 months. If not handled deftly and fast, it could be the cause of another implosion in the future. It is therefore reassuring to see the appointment of a highly competent professional economist like Dr Ahsan Mansur (former IMF Division Chief and Executive Director, PRI) at the helm of Bangladesh Bank. His immediate task is to bring inflation under control and restore sanity in the financial sector. But the challenges should not be underestimated.

Orthodox monetary management, which is now in full swing and seems to be intensified (by raising interest rates a few notches) may take too long for the patience of ordinary citizens to last. This inflation is not just an excess demand phenomenon which can be quashed by restraining demand through monetary tightening. There is a significant cost-push element arising from exchange rate depreciation (raising import prices) and hike in domestic energy tariffs that triggered the first inflationary spike in domestic prices in 2022. Then, there is the need to give a deflationary shock to prices, particularly to essential food items such as sugar, edible oils, onions, wheat, spices, etc. Import prices of intermediate and capital goods also need a reprieve in order to reduce production costs that have risen as a consequence of the 36 percent exchange rate depreciation that occurred over the past 18 months or more. What are the options?

Bangladesh presents a unique case of possible inflation control via long-pending tariff rationalisation in a high tariff economy. This presents an opportunity to kill two birds with one stone. What is not known to most experts in the country is that the 36 percent exchange rate depreciation has raised already high tariffs by exactly 36 percent, across-the-board. It is high time to shave off at least half of that, an action that will provide the dis-inflationary trigger to domestic prices.

Another point to note is that even if inflation were to decline to 6-7 percent due to monetary contraction, from the current level of more than 11 percent, over the next 6-9 months, that will not bring down market prices from current levels. This is the reality. You can't reduce prices by imposing pricing caps either. So, it is critical to come up with every possible ammunition in the economic policy package to reduce market prices to tolerable levels. The tariff handle is one such instrument. Tariff rationalisation has been a long-pending agenda. Its time has come. The National Tariff Policy 2023 has all the right policies waiting to be implemented. Budget and balance of payments support from IMF-WB could assuage any adverse impacts on revenue or balance of payments.

Bottom line: inflation must be tamed in the shortest possible time, or else it will remain a keg in the economic tinderbox.

Next off, it is the massive misgovernance in the banking and financial sector that needs immediate attention and redress. Needless to give details, all of which are now in the open. Some of the big guns involved in mega-theft (no better word to describe what has happened) of banks are in custody or on the run. The malaise runs deep and is a signature outcome of crass cronyism of the worse kind. What a mockery of the banking supervision rules. Setting up a banking commission and publishing a white paper on the state of the financial sector is a high priority and acknowledged by the interim government. Governance reforms in this sector simply cannot wait. Given the depth of the malaise, it is a tall order but one that deserves not words but action. Or else, here is one more keg in the tinderbox that could lead to a meltdown of the overall economy, simultaneously bringing both political and economic distress.

Since the outbreak of the Russo-Ukraine war the economy has been reeling under a balance of payments shock out of which it is yet to recover fully. Mismanagement of foreign exchange reserves and mishandling of exchange rate policy led to sharp depletion of forex reserves that were in highly comfortable range until 2022. After inexplicable delays, the exchange rate was substantially depreciated. A flexible exchange rate policy has been adopted—a crawling peg system—which has had the intended impact of stabilising forex reserves while minimising the divergence between the bank rate and the kerb market rate, thus incentivising and redirecting remittances through official channels.

Now comes the hard part. Restoring forex reserves to comfortable levels exceeding 5-6 months of import cover will need robust export performance for which a competitive exchange rate will play its part. This is where the interim government needs to exude signals of stability to the world community with laser-focus on reforms that bring dynamism to our export-oriented economy. That will then attract rising amounts of export-seeking foreign direct investment (FDI) bringing capital and technology and creating jobs with upskilling of workers aimed at markets of the future.

Thankfully, the nation can reap enormous dividends from the leadership that Nobel laureate economist Dr Muhammad Yunus brings to the table. Having received messages of continuing support from the multilateral institutions like the UN, World Bank, and IMF, there is increasing prospect of receiving higher balance of payments and budget support to backstop much needed reforms in financial, trade, and tax systems. Though not perfect, Bangladesh presents a notable example of effective aid utilisation where official development assistance has been a catalyst for its rapid progress.

To conclude, despite the youth-driven upheaval, the key drivers of the economy remain very much intact and ready to take the economy to new heights. First, the readymade garment industry has by and large remained unscathed with export prospects unaltered and perhaps better in the coming year as China+1 geoeconomics, a global strategy of diversifying supply chains, takes deeper root. Second, remittances are already showing signs of resurgence to be commensurate with the fact that departure of migrant workers has doubled in recent years. Third, agriculture, a sector that has taken the country towards food self-sufficiency, is also transforming itself into a mechanised and viable commercial enterprise of the future. Fourth, NGO-GO partnership for health, education, and human services for which Bangladesh is recognised the world over, gets a new boost with an NGO pioneer at the helm of affairs. These key drivers present challenges, with occasional hiccups, but no tinderbox-like phenomenon.

No doubt, there was a pent-up demand in the country for regime change. The youth have delivered where politicians failed. If this event can be called a "second independence", the nation indeed gets another chance to firmly establish itself as a "success story of development" that Oxford University professor and leading development economist, Stefan Dercon, thinks it is.

Dr Zaidi Sattar is chairman of Policy Research Institute of Bangladesh (PRI).​

 

[Saif]

IMF positive about lending additional $3b

The International Monetary Fund (IMF) is positive about lending an additional $3 billion to Bangladesh but the multilateral lender wants to know what reforms the interim government is planning to take.

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IMF positive about lending additional $3b

The International Monetary Fund (IMF) is positive about lending an additional $3 billion to Bangladesh but the multilateral lender wants to know what reforms the interim government is planning to take.

The topic came up during Finance Adviser Salehuddin Ahmed's maiden meeting with the Washington-based lender on Thursday.

Chris Papageorgiou, chief of the IMF staff mission that is overseeing the $4.7 billion loan programme for Bangladesh, led the IMF team at the virtual meeting, which was also attended by Finance Secretary Khairuzzaman Mozumder.

Speaking with journalists at the Secretariat yesterday, Salehuddin said the IMF wanted to know about reform plans and whether the tax-to-GDP ratio would increase.

"I told them 'definitely'," he added.

He said the Bangladesh Bank has already moved for the $3 billion loan proposal, adding that details would be discussed when an IMF mission visits Bangladesh later this month.

Following his appointment as Bangladesh Bank governor last month, Ahsan H Mansur initiated talks over an additional loan from the IMF to repay foreign liabilities and boost foreign exchange reserves.

IMF officials informed the finance ministry and central bank officials that they are assessing how much it can lend to Bangladesh without exceeding the quota for the country.

According to finance ministry calculations, Bangladesh can take another $3 billion without exceeding the quota.

A meeting on the loan arrangement could be held on the sidelines of the World Bank-IMF annual meeting in Washington in October, an event Bangladesh's finance adviser and central bank governor are likely to be a part of.

The IMF has so far released $2.3 billion under the $4.7 billion loan programme since it was approved in January last year.

The interim government took charge amid high inflation and depleting foreign currency reserves, issues that have been prevalent for almost two years.

Inflation remained high in July, with the consumer price index rising by 1.94 basis points to 11.66 percent while food inflation crossed 14 percent in July for the first time in 13 years.

Meanwhile, Bangladesh's foreign exchange reserves, which stood at more than $40 billion in July 2022, almost halved to $20.5 billion on August 21, according to the IMF's BPM6.

The interim government has taken some measures to tackle the situation, such as hiking the policy rate and implementing some strict measures for the banking sector.

Earlier, the IMF mission suggested various reform measures.

Considering Bangladesh's low tax-to-GDP ratio, the multilateral lender said it is imperative to prioritise sustainable revenue generation to bolster investments in social welfare and development initiatives.

To this end, tangible tax policy and administrative measures should be incorporated in the FY25 budget to augment tax revenues by 0.5 percent of the GDP, it added.

At the same time, a medium-and-long-term revenue strategy, with an accompanying implementation framework, should guide future reforms.

The IMF also recommended that reducing subsidies, improving expenditure efficiency, and managing fiscal risks will allow for additional spending on social safety nets and growth-enhancing investment.

"Reducing banking sector vulnerabilities remains a priority. Efforts to implement the non-performing loan reduction strategy should help support the growing financing needs of the economy," it said.

At the same time, the Bangladesh Bank should continue the transition to risk-based supervision to enhance financial sector resilience while continuing legal reforms to improve corporate governance and regulatory frameworks, it added.

Looking ahead, domestic capital market development will be instrumental in mobilising long-term financing to support growth, it further said.

ROOPPUR PLANT REPAYMENT PERIOD MAY BE EXTENDED

Finance Adviser Salehuddin also shared yesterday that Russia is positive about extending the loan repayment period for the Rooppur Nuclear Power Plant project.

However, they will only make a decision after the plant begins operations, he said.

Following a recent reshuffle to the advisory council of the interim government, Salehuddin was additionally charged with the Ministry of Science and Technology.

He started holding meetings with ministry officials yesterday.

Last week, Russian Ambassador to Dhaka Alexander A Nikolae paid a courtesy call to Salehuddin.

Responding to a query from journalists on the loan repayment schedule for the Rooppur plant, Salehuddin said: "We told them about the issue, and they told us to start operations [of the plant]."

Asked whether any cost-cutting initiatives would be taken, he said they are yet to assess it. He added that the plant would be operational soon.

The total loan for the project is $12.65 billion, according to an agreement signed with Russia in 2016.

At present, Bangladesh is paying $110 million yearly in two instalments with interest.

The 10-year grace period for the loan will end in March 2027. After that, Bangladesh must pay $390 million in two instalments every six months against the principal amount.

Recently, Bangladesh proposed to start making repayments against the principal amount in 2029 instead of 2027.​

 

[Saif]

Earning remittance senders' trust

Remittance, the second biggest source of Bangladesh's foreign currency earning after exports, the expatriate workers send home may vary in amounts from time to time. The variation depends on multiple factors. Last month, for instance, the homebound remittance recorded a 39 per cent rise in comparis

thefinancialexpress.com.bd

Earning remittance senders' trust
Published :
Sep 03, 2024 23:03
Updated :
Sep 03, 2024 23:03

Remittance, the second biggest source of Bangladesh's foreign currency earning after exports, the expatriate workers send home may vary in amounts from time to time. The variation depends on multiple factors. Last month, for instance, the homebound remittance recorded a 39 per cent rise in comparison to what it was in August 2023 at US$2.22 billion. An immediate explanation for this surge in remittance receipt may be the change in government following the ouster of thes former government. Notably, in July last, when the deposed Hasina government was still in power and, in a bid to suppress the student movement, shut down broadband internet service for five consecutive days, the homebound remittance flow took a jolt as it recorded a receipt of 10 months' low at US$1.90 billion. Also, the mobile internet service was shut off for 10 days in a row.

To make matters worse, the banks also remained closed between July 19 and July 23. No doubt, disruption of the internet service and bank closure played a part in reduced receipt of remittance from overseas migrant workers. But there were also reports that the expatriate workers as a show of solidarity with the agitating students stopped sending remittance. Whatever the case may be, the surge in remittance inflow is indeed a good augury for the incumbent interim government of Dr Yunus. With the remittance flow looking up, this may be considered a sign of the expatriate workers' confidence in the new interim government.

Political changes apart, there are also other issues that might have factored in this welcome boost to the homeward remittance flow. The measure that the Bangladesh Bank (BB), adopted shortly after the interim government's taking office did also contribute to increased remittance flow. This included the BB's raising the price of USD by 2.5 per cent with the result that the greenback's value increased by Tk 3.0 to Tk120. Obviously, this higher exchange rate did encourage remitters to send more money through the official channel instead of hundi. It is worth noting here that on May 8 last, the BB withdrew the then-prevailing fixed exchange rate regime and introduced the so-called crawling peg system for buying and selling US dollars on the spot market in Bangladesh Taka (BDT) and set the mid-rate at Tk117 for every USD. However, under the changed political circumstances last month, commercial banks, both state-owned and private, received their shares of remittance dollars in varied amounts that in some cases reflected the remitters' outlook towards the recipient banks in question. Six private banks owned by the notorious S. Alam group, for instance, reportedly, recorded 85 per cent drop in the receipt of remittance money. Most state-owned banks, on the other hand, reported an impressive growth in remittance receipts last month.

Overall, these developments have definitely come as a relief for the economy, particularly at a time when the country's foreign exchange reserve has been under strain. Now the latest BB data released on Sunday last show that the country's forex reserves recorded a rise by US$110 million from US$20.49 billion to US$20.60 billion within a span of four weeks between July 31 August 28. Admittedly, this is a significant development given that in May last the forex reserves fell to US$18.72 billion. However, remittance inflow is prone to fluctuations, so it would be prudent to observe the trend for some time to reach a firm conclusion. Meanwhile, the interim government would do well to improve service for the expatriate workers at the embassies in host countries and the airports at home. That would help build their trust in the present government.​

 

[Saif]

No action plan yet to explore blue economy

Quite a few years have passed since the settlement of maritime disputes with neighbours in the designated international court. Still, there is nothing in view to suggest any mentionable work programme to explore the vast resources of the ocean- blue economy as it is fondly dubbed. Clearly, wh

thefinancialexpress.com.bd

No action plan yet to explore blue economy
Wasi Ahmed
Published :
Sep 03, 2024 22:58
Updated :
Sep 03, 2024 22:58

Quite a few years have passed since the settlement of maritime disputes with neighbours in the designated international court. Still, there is nothing in view to suggest any mentionable work programme to explore the vast resources of the ocean- blue economy as it is fondly dubbed. Clearly, what the international court's verdict implied was a horizon waiting to be explored and exploited with well planned policies and actions.

This has not happened. Up until now, there has not been any move forward except for a small 'cell' set up under the Energy Division of the government. The cell -- Blue Economy Cell (BEC) -- was set up on a temporary basis under the Energy Division. The BEC remains a small organ headed by a director general with only a few officials and employees appointed on temporary basis.

Terming it a frustrating situation, energy experts have said that this is because of the lack of interest in exploring resources including oil, gas and fisheries in the bay. They stressed the need for multi-client seismic survey in offshore areas. Without acquiring seismic data, according to them, it is impossible to make any headway in the assessment of our share in the resources in the Bay of Bengal.

It may be recalled that Bangladesh got 19,467 square kilometres out of the 25,602 sq km disputed area from Indian claimed area in the Bay of Bengal. In addition, the country sustained a claim to 200 nautical miles for exclusive economic zone and territorial rights in the Bay against Myanmar's claim. But things have not moved farther in terms of preparations, and needless to say, the subject demanding high level of expertise should have been left to experts to suggest how to go about it. The former government reportedly formed a 25-member 'Coordination Committee on Sea Resources Exploration and Fair Management' headed by Principal Secretary to the Prime Minister's Office years ago for taking up strategic planning in this regard. The committee, comprising top government officials and representatives from relevant organisations, was supposed to sit every three months, but it is not known whether it framed any framework for strategies. On the other hand, the BEC, too, could not make any worthwhile move.

There are talks of setting up a blue economy authority to deal with the massive development activities required in this regard in a planned way. Experts opine that moving ahead methodically and meaningfully could generate businesses worth $40 billion in the coming days from untapped sea resources. Globally, according to experts, blue economy has resources worth $24 trillion, but so far only around $3.0 trillion worth of resources has been utilised.

Ocean economy is an integral part of today's development paradigm, emphasising greener and more sustainable and inclusive economic development paths consistent with the 2030 Agenda for Sustainable Development and the Sustainable Development Goals (SDGs), especially Goal 14 (conservation and sustainable use of oceans, seas and marine resources for sustainable development).

The need for a well-empowered authority for methodical exploration of the sea resources cannot be overemphasised. Experts strongly support the idea because besides putting in place a general framework of activities including implementation and monitoring, a high level body such as the blue economy authority could be the appropriate agency to specifically outline proper business modules for investors in a planned way. Many sectors of the economy can immensely benefit from the marine resources. These include -- fisheries, mineral resources, pharmaceuticals, transportation, energy, foods, health and tourism etc. According to experts, the country's expanded sea area is almost 81 per cent of the entire mainland. The country has a total of 660 km-long sea boundary, but the fishing vessels cannot catch fish beyond 70 km. It means we have no access to almost 600 km. That's why fishing vessels from India and Myanmar often come to catch fishes from our territory. Not only that, our fishing net cannot go below 200 feet of water, whereas the high-valued fishes like Tuna and Swordfish are available in the deep water.

In this connection, it may not be out of place to mention that the UNCTAD has come up with some proactive moves to facilitate countries in need of financial and technical resources to seek assistance under what is called OETS (ocean economy and trade strategy) project. The OETS project aims to support developing countries in realising economic benefits from the sustainable use of marine resources. It will assist coastal and developing countries in promoting sustainable trade of products and services in ocean-based economic sectors by analysing, elaborating and adopting evidence-based and policy-coherent ocean economy and trade strategies and contribute to building national capacities to implement them. Some countries have already expressed interest to be part of the project. Bangladesh may also like to examine the scope for reaping benefits from the UNCTAD project.​

 

[Saif]

Export target set at $57.5b for FY25

The government has set the country’s export earnings target at $57.50 billion with 12.59 per cent growth for the financial year 2024-25...

www.newagebd.net

Export target set at $57.5b for FY25
Staff Correspondent 08 September, 2024, 23:21

A file photo shows workers sewing clothes at a readymade garment factory in Narayanganj recently. The government has set the country’s export earnings target at $57.50 billion with 12.59 per cent growth for the financial year 2024-25. | New Age photo

The government has set the country’s export earnings target at $57.50 billion with 12.59 per cent growth for the financial year 2024-25.

The commerce ministry on Sunday approved the export target at the 146 meeting of the board of directors of the Export Promotion Bureau held at Bangladesh Secretariat in the capital Dhaka.

‘We have set an export earnings target aiming for over 12 per cent growth compared with the earnings for the financial year 2023-24,’ commerce adviser Salehuddin Ahmed told reporters following the meeting.

He said that the target has been set keeping the current situation in mind and expressed hope that it would be achieved.

In response to a question, the adviser said that the United States had put some queries, rather than conditions, regarding the GSP facilities, and the government had already addressed those.

‘This month, I will travel to Washington, where I will discuss the matter with them,’ Salehuddin said.

According to the presentation from the meeting, an export target of $50 billion has been set for goods, having a 12.44-per cent growth, and $7.5 billion for the service sector with a 13.64-per cent growth.

The meeting was attended by industries ministry senior secretary Zakia Sultana, commerce secretary Md Selim Uddin, finance secretary Khairuzzaman Mozumder and EPB vice-chairman Anwar Hossain.

Revised data from the EPB showed that total export earnings from both goods and services amounted to $51.07 billion for the financial year 2023-24.

In FY24, exports totalled at $44.47 billion for goods and $6.60 billion for services, with growth rates of -11.97 per cent for goods and -5.30 per cent for services, respectively.

According to sources from the commerce ministry, the export earnings target for readymade garments in FY25 has been set at $40.48 billion, with an 11.99-per cent growth from the $36.15 billion earned in FY24.

The commerce ministry has set the export earnings target for FY25 at $21.07 billion for knitwear, having a 12.54-per cent growth, and $18.78 billion for woven garments, with an 11.36-per cent growth.

Meanwhile, the EPB on Sunday submitted revised export earnings data for the FY23 and FY24 to the commerce ministry.

The EPB revised its earnings for FY24 downward by more than $10.81 billion to $44.46 billion, which was 4.22 per cent lower than the $46.43 billion earned in FY23.

After excluding double entries, the country’s export earnings for FY23 decreased by $9.06 billion, from the previously reported $55.56 billion.

There was a total decrease of $19.88 billion in export earnings over the past two financial years, official data showed.

Due to discrepancies between the statistics reported by the EPB and the National Board of Revenue, the EPB has suspended the publication of export data since last June.

On Sunday, the EPB data submitted to the commerce ministry showed that export earnings from readymade garment in the FY24 fell by 5.22 per cent to $36.15 billion from $38.14 billion in FY23.

The data showed that earnings from knitwear in FY24 decreased by 5.13 per cent to $19.28 billion, while earnings from woven garments fell by 5.32 percent to $16.87 billion during the same period.

Export earnings from home textile in FY24 feel by 22.05 per cent to $851 million from $1.09 billion in the previous financial year.

The country’s export earnings from leather and leather goods in FY24 fell by 11.6 per cent to $1.04 billion while the earnings from jute and jute goods declined by 6.17 per cent to $855.23 million.

Export earnings from agricultural products, however, increased by 16.59 per cent to $964.34 million in FY24 from $827.10 million in FY23.

Live and frozen fish exports in FY24 decreased by 10.71 per cent to $376.68 million from $421.86 million in FY23.

In June, the final month of FY24, the country’s export earnings decreased by 8.54 per cent, falling to $3.61 billion from $3.95 billion in the same month of FY23.​

 

[Saif]

Bangladesh seeks $3b from ADB, WB

Bangladesh could get $3 billion in budgetary support under an Asian Development Bank (ADB) and World Bank (WB) arrangement for energy and power sector reforms and the upcoming status graduation from a least developed country (LDC) to a developing nation in 2026.

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Bangladesh seeks $3b from ADB, WB

Bangladesh could get $3 billion in budgetary support under an Asian Development Bank (ADB) and World Bank (WB) arrangement for energy and power sector reforms and the upcoming status graduation from a least developed country (LDC) to a developing nation in 2026.

Last Thursday, the finance ministry sent a letter to the ADB seeking $1 billion in budgetary support for the energy and power sector.

Besides, an ADB mission has been holding talks with the government since September 3 over lending another $1 billion as LDC graduation-related support.

Of the amount, the ADB will provide $400 million. The remaining $600 million is expected to come from the Asian Infrastructure Investment Bank (AIIB) and Japan International Cooperation Agency (JICA) under an ADB arrangement.

In line with its bid to get budgetary support, the finance ministry on Sunday sought another $1 billion from the WB to bring about reforms in the energy and power sector.

Meanwhile, an International Monetary Fund (IMF) staff mission will arrive in Dhaka on September 24 to hold talks over lending another $3 billion in addition to the $4.7 billion it lent to the country in January last year.

All in all, the interim government, which took charge last month following the toppling of the Sheikh Hasina-led Awami League government on August 5, is seeking an additional $6 billion.

The interim government wants to bolster foreign exchange reserves, which have been falling for over two years, bring back stability to the exchange rate and restore confidence in the economy, which has been facing one of the most challenging situations in decades.

In the letter sent to ADB, budgetary support was sought for bringing about reforms in sustainable power and energy, according to a finance ministry official.

Focus points mentioned in the letter include improving sectoral governance, developing conducive policies and regulatory frameworks, improving financial viability and sectoral sustainability, attracting private investment, and preparing and formulating renewable energy procurement plans, the official said.

It also includes preparations for technical studies and pilot projects on smart grid energy storage and demands, the official added.

The letter added that the government's expenditure on importing energy and power increased significantly. Besides, due to a decline in domestic natural gas production, more primary fuel needs to be imported, it said.

In this context, the interim government has formed a committee to review the existing power generation practices and procurement process.

The finance ministry official said they requested $1 billion for the energy and power sector from the ADB in two tranches of $500 million each.

Government officials said the ADB suggested bringing about reforms in the revenue sector, budgeting, fiscal policy, procurement, logistics, and various other sectors to get the country status graduation-related budgetary support.

Officials said Bangladesh would lose different benefits, including concessional loans and tariff benefits, once it graduates from LDC status.

However, graduation will create other opportunities. To utilise those opportunities, Bangladesh must remove obstacles to smooth business activities and take steps to attract more foreign direct investment (FDI), they said.

Bangladesh must implement various reform programmes under the ADB-arranged loan so that the country does not have to face challenges following graduation from LDC status, they added.

Officials said a WB mission was expected to visit Dhaka in the second half of this month to discuss the power and energy sector reform programme.

"We are hopeful of getting support from the World Bank and ADB within December this year," a finance ministry official said.

Meanwhile, preliminary discussions for an additional $3 billion loan will begin with the IMF when its mission arrives in Dhaka in around two weeks.

Bangladesh Bank Governor Ahsan H Mansur had earlier requested the loan during a virtual meeting.

Finance Adviser Salehuddin Ahmed also held separate meetings with the IMF and stressed the need for additional loan support.

IMF officials informed the finance ministry and central bank that they were assessing how much it could lend to Bangladesh.

The IMF has so far released $2.3 billion under the ongoing $4.7 billion loan programme.

A finance ministry official said the upcoming IMF staff mission would mainly try to conduct a preliminary assessment of the reform measures that the interim government would undertake.

However, a meeting detailing the loan arrangement could be held on the sidelines of the World Bank-IMF annual meetings in Washington in October. The finance adviser and the central bank governor are likely to take part in the meeting.

Gayle Martin, WB's Acting Country Director for Bangladesh, said during a meeting with the Power and Energy Adviser that discussions have been held with the Bangladesh Bank governor and the finance adviser regarding the budget support. Martin also expressed optimism about providing the support for the energy and power sector by next December.

After taking charge as Bangladesh Bank Governor, Mansur created a list of priorities, one of which is to improve the condition of the foreign currency reserves.

For this, alongside increasing exports and remittance earnings, the government has been looking for budgetary support from various lenders, including the IMF.

A senior Bangladesh Bank official said the government has debts of over $2 billion in the energy sector. Besides, the country requires about $1 billion each month to meet various demands, including that for power and LNG.​

 

[Saif]

Forex reserves stand at $19.46b after ACU pay

The gross foreign exchange reserve in Bangladesh, according to the guideline of the International Monetary Fund, has dropped to $19.46 billion after the payment of import bills...

www.newagebd.net

Forex reserves stand at $19.46b after ACU pay
Staff Correspondent 10 September, 2024, 22:14

A file photo shows a man counting US dollar notes in the capital Dhaka. | New Age photo

The gross foreign exchange reserve in Bangladesh, according to the guideline of the International Monetary Fund, has dropped to $19.46 billion after the payment of import bills worth $1.37 billion to the Asian Clearing Union for July and August.

Before the payment, the foreign exchange reserve was $20.8 billion.

The payment is made in every two months.

However, according to conventional valuation by the Bangladesh Bank, the foreign exchange reserve dropped to $24.53 billion on Monday from $25.87 billion in the previous day.

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

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

Following the political changes in Bangladesh since August 5, the central bank stopped selling dollars from its reserve, BB officials said.

Therefore, the decline will not affect the reserve as it would revive soon, they said

The reserve came down to the current level following continued sales of dollars in the past three years.

The foreign reserve was $20.39 billion on July 31 which increased to $20.8 billion on Sunday due to increased remittance flow after the fall of Awami League-led government.

Sheikh Hasina resigned as prime minister and fled to India on August 5 amid a student-led mass uprising.

The BB sold about $34 billion from its reserve in the past three financial years, which contributed most to depletion of reserve.

The Bangladesh Bank adheres to the IMF’s Balance of Payments and International Investment Position Manual, 6th edition (BPM6), for calculating both the gross international reserve (GIR) and the net international reserve (NIR).

The Bangladeshi taka weakened against the US dollar, reaching Tk 120 for a dollar, driven by a dollar shortage and a pressure on banks to settle import payments.

The exchange rate per dollar was Tk 84.81 in June 2021, Tk 93.45 in June 2022 and Tk 106 in June 2023.

The ongoing dollar crisis has substantially affected banks’ capacity to settle import payments and open letters of credit, posing challenges for businesses.

To address the dollar shortage, the government and the Bangladesh Bank had jointly introduced measures to curtail imports.

These initiatives involve restrictions on luxury and non-essential imports.​

 

[Saif]

IMF to assess Bangladesh’s need for fresh loan

An International Monetary Fund (IMF) delegation due to arrive later this month will assess Bangladesh’s potential financial needs as the country sought a fresh $3 billion loan from the multilateral lender.

www.thedailystar.net

IMF to assess Bangladesh’s need for fresh loan

An International Monetary Fund (IMF) delegation due to arrive later this month will assess Bangladesh's potential financial needs as the country sought a fresh $3 billion loan from the multilateral lender.

The delegation is likely to arrive in Dhaka on September 24 and stay till September 30, said a finance ministry official.

"As part of the upcoming mission [to Dhaka], the team will be assessing all of the economic developments and any potential financing needs," Julie Kozack, director of IMF Communications Department, told a press briefing in Washington DC on Friday.

"From the IMF side, we are working closely with the interim government [of Bangladesh]," she said, according to a transcript of the briefing published on the IMF website.

"We remain fully committed to working with Bangladesh and to support the people within the context of the IMF programme, we will continue to work closely with the authorities to help advance the reform agenda," she added.

Further details about the visit will be communicated in due course, she said.

Kozack also expressed her deep sorrow over the loss of lives and injuries during the recent protests in Bangladesh.

"It was very distressing to hear about those losses of lives," she said.

Addressing the nation on Wednesday, Professor Muhammad Yunus, chief adviser to the interim government, said budgetary support has been sought from development partners to enhance the country's foreign currency reserves.

The $3 billion loan was sought by Finance Adviser Salehuddin Ahmed and Bangladesh Bank Governor Ahsan H Mansur during separate virtual meetings with the IMF earlier.

The IMF has an ongoing $4.7 billion loan programme for Bangladesh, which was approved in January last year.

Over the past two years, Bangladesh's foreign currency reserves have been dwindling, having barely enough to cover import payments of a couple of months, which is the IMF's minimum benchmark.

In recent months, the reserves have been hovering around $20 billion, as per the IMF's calculations. On September 11, there was $19.44 billion.

In the energy and power sector alone, the government has outstanding dues of more than $2 billion, according to the central bank officials.

On top of that, the government requires about $1 billion each month for import bill payments for this sector.

Against this backdrop, the interim government has been seeking budgetary support from the development partners, alongside looking to bring in increasing amounts in remittance and export earnings.​

 

[Krishna with Flute]

After the ouster of shaikh Hasina, BD should forget about economic development. Economic development does not happen in political instability particularly when the radical Islamist have taken over. BD should come back to normalcy as soon as possible by arranging far elections.

 

[Saif]

The critical challenges facing the economy

How did the elite and the politicians manage to evade the rule of law and siphon billions out of the country?

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The critical challenges facing the economy

Visual: STAR

The head of the interim government, Prof Yunus, recently formed a committee to prepare a "white paper on the state of Bangladesh economy." The terms of reference for the committee are very broad, but the key task is to present the true state of the economy, outline key weaknesses (and, if possible, identify the sources), and, most importantly, provide a roadmap for the interim government.

One cannot overstate the white paper's role in shaping the new administration's policies and forthcoming reforms. Fortunately, the committee has already invited public input, and I am confident that the committee and the competent support staff will accomplish their mission.

It is tempting to throw my hat into the ring and write a long email to the committee and offer my professional view on the cardinal issues facing the country along with my ideas on curtailing corruption, stabilising the foreign exchange sector, reducing income inequality or alleviating poverty. But I will resist for two reasons. First, I have complete faith in the competence of the committee members, with some of whom I have exchanged opinions and thoughts in various forums. Secondly, the experts in the group—and outside—have voiced their learned opinions in professional journals and social and print media over the last few years on the goals of this nation, its progress, and the roadblocks. In other words, the research is already there. The nation is waiting with bated breath for this august body to practice due diligence, given the resources provided at its disposal, and come up with its own prognosis and suggest some best practices to help the new government achieve its economic goals before the latter hands over power to elected leaders.

Professor Yunus in his first speech to the nation last month identified three areas that deserve utmost priority: banking, corruption, and undue emphasis on GDP growth. The data from the past Household Income and Expenditure Surveys carried out by the Bangladesh Bureau of Statistics (BBS) over the last two decades clearly indicate the trend pointing to the rising levels of income and wealth inequality. Whether we take the well-known measure, the Gini coefficient, or an alternative measure, such as the Palma ratio, and compare the income share of the top 10 percent with the income share of the bottom 40 percent, the signs are clear. We are heading towards a very unequal society. The committee must address this issue and debunk the previously held trickle-down theory.

Another important aspect of the white paper is a thorough diagnosis of the economic malaise of the country. What role did the various irregularities play in inflating the cost of megaprojects, the collapse of the financial infrastructure, and the economic hardship of the average person? Did the previous regime fudge the data and paint a rosy picture of the condition of the masses? How did the elite and the politicians manage to evade the rule of law and siphon billions out of the country?

But then after all the diagnosis is done, the committee needs to prioritise the issues to inform the interim government's next steps. Obviously, the interim government does not have to promise any miracles. Our people understand that we went through some rough patches and the interim government and all the wise men and women involved in rebuilding our political system, economy, and the administrative structure face serious odds. Nonetheless, it is worth reminding ourselves of the immediate and long-term problems that will be with us regardless.

The country witnessed food price increases in the double digits for months in a row, and there are still no signs of prices cooling down. These increases leave their mark on the budget since, even if there is a deceleration of inflation, recent inflationary hikes have already hit consumers' pockets hard. According to one BBS study at the end of 2023, one in every five households in Bangladesh experienced food insecurity.

To ensure success of the above initiatives, the state must effectively identify vulnerable people and thereby determine the nature and duration of the support they will need, ensure that the genuinely poor and vulnerable people receive support, and monitor the channels to ensure efficiency, transparency, and accountability in the distribution chain.

The previous government was overthrown because of its economic mismanagement, so if the interim government promises that it will try to manage it well and avoid corruption and greed as much as possible, based on the recommendations of the white paper and allow a task force to implement policies in order of priorities, that itself will be a first.

The white paper committee must also be mindful of its audience. Who are they? There are three: policymakers, the general public, and to a lesser degree, the experts. The people need to know the actual state of the economy. Experts already have a good understanding of the former regime's misdeeds. It is the policymakers in the interim government who urgently need a roadmap.

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

 

[Saif]

The steep economic challenges that the interim government faces

It is crucial for the interim government to focus on setting a strong foundation for future changes.

www.thedailystar.net

The steep economic challenges that the interim government faces
economic challenges for interim government

FILE VISUAL: STAR

The political upheaval in Bangladesh is having a profound impact on the country's economy. For the country to recover and stabilise, the interim government must prioritise political stability and the restoration of law and order. These steps are critical to setting the stage for economic recovery.

The ongoing political crisis can significantly slow down economic growth. Political instability breeds uncertainty, which in turn undermines investor confidence. As a result, both domestic and foreign investors can become more cautious, leading to reduced private investment. Political instability also affects the broader economic environment by disrupting business operations and creating an unpredictable financial climate.

Bangladesh has been experiencing high inflation since early 2022, with inflation rates reaching 11.66 percent in July 2024—highest in 13 years. Food inflation has been even more severe, hitting a record 14.10 percent. The ongoing supply chain disruptions and shortages are likely to keep inflation elevated, which disproportionately impacts low-income households. For many families, the rising cost of living is a significant burden, further straining their financial resources.

Unemployment, especially among educated youth, remains a pressing issue. Around 41 percent of young people aged 15-24 years are neither in education, employment, nor training (NEET), nearly double the global average. This high rate of NEET youth exacerbates social and economic challenges, contributing to a sense of disenfranchisement and economic frustration among the younger population.

The country has been facing a worsening macroeconomic situation since the beginning of 2022, manifested by the decline in foreign exchange reserves and slow growth in exports and remittance earnings. During the ongoing political turmoil, small businesses and production units are particularly vulnerable to these challenges, facing disrupted operations, decreased productivity and, in some cases, forced closures. This affects the business owners and has a ripple effect on employees and suppliers, further compounding the economic difficulties.

The interim government's role is crucial in navigating these economic challenges and laying the groundwork for a stable transition to a permanent government. Immediate economic priorities should include combating inflation and restoring macroeconomic stability.

Addressing high inflation requires a coordinated approach involving monetary, fiscal and tariff policies. Effective market management is essential to stabilise prices. The appointment of a new central bank governor has raised expectations for better use of monetary policy tools to control inflation and stabilise the economy.

The government must work to stabilise the macroeconomic environment by improving forex reserves, increasing remittance inflows through formal channels, and boosting exports despite the political crisis. These measures are crucial for restoring confidence in the economy and ensuring sustainable growth.

However, to address the country's structural economic challenges, comprehensive reforms are essential in several key areas:

Banking sector: Reforms are needed to tackle high levels of non-performing loans, poor governance, corruption, inadequate risk management, and regulatory weaknesses within the banking sector. Strengthening transparency, enhancing regulatory oversight, and ensuring sound financial practices are vital for restoring confidence in the financial system.

Taxation system: Bangladesh's tax-GDP ratio is notably low, standing at 7.8 percent in December 2023. Reforms should focus on broadening the tax base, improving compliance, and enhancing the efficiency of tax collection. Administrative and institutional reforms are necessary to strengthen the tax collection authority, curb corruption, and ensure a more equitable and effective tax system.

Trade and investment policies: To foster a more favourable environment for export diversification and foreign direct investment (FDI), reforms should address the heavy reliance on ready-made garments and the challenges in attracting FDI. As Bangladesh approaches its graduation from Least Developed Country (LDC) status in November 2026, it is crucial to liberalise trade and investment regulations, remove structural barriers, and improve the ease of doing business.

Public expenditure: With public expenditure at around 15 percent of GDP, significantly lower than its comparators, reforms should aim to improve allocation efficiency and enhance spending in key social sectors. Prioritising investments in education, healthcare, and infrastructure will help address critical needs and support long-term economic growth.

Institutional capacity: Strengthening state capacity is essential for effective governance and service delivery. Institutional reforms should focus on improving efficiency and accountability within government institutions. This includes enhancing the capabilities of public servants, streamlining bureaucratic processes, and combating corruption to ensure that government actions are effective and transparent.

Addressing Bangladesh's economic challenges requires not only political stability, but also a robust and comprehensive approach to reform. The interim government must focus on both immediate economic priorities and long-term structural reforms to foster a stable and prosperous economic environment. By taking decisive action in these areas, the government can set the stage for sustained recovery and growth.

While the interim government may face limitations in implementing all desired reforms within its term, it is crucial to focus on setting a strong foundation for future changes. Establishing effective and robust frameworks for reform can ensure that progress is sustained beyond the interim period. By mobilising support from key stakeholders—including political leaders, civil society, and the private sector—the interim government can foster a collaborative environment that drives reform forward. This strategic groundwork will help pave the way for a more comprehensive and successful implementation of reforms in the long term, even if the immediate results fall short of expectations.

Dr Selim Raihan is professor at the Department of Economics at the University of Dhaka and executive director of South Asian Network on Economic Modeling (SANEM).​

 

[Saif]

Tax reform imperatives for the interim government

Historically, revenue efforts in Bangladesh have been seriously inadequate, which has constrained public expenditure.

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Tax reform imperatives for the interim government

Illustration: Star

Bangladesh is at a crossroads on several fronts. The expectations from the current interim government are enormous, particularly regarding the implementation of bold and radical reforms in key areas, including the economy. The key economic challenges facing the interim government include controlling inflation, preventing the depletion of foreign reserves, restoring discipline and public trust in the banking system, and overhauling the revenue mobilisation system. Historically, revenue efforts in Bangladesh—measured by the revenue-to-GDP ratio—have been seriously inadequate, which has constrained public expenditure.

This weak revenue effort has limited Bangladesh's ability to finance critical expenditures on physical infrastructure, human development, and pro-poor initiatives—thus restricting economic growth and employment. Additionally, it has strained the government's ability to fund social sector programmes, including social protection initiatives. Therefore, raising more revenue is essential for the government, and especially so for the interim government, given the heightened expectations from it for meaningful and positive changes.

Note: *Per capita GDP in Panel B refers to constant 2015 US dollar. Source: Panel A is based on NBR and BBS Data and Panel B based on World Bank

Generally, in countries, there is a positive relationship between income growth (i.e., GDP, per capita GDP) and revenue mobilisation. In Panel A of the figure provided, revenue efforts are compared against per capita GDP between 2010 and 2023. And the trend in per capita GDP is rising, indicating that incomes—and thus the tax base—are increasing, which should lead to higher revenue generation, even if tax rates remain unchanged. However, contrary to this, the declining revenue-effort trend suggests an inefficient revenue system in Bangladesh. Revenue efforts, which were around 11 percent in 2011, dropped to 8.3 percent in 2023—a decline of 2.7 percentage points over 12 years, during which per capita GDP increased by approximately 200 percent. This large negative association between per capita income growth and revenue efforts is both undesirable and unsustainable.

Furthermore, Bangladesh's performance in revenue mobilisation is dismal compared to its peers. Both Nepal and Cambodia, with lower per capita GDP than Bangladesh, have significantly higher revenue efforts—more than double Bangladesh's 7.4 percent. Even Uganda, with half of Bangladesh's per capita GDP, managed to raise 12.5 percent in revenue—5.1 percentage points higher than Bangladesh. These comparisons further highlight the inefficiencies in Bangladesh's revenue system.

The two most important taxes in Bangladesh are value added tax (VAT)—an indirect tax—and personal and corporate income taxes, which are direct taxes. In FY23, these two taxes together accounted for 72 percent of total tax revenue. VAT, which makes up about 40 percent of tax revenue, has one of the lowest productivity rates in the world. This means that Bangladesh collects less VAT revenue at existing VAT rates compared to other countries with similar or lower rates.

When considering other indirect taxes such as import duties, supplementary duties, and excise taxes, the total share of indirect taxes is around 66 percent, while the share of direct taxes is only 34 percent. The inability to raise a higher proportion of tax revenue from direct taxes is another striking weakness of our system. The income tax system is based on an outdated 1984 ordinance, leading to complex tax forms and burdensome filing requirements, which discourage voluntary compliance. As a result, there were only 2.5 million taxpayers, or 1.52 percent of the total population in FY22. Low compliance and a narrow tax net have kept income tax revenue low, increasing reliance on indirect taxes, which disproportionately burden the poor.

A paradox of our tax system is the high tax-expenditure ratio despite dismal tax efforts. Tax expenditures are special provisions in the tax code—such as exclusions, deductions, deferrals, credits, and tax rates—that benefit specific activities or groups. These provisions result in forgone revenue. According to an NBR report ("The Tax Expenditure in the Direct Tax of Bangladesh: Estimation and Review," March 2024), tax expenditures in direct taxes amounted to 3.56 percent of GDP in FY21. While some of these may be justified on merit, such high tax expenditures alongside low revenue efforts are clearly unsustainable.

The assessment above suggests that Bangladesh's revenue system is both inefficient and inequitable. The dismal state of the revenue system is largely due to the lack of meaningful reforms over the past three decades since the introduction of the VAT system in 1991. Therefore, future reforms must focus on improving both the efficiency and equity of the system. Having a clear reform roadmap with specific targets is crucial. Bangladesh should aim to increase its revenue effort to 13.5 percent within the next two years and to 16.5 percent within the next five years. Although ambitious, these targets are feasible, as evidenced by the performance of other countries. Additionally, revenue from direct taxes must increase to 40 percent within two years and 60 percent within five years.

Strategic recommendations

Implementing the 2012 VAT law is likely to improve VAT revenue collection, address inefficiencies in the system, and enhance overall revenue through: i) eliminating the complexity of having multiple tax rates on the same products at different stages of production; and ii) reducing tax evasion, boosting revenues, and discouraging vertical integration, which will support the SME sector through subcontracting by large enterprises.

Increasing revenue from the direct tax system

Bangladesh needs to mobilise more revenue from direct taxes to align with countries at similar income levels by: i) simplifying the personal income tax system by eliminating wealth and income-expenditure statements, which contribute to corruption; ii) implementing electronic filing and payment systems while eliminating direct interactions between taxpayers and tax collectors; iii) lowering corporate tax rates to a maximum of 25 percent over the medium term with minimal exceptions—all sectors, including ready-made garments (RMG), should be treated equally; iv) replacing the wealth tax with a proper property tax system, based on realistic valuations of personal and commercial properties, with revenues earmarked for local governments; and v) reducing rebates, discounts, exemptions, and reduced rates of taxation, and introducing a tax-expenditure tool to clearly show the benefits and costs of tax policies.

Improving tax administration

Bangladesh must: i) automate its tax administration; ii) establish a modern, computer-based audit system to identify audit candidates based on pre-determined red flags and focusing on revenue productivity and genuine tax evaders; iii) create a separate tax policy division within the Ministry of Finance, staffed with tax policy experts to ensure tax changes are effective, efficient, and equitable; iv) incorporate alternative dispute resolution in income tax, VAT, and customs legislation to collect unpaid revenue; v) strengthen the research and administrative capacities of the National Board of Revenue through international technical assistance and partnerships with local research institutions—all tax data should be computerised, and online tax filing should be facilitated; and vi) introduce a redistributive fiscal policy tool (in line with SDG 10) to assess the impact of tax and expenditure proposals.

Bazlul Haque Khondker is chairman of South Asian Network on Economic Modeling (SANEM) and director at Policy Research Institute (PRI).​

 

[Saif]

IsDB to give $4-5b in three years

Islamic Development Bank (IsDB) will likely provide an overall support of around $4 billion to $5 billion to various sectors in Bangladesh within the next three years under its “Member Country Partnership Strategy” (MCPS).

www.thedailystar.net

IsDB to give $4-5b in three years

Islamic Development Bank (IsDB) will likely provide an overall support of around $4 billion to $5 billion to various sectors in Bangladesh within the next three years under its "Member Country Partnership Strategy" (MCPS).

Muhammad Nassis Sulaiman, head of the IsDB regional hub in Dhaka, informed journalists about this development while replying to their queries after meeting with Salehuddin Ahmed, finance and commerce adviser to the interim government.

The meeting was held at Ahmed's office at Bangladesh Secretariat in Dhaka yesterday.

"As a part of the MCPS, the plan for the next three years is to give support of $4-5 billion," Sulaiman said.

Asked whether there had been any discussion about International Islamic Trade Finance Corporation (ITFC) increasing its lending limit to Bangladesh for fuel oil purchases, he said it was included in their overall talks with the interim government.

The ITFC is a trade financing arm of IsDB Group.

The IsDB's MCPS needs to be framed in detail for the next couple of years to fix their support, including the ITFC's support to Bangladesh, said Sulaiman.

"So, we really look forward to providing support in infrastructural development and address some of the issues related to climate change in the country," he added.

He also talked about the IsDB Group's interventions.

"Of course, the interim government is also looking forward to seeking support for overall engagement, particularly we will discuss it with the ITFC about how the support can be further developed and moved forward," he said.

Sulaiman mentioned that the IsDB would continue working for the socioeconomic development of Bangladesh.

"Considering the IsDB's strategies and the interim government's priorities, we will hopefully be able to give the required support in terms of resources and collaboration," he said.

Salehuddin Ahmed said since the IsDB was a multilateral development partner of Bangladesh, they were providing various kinds of assistance to the country, such as in the health sector and for building cyclone shelters.

He informed that the interim government has requested them to support in rebuilding the damaged rural roads affected by recent devastating floods in the country.

He also said they have already conducted a survey in Sylhet, one of the worst affected areas, to this end.

"Overall, the IsDB will support us in rebuilding damaged rural roads. They are already supporting us in the health sector, constructing bridges, physical infrastructures and so on," Ahmed added.

Regarding support in purchasing fuel oil, the finance adviser said the IsDB would explore possibilities for boosting existing cooperation through consultations with other development partners.

"We've requested them to provide us funds and they would assess the possibilities. Until it is finalised, nothing can be said as the IsDB board meeting will be held in December," he added.

Ahmed also said the Jeddah-based lending agency would provide long-term support to Bangladesh in line with the country's demands.

"Overall, the IsDB will support us," he said.

Regarding the MCPS, he informed that the government would assess potential projects for which funds would be sought and the IsDB would then consider whether to move forward with those.

The MCPS for 2024-2026, titled "Supporting Sustainable Economic Growth and Resilience", was launched on April 29.

The Bangladesh MCPS provides broad strategic directions and focuses on sectors for the IsDB's engagement in the country.

The MCPS focuses on building sustainable infrastructure for energy, transport, information and communications technology, water and sanitation.

It seeks to enhance future competitiveness of Bangladesh through support for education, health, agriculture and nutritional security.

It also aims to provide complementary cross-cutting support on climate change mitigation and adaptation, women and youth empowerment, capacity development, and enhancing financial market depth and access to finance through Islamic finance.​

 

[Bilal9]

Islamic Development Bank to provide Bangladesh with $5bn support over next 3yrs​

Funding for infrastructure, climate change adaptation, and socio-economic development

https://www.dhakatribune.com/358748


Representational image of dollar. Photo: Collected

UNB
Publish : 17 Sep 2024, 06:45 PM
Update : 17 Sep 2024, 06:45 PM

The Islamic Development Bank (IsDB) has announced plans to provide Bangladesh with financial support totaling $4-5 billion over the next three years under its Member Country Partnership Strategy (MCPS) for 2024-2026.

This funding will be directed towards key sectors including infrastructure, climate change adaptation, and socio-economic development.

Muhammad Nassis Sulaiman, head of the IsDB Regional Hub, disclosed this information on Tuesday after a meeting with Finance Adviser Dr Salehuddin Ahmed at the Bangladesh Secretariat.

“As part of the Member Country Partnership Strategy (MCPS), we plan to provide around $4 to $5 billion in support over the next three years,” Sulaiman said.

Sulaiman highlighted that the bank’s strategy would address critical issues such as infrastructural development and climate change.

“We look forward to providing support in infrastructural development to tackle the climate challenges facing Bangladesh,” he said.

When asked about the possibility of increasing the lending limit for purchasing fuel oil through the International Islamic Trade Finance Corporation (ITFC), a trade financing arm of the IsDB Group, Sulaiman confirmed that this was part of ongoing discussions with the government.

Finance Adviser Dr Salehuddin Ahmed emphasized the importance of IsDB’s role as a multilateral development partner, particularly in the health sector and disaster recovery efforts.

The government has requested support for rebuilding rural roads damaged by the recent devastating floods, Dr Salehuddin noted, adding that the IsDB had already conducted a survey in the Sylhet region.

Regarding the financing for fuel oil, the finance adviser mentioned that while discussions were ongoing, any final decision would depend on the outcomes of the IsDB Board meeting scheduled for December. “We’ve requested funds, and they will assess the possibilities. Until then, nothing is finalized,” he said.

Sulaiman reiterated IsDB’s long-term commitment to supporting Bangladesh’s socio-economic development, stressing the importance of aligning their efforts with the country’s strategic priorities. “Considering the IsDB’s strategies and the government’s priorities, hopefully we will be able to support in terms of resources and collaboration with other development partners as well.”

Bangladesh Member Country Partnership Strategy (MCPS) (2024-2026), titled “Supporting Sustainable Economic Growth and Resilience” was launched on April 29, 2024.

The MCPS provides broad strategic directions and sectoral focuses for IsDB’s engagement in Bangladesh.

The MCPS focuses on building sustainable infrastructure for driving industry through support for energy, transport, information and communications technology (ICT), water and sanitation, and enhancing future competitiveness of Bangladesh through support for education, health, agriculture and nutritional security with complementary cross-cutting support on climate change mitigation and adaptation, women and youth empowerment, capacity development, and enhancing financial market depth and access to finance through Islamic finance.

Source: https://www.dhakatribune.com/358748