[🇧🇩] Monitoring Bangladesh's Economy

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Inclusive development for an equitable country

Through the war of independence, the people of Bangladesh sought to establish a country free from exploitation and deprivation, where every citizen would enjoy fair treatment and access to basic rights and benefits. It is deeply regrettable that even after more than half a century of independence a

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Inclusive development for an equitable country
Md Tauhidul Alam
Published :
Aug 26, 2024 22:44
Updated :
Aug 27, 2024 21:15

Through the war of independence, the people of Bangladesh sought to establish a country free from exploitation and deprivation, where every citizen would enjoy fair treatment and access to basic rights and benefits. It is deeply regrettable that even after more than half a century of independence and significant economic growth, approximately 35 million people of the country, representing 18.7 per cent of the population, still live below the poverty line. While there has been notable progress in reducing poverty, income inequality remains distressingly high, particularly among rural communities, women, and other vulnerable groups who still struggle to secure basic necessities such as food, shelter, healthcare, and education. This persistent disparity is largely driven by unequal distribution of the benefits of economic growth, which has disproportionately favoured the privileged segments of the society.

In this context, fostering inclusive development is crucial to ensure that all segments of the society, especially those who are marginalised, can share the nation's economic progress. With the fall of Sheikh Hasina's autocratic regime and the emergence of an interim government, a significant opportunity has arisen to build an equitable and just society-an opportunity the nation must seize to achieve true inclusion.

INCLUSIVE DEVELOPMENT: Inclusive growth and inclusive development both refer to an economic growth process that is broad-based, sustainable, and equitable, ensuring that all segments of the society, especially the marginalised and disadvantaged, benefit from economic progress. These concepts emphasise the importance of creating opportunities for everyone, reducing income inequality, and addressing social and economic disparities. Inclusive growth and development aim not only to increase overall economic output but also to distribute the gains from growth more evenly across the society, fostering social cohesion and improving the quality of life for all individuals. The core principle is the "inclusion of the excluded," focusing on dismantling barriers and promoting the participation of marginalised groups to create a more equitable society where no one is left behind.

EDUCATION AND SKILL DEVELOPMENT: Education is the cornerstone of inclusive development, and while Bangladesh has made significant progress in improving access to education, challenges remain in terms of quality and equity. To address these challenges, particularly for the marginalised communities such as rural and indigenous populations, targeted programmes are essential. Additionally, enhancing vocational and technical training can equip the youth with skills that match the demands of the evolving job market, thereby reducing unemployment and underemployment. However, to establish an education system that is both people-centred and supportive of the poor, a comprehensive reform programme is urgently needed. Immediate actions, including reconstituting the governing bodies and managing committees of nearly all educational institutions with qualified, honest, and skilled individuals are crucial. Furthermore, recruiting qualified teachers and providing rigorous training for existing educators are critical steps in improving the overall standard of education.

HEALTHCARE ACCESS AND QUALITY: Bangladesh has made notable progress in healthcare, particularly in reducing child mortality and increasing life expectancy, but significant disparities in access to quality healthcare remain, especially among rural and low-income populations. The healthcare system is plagued with challenges such as inadequate facilities, underfunding, and a shortage of skilled professionals, particularly in rural areas. High out-of-pocket expenses further hinder access for those with limited financial resources, forcing many to rely on informal and unregulated providers, resulting in incorrect treatments and worsened health outcomes. Overcrowded and under-resourced public hospitals, coupled with systemic issues like favouritism and influence of corrupt syndicates, exacerbate these challenges by creating unequal access to care, draining public resources, and diminishing the quality of healthcare. These factors erode public trust and perpetuate cycles of poverty and poor health outcomes. To address these issues, it is crucial to implement stronger regulations, increase transparency, and ensure equitable access to healthcare for all citizens by strengthening rural healthcare infrastructure and adopting universal health coverage, thereby promoting inclusive development and improving overall health outcomes in the country.

SOCIAL PROTECTION AND SAFETY NETS: Social protection programmes are crucial for safeguarding the most vulnerable populations against economic shocks and natural disasters. While Bangladesh has several social safety net programmes, their coverage and effectiveness require significant enhancement. One of the key challenges is the political bias that often influences these programmes, leading to the exclusion of a large number of people who should be beneficiaries. Additionally, the high rate of corruption in the distribution process is a major concern, as benefits are frequently siphoned off by influential individuals involved in the distribution. To achieve inclusive development, it is essential to expand these programmes to cover all vulnerable groups, including the elderly, disabled, and extreme poor.

ECONOMIC POLICY AND JOB CREATION: Economic policies should be designed to promote job creation and entrepreneurship, particularly in sectors with the potential to absorb large numbers of workers, such as agriculture, manufacturing, and services. However, several challenges hinder entrepreneurship development, including limited access to capital, inadequate infrastructure, lack of technical skills, and burdensome regulatory hurdles. These barriers must be addressed promptly, as failing to do so will leave job creation as an unfulfilled promise.

Special attention should be given to empowering women and youth, who are often marginalised in the formal economy. Financial inclusion initiatives, such as mobile banking, microfinance, and tailored financial literacy programmes, can play a pivotal role in ensuring that all citizens have access to the financial resources needed to engage in economic activities. Moreover, creating a supportive ecosystem that includes mentorship, access to markets, and streamlined business registration processes is essential for nurturing entrepreneurship and driving sustainable economic growth.

INFRASTRUCTURE DEVELOPMENT: Infrastructure is crucial in bridging marginalised

communities with markets, services, and opportunities. To truly make a difference, investments in transportation, energy, and digital infrastructure must focus on underserved regions, especially rural and remote areas. This approach not only drives economic growth but also fosters greater social inclusion.

However, infrastructure development in Bangladesh has been marred by several challenges. Poor quality, corruption, and frequent delays are common, leading to cost overruns and poor project outcomes. Environmental degradation, community displacement, and a lack of inclusive planning further compound these issues. Additionally, political interference often distorts project priorities, while a heavy reliance on foreign loans raises concerns about debt sustainability. Critics argue that these problems underscore the urgent need for more transparent, efficient, and sustainable infrastructure development practices in Bangladesh.

ENVIRONMENTAL SUSTAINABILITY: For development to be truly inclusive, environmental sustainability must be prioritised, as climate change disproportionately impacts the poor and marginalised. Integrating climate resilience into development planning is essential, with key strategies including sustainable agriculture, renewable energy investments, and robust environmental policies. However, Bangladesh faces significant challenges, such as inadequate implementation of environmental regulations, leading to severe pollution from industries like textiles and leather. Rapid urbanisation is encroaching on wetlands, while reliance on fossil fuels and poor waste management exacerbate environmental degradation. Current efforts often overlook marginalised communities, who bear the brunt of these issues, underscoring the need for more equitable and inclusive sustainability approaches. Comprehensive solutions are vital for achieving development that benefits all and preserves the environment.

CHALLENGES AND THE WAY FORWARD:

To overcome the challenges, a multi-stakeholder approach is necessary. The government, private sector, civil society, and international partners should work together to create policies and programmes that are inclusive by design. This includes fostering public-private partnerships, enhancing governance and accountability, and ensuring that marginalised groups have a voice in decision-making processes.

Md. Tauhidul Alam, CICC, is a Senior Faculty and Head of the earning Facilitation Wing, MTB Training Institute (MTBTI)​

 

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Budget support: Govt hunts for $8b from IMF, other lenders

The government is seeking as much as $8 billion in budget support by December from the development partners, including the International Monetary Fund (IMF), to pay back foreign liabilities and boost foreign exchange reserves.

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Budget support: Govt hunts for $8b from IMF, other lenders
Bangladesh seeks to shore up reserves, repay liabilities

The government is seeking as much as $8 billion in budget support by December from the development partners, including the International Monetary Fund (IMF), to pay back foreign liabilities and boost foreign exchange reserves.

It is also working to get immediate funds from the Asian Development Bank (ADB) and the World Bank for rehabilitation programmes in areas recently devastated by floods.

Based on a primary assumption of loss and damage, the government has already sent a letter to the ADB, requesting $300 million for flood rehabilitation. It will seek a bigger amount from the World Bank, but a formal request has not been made yet.

Of the budget support, $3 billion is expected to come from the IMF on top of the global lender's existing $4.7 billion loan programme.

The government will seek as much as $5 billion from other development partners like the World Bank, ADB, Japan International Cooperation Agency (JICA) and the Asian Infrastructure Investment Bank (AIIB), said officials of the finance ministry and the Bangladesh Bank.

Recently, Bangladesh Bank Governor Ahsan H Mansur told foreign media that they would seek $3 billion from the IMF. A finance ministry official said they have already started talks with the IMF for the funds.

The official said an IMF staff mission is likely to visit Bangladesh to discuss the loan towards the end of next month. After the visit, Bangladesh will formally send a letter to the IMF, seeking the additional loan.

IMF officials informed the finance ministry and the central bank that it was assessing how much it could lend Bangladesh, going beyond the existing quota for the country.

The officials said a meeting on the loan arrangement could be held on the sidelines of the World Bank-IMF Annual Meetings in Washington in October. Finance Adviser Salehuddin Ahmed and the central bank governor are likely to take part in the meeting.

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

After the interim government took charge, the World Bank and the ADB held separate meetings with the finance adviser, the energy adviser and the central bank governor. Bangladesh sought more budget support from them during the meetings but did not specify any amount.

The energy adviser during meetings with the World Bank and the ADB sought $1 billion as immediate budget support, according to officials familiar with the development.

Officials at the Economic Relations Division said they could get funds from the World Bank under three arrangements -- a policy-based loan, diverted regional funds or from slow-moving projects.

Besides, Bangladesh could quickly get $1 billion to $1.5 billion from the ADB under two arrangements -- a policy-based loan or countercyclical support. Both JICA and AIIB could join the ADB arrangement, according to officials.

The interim government took charge amid pressure of high inflation and bleeding of foreign currency reserves which have been prevalent for almost two years.

The reserves stood at $20.5 billion on August 21 in line with the IMF's BPM-6 after the new government headed by Nobel laureate Professor Muhammad Yunus had taken charge earlier this month following the downfall of former prime minister Sheikh Hasina's government through a student-led mass uprising.

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

When Hasina fled the country, the Awami League government left $156 billion in local and foreign loans for the country to carry. These included $88 billion from domestic sources and the remaining $68.33 billion was external debt.

The country is also struggling to deal with a fragile banking sector hit by scams and defaults caused by people with direct or indirect links to the previous government.

The interim government has taken some quick and drastic measures to tackle the situation surrounding finances while bringing reforms to all the sectors as promised by Yunus.

Policy rates against both local and foreign currencies have been increased, while strict measures have been taken for the banking sector which are longtime suggestions from the development partners for providing budget support.

Finance ministry officials said because of the reform measures taken by the interim government, development patterners are ready to provide more support.​

 

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White paper on economy: 12-member committee formed

The Debapriya Bhattacharya-led committee will hold its first meeting tomorrow

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White paper on economy: 12-member committee formed
The Debapriya Bhattacharya-led committee will hold its first meeting tomorrow

Debapriya Bhattacharya. File photo

The government today formed a 12-member committee led by Dr Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD), to prepare a white paper on the state of Bangladesh's economy.

The panel will hold its first meeting at the Planning Commission in Dhaka tomorrow.

The committee members include Professor AK Enamul Haque, dean of Faculty of Business and Economics of East West University; Ferdaus Ara Begum, CEO of Business Initiative Leading Development (BUILD); Imran Matin, executive director of BRAC Institute of Governance and Development at BRAC University; Dr Kazi Iqbal, senior research fellow at Bangladesh Institute of Development Studies (BIDS); and Dr M Tamim, professor of Bangladesh University of Engineering and Technology (BUET).

The others are Dr Mohammad Abu Eusuf, professor of Dhaka University's Department of Development Studies; Professor Mustafizur Rahman, distinguished fellow of CPD; Dr Selim Raihan, professor of Department of Economics, University of Dhaka; Dr Sharmind Neelormi, professor of Department of Economics of Jahangirnagar University; Dr Tasneem Arefa Siddiqui, founding chair of Refugee and Migratory Movements Research Unit (RMMRU); and Dr Zahid Hussain, former lead economist of the World Bank.

The interim government last week announced its decision to prepare the white paper so that strategic steps can be taken to stabilise the economy, reach the Sustainable Development Goals, and mitigate the challenges after Bangladesh graduates from the LDC grouping.

Debapriya, who is also the convener of the Citizen's Platform for SDGs, Bangladesh, said after a meeting with Finance Adviser Salehuddin Ahmed at the Secretariat on August 25 that the panel would consider incorporating issues beyond its mandate, depending on the situation.​

 

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White paper to assess extent of corruption

The committee tasked with formulating a white paper on Bangladesh’s economy will assess the extent of corruption in the country and identify the reasons behind it, according to Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD).

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White paper to assess extent of corruption
Says Debapriya Bhattacharya

The committee tasked with formulating a white paper on Bangladesh's economy will assess the extent of corruption in the country and identify the reasons behind it, according to Debapriya Bhattacharya, a distinguished fellow at the Centre for Policy Dialogue (CPD).

However, he said that it would not identify any individuals involved.

"Many people think it is a committee to catch corrupt people, but that is not its purpose. Instead, it will explain why corruption occurred and to what extent," he said. "The government has its own agencies for finding those responsible."

Bhattacharya, team leader of the 12-member committee tasked with preparing a white paper on the state of the economy, was speaking at a press briefing after the committee's first meeting at the Planning Commission in Agargaon yesterday.

Asked whether the committee would publish the names of corrupt individuals, he said it was out of the question.

Regarding the main tasks of the committee, he said they will highlight the challenges in managing the economy and present its true state with data. The report will not detail why these challenges arose, but some indications will be provided.

"At the same time, we will offer some hints on how to overcome these challenges," Bhattacharya said.

It will also mention measures that can safeguard the country from plunging into such a crisis in the future.

It will not evaluate the activities of the previous government, but will make recommendations to the current government to avoid repeating past mistakes.

He also informed that the newly formed committee would only discuss the country's mega projects instead of all development projects.

"We are not going to discuss all development projects. We will review the mega projects. If it is necessary to examine any specific project in detail, we will do so," he said.

"We will review the necessity of undertaking these mega projects and the government's ability to repay associated loans ."

Regarding the banking sector, Bhattacharya said there will be a separate commission to evaluate it.

The committee will prepare the white paper following a critical evaluation of government data, existing reports and research papers from local think tanks and global institutions. Members will also meet with stakeholders both within and outside Dhaka.

The committee will share interim reports periodically over a three-month period.

"Mega projects and their liabilities will be a major focus of the discussions," the central bank governor said.

"We will try to identify where the interim government stands now. This will help them prioritise the reform tasks ahead," he added.

The government formed the panel on Wednesday to prepare a white paper so that strategic steps can be taken to stabilise the economy, reach the country's Sustainable Development Goals, and mitigate challenges after Bangladesh graduates from the group of least developed countries.

The 11 other committee members include Professor AK Enamul Haque, dean of the business and economics faculty at East West University, Ferdaus Ara Begum, CEO of Business Initiative Leading Development, Imran Matin, executive director of the BRAC Institute of Governance and Development, Dr Kazi Iqbal, senior research fellow at the Bangladesh Institute of Development Studies, and Dr M Tamim, a professor at the Bangladesh University of Engineering and Technology.

The other members are: Dr Mohammad Abu Eusuf, a professor of development studies at the University of Dhaka, Professor Mustafizur Rahman, distinguished fellow of the CPD, Dr Selim Raihan, a professor of economics at the University of Dhaka, Dr Sharmind Neelormi, professor of economics at Jahangirnagar University, Dr Tasneem Arefa Siddiqui, founding chair of the Refugee and Migratory Movements Research Unit, and Dr Zahid Hussain, former lead economist of the World Bank.​

 

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Upward trend in remittance: Bangladesh receives over $2 billion in Aug

Bangladesh is showing an upward trend again in remittance sent by expatriates and exceeded US$ 2 billion in 28 days of August. According to Bangladesh Bank’s updated report on remittance as of August 28, expatriate Bangladeshis sent $2.07 billion to the country through the formal channel. In

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Upward trend in remittance: Bangladesh receives over $2 billion in Aug
FE Online Desk
Published :
Aug 29, 2024 21:45
Updated :
Aug 29, 2024 23:35

Bangladesh is showing an upward trend again in remittance sent by expatriates and exceeded US$ 2 billion in 28 days of August.

According to Bangladesh Bank’s updated report on remittance as of August 28, expatriate Bangladeshis sent $2.07 billion to the country through the formal channel. In the same period of August 2023, remittance inflow was $1.43 billion, reports UNB.

Bangladesh witnessed the lowest remittance in the last 10 months in July 2024 amid the student movement. In July, the country’s remittance was about $1.91 billion.

It is to be noted, banks were closed from July 19 to 23 due to the situation caused by the students’ movement against discrimination, public and general holidays. Apart from this, broadband internet was off for 5 consecutive days and mobile internet was off for 10 days. Because of this, foreign transactions with the country’s banks were almost stopped.

Bangladesh Bank has taken different steps to increase remittance to overcome the foreign exchange crisis and increase reserves. In the last few months, these measures have had a positive impact on expatriate income or remittance coming into the country.​

 

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Is govt action enough to curb inflation?

Persistent inflationary pressure, particularly in terms of food inflation, has been taking a toll on low- and fixed-income people in Bangladesh, forcing them to spend most of their income on nutrition.

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Is govt action enough to curb inflation?

Persistent inflationary pressure, particularly in terms of food inflation, has been taking a toll on low- and fixed-income people in Bangladesh, forcing them to spend most of their income on nutrition.

The recently ousted Awami League government had taken steps to cushion this blow, especially by introducing food distribution programmes.

And though such measures remain in place, the question is whether these alone are enough to tackle inflation.

A record 32.61 lakh tonnes of food grains were sold at subsidised rates through public distribution systems like the Open Market Sale (OMS) and Vulnerable Group Development programmes in FY24.

The OMS alone distributed about 32 percent of the total grains, mostly rice and wheat, to increase market supply and maintain a price equilibrium.

Essential commodities, including oil and sugar, are also being sold at subsidised rates to around one crore family cardholders under a Trading Corporation of Bangladesh (TCB) programme.

Professor Bazlul Haque Khondker, chairman of the South Asian Network on Economic Modeling (Sanem), welcomed these moves but urged authorities to monitor distribution properly.

"We often receive allegations of corruption in the distribution process. At times, the support does not reach the intended beneficiaries," he said.

Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), said it is critical to plug these leaks in public food distribution programmes, including the TCB's family card initiative.

"The list of beneficiaries should be revisited to stop both inclusion and exclusion errors," he added.

Khan also emphasised the need to increase budgetary allocations for public food distribution initiatives.

"The last budget did not include adequate support to reduce the production cost of essential commodities. Even energy and fuel prices were kept high."

He suggested the interim government facilitate the import and distribution of essential commodities so that more players can enter the market.

Sanem's Bazlul Haque Khondker said the focus should now shift to framing non-monetary policies to control inflation.

He added that proper market management by removing the scope for extortion should be prioritised.

"The country may witness significant change in the next six months if the interim government can play a remarkable role with a tight monetary policy," he added.

The CPD's Towfiqul Islam Khan said recent changes in the monetary policy, including policy rate hikes and allowing banks more flexibility to fix interest rates, were taken with a view to addressing demand-pull issues.

However, conventional economic theories and past global experiences suggest that these measures need time to have an effect.

"The government policies have not adequately addressed the issue of cost-push inflation areas. The pressure on the exchange rate will be there for some time in the foreseeable future," Khan said.

He also mentioned that the official data does not adequately reflect ground realities and somewhat underestimates the inflation rate.

"The policies are taken with low-quality data year after year. It is high time we took immediate steps to improve this situation."​

 

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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.​

 

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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.

www.thedailystar.net

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.​