[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Inward remittance through MFS hits 5-year high in August

Bangladesh’s migrant workers sent home Tk 1,101.8 crore in remittances through mobile financial service (MFS) providers in August, marking the highest monthly receipts through digital channels in the past five years.

www.thedailystar.net

Inward remittance through MFS hits 5-year high in August

Bangladesh's migrant workers sent home Tk 1,101.8 crore in remittances through mobile financial service (MFS) providers in August, marking the highest monthly receipts through digital channels in the past five years.

This figure represents a remarkable 113 percent year-on-year increase from the Tk 515.4 crore that was sent home through MFS providers in August 2023, offering a glimmer of hope for bolstering the country's dwindling foreign exchange reserves.

Bangladesh currently has around $20 billion in its foreign exchange reserves, far lower than the record $40.7 billion it boasted in August 2021.

Industry people said remittance transactions through MFS were higher in August as there were banking disruptions and limited cash supplies to ATMs following the political changeover in that month.

Besides, they credited the increasing use of technology, a 2.5 percent government incentive on remittance through formal channels, as well as various cash benefits offered by the MFS providers for the remittance surge.

Currently, at least 13 MFS platforms, including bKash, Nagad and Rocket, operate in Bangladesh.

MFS providers facilitated 54.21 percent more remittances in August compared to the month prior, according to data from the Bangladesh Bank.

In July, expatriate workers had sent home Tk 7,144 crore through MFS channels.

An analysis of central bank data reveals that August's remittance inflow through MFS channels was the highest since December 2018.

The increase follows the recent political changeover on August 5, when former prime minister Sheikh Hasina resigned and fled the country amid a mass uprising.

With MFS channels contributing significantly, total remittances surged nearly 39 percent to $2.2 billion year-on-year in August.

According to the latest data from the Bangladesh Bank, overall remittance receipts continued to rise in September, jumping 80.28 percent year-on-year to $2.40 billion.

Moreover, September's receipts were 8.12 percent higher than the previous month's.

Apart from ease of access and cash benefits, various policies from the central bank and continuous efforts of MFS providers encouraged migrant workers to use the formal channel, industry insiders said.

At the end of last year, the Bangladesh Bank doubled the maximum single-transaction limit for sending remittances to individual MFS accounts from Tk 1.25 lakh to Tk 2.5 lakh.

Ali Ahmed, chief commercial officer of bKash, said the central bank had recognised the critical role of remittance inflows in bolstering the country's economy.

Through concerted efforts and technological and distributional support of MFS providers, they have successfully channelled remittances through digital channels, he said.

Over the years, bKash has built a robust partnership ecosystem for remittances whereby seamless cross-border fund transfers can be initiated from more than 130 countries through Money Transfer Operators (MTOs) and leading commercial banks, Ahmed said.

He added that remittances received through bKash could be accessed anytime, anywhere.

Families of the expatriates can utilise remittance to take various services through their bKash accounts, including paying for goods and services, utility bills, and educational and government fees. They can also send money, donations and many other services from the comfort of their homes, he said.

In addition to offering convenient, instant, and secure remittance transfers, bKash has lowered cash-out fees, he added.

Beneficiaries can now withdraw remittances at a minimal cost of Tk 7 per thousand from approximately 2,500 ATMs of 19 leading commercial banks, Ahmed said.

"Furthermore, bKash has collaborated with various organisations and launched regular campaigns with attractive offers to encourage the use of legal remittance channels among expatriates and raise awareness. These efforts have contributed significantly to the growth of remittance inflows in Bangladesh."

Muhammad Zahidul Islam, head of media and communications at Nagad, said they had witnessed significant remittance earnings in August.

"With the natural growth, we from Nagad have also given tremendous effort to bring more remittances, such as by onboarding world-class foreign partners. Currently, people from more than 200 countries can send remittances through Nagad to Bangladesh," he said.

He said Nagad has already started a Tk 100 cashback campaign on top of the 2.5 percent government incentive to further boost inward remittance, adding that it had garnered a huge response from non-resident Bangladeshis.

"We have observed that these efforts have regained respect for us and the number of transactions has grown rapidly over time."

Through such measures, top MFS providers like Nagad are playing a vital role in strengthening and elevating the country's foreign exchange reserves, he added.​

 

[Saif]

Bangladesh seeks $3.0b ITFC loan for 2025

Bangladesh has taken a fresh move to rebuild ties with the Islamic Development Bank (IsDB) as it sought a substantial US$3.0 billion credit from the middle-eastern donor to finance the imports of fuel, LNG and fertiliser in 2025, officials said on Saturday. The government has recently sought the l

thefinancialexpress.com.bd

Bangladesh seeks $3.0b ITFC loan for 2025
FHM Humayan Kabir
Published :
Oct 13, 2024 00:00
Updated :
Oct 13, 2024 10:09

Bangladesh has taken a fresh move to rebuild ties with the Islamic Development Bank (IsDB) as it sought a substantial US$3.0 billion credit from the middle-eastern donor to finance the imports of fuel, LNG and fertiliser in 2025, officials said on Saturday.

The government has recently sought the loan from the IsDB's commercial window ITFC for the next year, they said.

The Economic Relations Division (ERD) requested the ITFC (International Islamic Trade Finance) team, which visited Bangladesh last week, for extending the financial support in addition to its continuing lending in the next calendar year, ERD officials said.

"We have sought nearly an additional $1.0 billion for the next fiscal than the ITFC's $2.1 billion committed annual portfolio to Bangladesh in the year 2024. The lender has assured us of considering the additional financing," said a senior ERD official.

He said: "The last meeting with the ITFC team was the initial one for securing the fund commitment. If they agree, we will go for negotiations soon to confirm the next year's credit requirement."

Over the last few years, the support from the IsDB declined as the previous Sheikh Hasina's government maintained weak relations with the donors from the Islamic nations including the middle-eastern development, another ERD official said.

Securing the proposed loan will be a good gesture of rebuilding the fragile trust between the IsDB and Bangladesh, he added. Under an agreement in February this year, the Jeddah-based IsDB's ITFC provided $2.1 billion worth of funds for purchasing fuel oil and LNG from the overseas market during this calendar year 2024.

Now the government is looking to get funds from the IsDB for purchasing fertiliser as Bangladesh needs a significant amount of the agricultural inputs for increasing its crop production.

In the last year (2023), the ITFC provided $1.40 billion worth of loan for importing the fuel.

Under the credit agreement, the ITFC will finance state-owned Bangladesh Petroleum Corporation (BPC) to import petroleum fuels and state-owned Petrobangla to import liquefied natural gas (LNG).

According to the government's plan, some $1.6 billion out of the $2.1 billion credit will be utilised to import petroleum fuel oils, while the remaining $500 million for LNG.

Bangladesh is one of the top borrowers of the Gulf lender, ITFC, in the energy sector. According to the ITFC, it bankrolled Bangladesh with the highest amount of $1.16 billion in 2022.

Bangladesh mostly depends on the imports of fuel oil, LNG and fertilizer, spending the highest amount for fuel oil imports.

The country annually spends around $5.0 billion for importing refined and crude oil from the gulf and other oil supplying countries.

The ITFC has so far approved trade finance proposals totaling nearly $16.50 billion for Bangladesh since its inception in 2008.

The private sector, including banks, takes trade finance from the middle-eastern lender.

The repayment period for the $2.1 billion loan has been set for one year, with an interest rate to be calculated using the Secured Overnight Financing Rate (SOFR) plus 2.0 per cent spread. This 2.0 per cent includes a 1.80 per cent interest rate and a 0.20 per cent administrative charge.

This administrative charge must be paid before releasing the loan. On October 10, the SOFR was at 5.34 per cent, which fluctuates daily.

Government officials said the country's energy import bills, including petroleum and LNG, stood at around $10 billion in the FY2023, with a similar amount expected for the last fiscal year ending in June 2024.

Local experts forecast that if Bangladesh continues relying on imports in this way, the energy bill could double by the year 2030.

In the last FY2023, Bangladesh's oil company - Bangladesh Petroleum Corporation (BPC) - imported 1.307 million metric tonnes (MT) of crude oil spending US$836.744 million, government statistics showed.

It also imports 4.388 million MT of Jet A-1, SKO, Mogas and HSD; while 0.6608 million MT of furnace oil at a total Tk 461.704 billion cost from different overseas suppliers for catering to the demands for the local market, the BPC data showed.​

 

[Saif]

Current slow pace of economy in Bangladesh may lead to recession: Experts

Currently, regardless of the measures taken through fiscal policy, no significant results are expected to be achieved within the next six months, experts observed on Monday. Dr. Monzur Hossain, Research Director of the Bangladesh Institute of Development Studies (BIDS), made this remark during a s

thefinancialexpress.com.bd

Current slow pace of economy in Bangladesh may lead to recession: Experts
FE ONLINE REPORT
Published :
Oct 14, 2024 22:26
Updated :
Oct 14, 2024 22:26

Currently, regardless of the measures taken through fiscal policy, no significant results are expected to be achieved within the next six months, experts observed on Monday.

Dr. Monzur Hossain, Research Director of the Bangladesh Institute of Development Studies (BIDS), made this remark during a seminar titled "Current Economic State and Way Forward," held at the Bangladesh Institute of Social Research (BISR) Trust office in Lalmatia.

He further stated that the current sluggishness of the economy could lead to a recession.

“Although government spending has decreased, both public and private investment have significantly dropped. Additionally, the National Board of Revenue does not have a separate research cell. They create and implement policies, which is why there are no positive outcomes,” Monzur added.

Moreover, Bangladesh's tax-to-GDP ratio is the lowest in South Asia. Therefore, the current tax policy is unlikely to remain sustainable for long, he noted.

“The Bangladesh Bank is currently trying to provide liquidity support to fragile banks by arranging cash from other commercial banks. However, stabilizing the banks will still be difficult. During the previous government, there were no economic policies, which is why countries around us have been able to reduce inflation while we have not. Inflation cannot be controlled solely through monetary policy; if extremely high rates are imposed, all sectors, including industry and trade, will collapse,” Monzur Hossain stated.

He said maintaining reserves between $25-30 billion is sufficient. At one point, reserves reached around $48 billion because imports were restricted after the pandemic, while exports were performing well. He also advised focusing on quality investments.

In response to a question from Munem Ahmad Chowdhury, a research associate at BISR Trust, Monzur mentioned that even if autonomy is granted to the Bangladesh Bank, the country's central bank, it is crucial to fulfill such responsibilities. In that case, the governor must act impartially under this autonomy, and lobbying should not occur.

He added that the Bangladesh Bureau of Statistics is not very responsible, as accurate information is not always available.

The seminar was moderated by Khurshed Alam, Chairman of BISR Trust, who emphasized the need for data to accurately understand any developmental activity or issue.

“Many dismiss data from the previous government as baseless, raising the question of why people should still trust government data. Transparency and accountability are thus crucial,” he remarked.

Khurshid also noted a common issue in mega projects like the Jamuna Bridge, Padma Bridge, and Karnaphuli Tunnel: weak planning. He questioned whether spending on the Karnaphuli Bridge would have been more beneficial than spending on the tunnel.

Md. Murad Ahmed, Senior Researcher at BISR Trust, stated that enhancing the efficiency of the capital market would restore investor confidence, leading to diversified investments and profits. If certain instruments can be introduced to the country's economy, inflation will decrease, and the economy will move toward a more robust position.

AKM Riaz Uddin, Senior Research Fellow at The Hunger Project, remarked that just as abnormal symptoms arise when a drug addict stops using drugs, abnormalities will emerge if economic irregularities are addressed all at once. Therefore, patience is necessary to achieve sustainable solutions.

During the discussion, prominent businessman Swapan Kumar Das pointed out that previous agreements regarding loan contracts have caused millions in losses, placing investors in significant danger.

He noted that the system is being driven by words rather than actions. If this situation is not quickly resolved, investors will lose interest, potentially leading to an economic collapse, he added.

Mohammad Yakub, CEO of the All Bangladesh Research and Development Group, highlighted the importance of research in ensuring transparency in the financial sector.​

 

[Saif]

Chinese debt rescheduling, import credits seen imperative for BD economy

Leading economists and foreign-relations experts stressed debt rescheduling by the Chinese side raising the loan-repayment and grace periods to enable Bangladesh to absorb economic shocks, as closer cooperation between the two countries came into the limelight. Addressing an international seminar

thefinancialexpress.com.bd

Chinese debt rescheduling, import credits seen imperative for BD economy
FE REPORT
Published :
Oct 15, 2024 00:10
Updated :
Oct 15, 2024 00:10

Leading economists and foreign-relations experts stressed debt rescheduling by the Chinese side raising the loan-repayment and grace periods to enable Bangladesh to absorb economic shocks, as closer cooperation between the two countries came into the limelight.

Addressing an international seminar on 'Bangladesh-China Relations: A Future Outlook'" they also opined that if China provides credit arrangements to Bangladesh for its import from China, it would help the country address the fragile BoP situation.

Bangladesh Institute of International and Strategic Studies (BIISS) and the Centre for China Studies (SIIS-DU) jointly organised the meet to commemorate the 50th anniversary of the establishment of diplomatic relations between China and Bangladesh.

Md. Touhid Hossain, Adviser for Foreign Affairs of the current interim government, was the chief guest at the seminar which was also addressed by Yao Wen, Ambassador of China in Bangladesh, and Dr Debapriya Bhattacharya, Distinguished Fellow of CPD and Chair of the Committee on White Paper on the State of Bangladesh's Economy.

"Almost a quarter of our imports are coming from China, but the trade deficit is increasing. Trade deficit is increasing at a faster rate than the volume of the trade itself. China has been generous in order by providing us, first, the 97-percent duty- free and quota-free market access. Now it has gone up to 100 per cent, but we know by now in the world, trade does not depend on only market access based on tariffs and other regulatory or other forms of financial considerations. It also depends on the process through which it happens. It also depends on the non-trade barriers which are there," said Dr Debapriya.

"So I think if you look at the future of Bangladesh exports to China, then it is not tariff, it is the non-tariff barriers which we need to look at."

He also stressed the need to look at the lengthy processes. "Quite often it takes to dispute settlement."

Highlighting the need for debt rescheduling with China he said, "As I mentioned, almost 9.0 per cent to 10 per cent of the financial flows are coming from China. And, well, if you look at the debt situation of Bangladesh at this moment, almost 5.6 billion dollars are owed to China which is almost 10 per cent of the total debt of Bangladesh has overseas. So the debt per repayment is becoming an increasing challenge for Bangladesh."

The economist also points out that some of the loans come as supplier's credit.

And shorter repayment period, shorter grace period, and higher commitment charges than others show there are opportunities for streamlining them in the future.

He argues that Chinese loan and debt in Bangladesh definitely demand a bit much closer look.

He suggests making the debt situation more compatible with the upcoming development requirements of this country.

Mr Debapriya also observed that although the foreign-exchange reserves improved in the recent weeks, and the foreign-exchange flow stayed quite sustainable in the recent past, a debt rescheduling is not totally out of picture.

"At this moment, a debt-rescheduling issue may soon come up to look at how we really pay back some of these loans which are really maturing very fast," he told the cutting-edge function at an important crossroads in Bangladesh's political history following the July-August uprising.

About the importance of more Chinese investment in Bangladesh he said China can bring Bangladesh into the regional value chain through investing in the garment and manufacturing sector.

"What is becoming important now to have the Chinese investment more in Bangladesh over here, and where the Chinese investment can go in Bangladesh," he said, adding that it has to go to the Chinese economic and industrial zone which has been allocated in Anwara upazila in Chittagong.

He also argues that more investment in the Anwara EPZ is needed to make the Karnaphuli Tunnel economically viable.

The CPD economist stresses the need for Chinese credit to support Bangladesh's import from that country. Import from China is critical for Bangladesh, and given that Bangladesh does not have adequate foreign exchange now to pay up debt, it is important to get a financing from China in order to underwrite those imports.

"It is the old-fashioned open general licence system that you open up a credit line which can only go to finance the imports which are coming from China and support that one and create no less pressure on our balance-of-payments situation," he said.

He notes that China remains the single-largest provider of financial support to Bangladesh, as of last year (2023). The latest data show Dhaka received nearly US$4.0 billion almost in financial support which is about 9.0 per cent of the total flow which came to Bangladesh in that year.

The economist mentions that Bangladesh imports almost $25 billion of goods from China. It is about 23 per cent of the total imports coming to Bangladesh, and China's investment has now reached almost $1.5 billion.

"And what we see is important also in terms of human development. There're 20,000 students from Bangladesh currently studying in China at this very moment. So if this is one of the benchmarks and if you look at the future, why

Bangladesh should be looking at China as its major source of development cooperation and economic cooperation in the future."

Speaking on the strengths of China, he said, "China, as you may know, remains the driver of global economy at this moment, at least 30per cent of the global good is attributable to China. We make the joke that if China catches cold, then the whole world sneezes. That is the economic situation what we have now. So we are talking about a country which has generated $600 billion of trade surplus. We are talking about a country which has 3000 billion of foreign-exchange reserves."

Foreign Adviser Touhid Hossain said Bangladesh could not capitalise on the duty-free access that China has given for many reasons. "I would say that it's basically our lack of competitiveness in many areas and lack of diversification. I think we need to concentrate on these two. We need to enhance our competitiveness."

He agrees on the issue of debt rescheduling by the Chinese side.

The adviser said Bangladesh and China have very important defence cooperation. "As we all know, China is a major supplier of our defence equipment and the modernisation of our military services that we are looking forward to. I think we need a lot of cooperation in this respect, from China."

About the collaboration in the infrastructure-development sector, he said, "Of course, there are some limitations, as has already been mentioned, and we need to overcome those so that the infrastructure-development cooperation that exists between our two countries becomes more useful, more sustainable."

The foreign affairs' adviser of the interim government also stressed enhanced cooperation in the energy sector, both in green and traditional. Some projects are ongoing in various areas, and he hopes that these will be expedited so that they can be completed in time and become more useful for the Bangladesh economy.

One important area of cooperation between the two countries, as has been already touched by the ambassador, is technological know-how and communications, and Information and Communication Technology, he said.

Seeking Chinese cooperation in resolving the Rohingya crisis he said China has been cooperating in this respect for the return of the refugees. "We know that there is only one solution to this problem, which is that the people who are now in the camps in Bangladesh have to go back to their home. That is the only solution."

"China has been with us and there were trilateral dialogues, but, unfortunately, the previous initiatives have not resulted in any return of any of the Rohingya people to their homeland."

He notes that China has a lot of influence in Myanmar Dhaka looks forward to more active Chinese role in ensuring that these people, who are in a very deplorable situation, can be sent back.

"There their rights have been trampled upon, and they should be allowed to go back with rights and security so that we can get over this problem once and for all, and it is not repeated one again and again. Cash has been in the past," the foreign adviser opined.

He said both countries, from the very beginning, supported each other on the matters of core interest and work together on a path to realising the respective development.

"Now, in the current situation, as Bangladesh has witnessed the most significant political change in its national history, the future of Bangladesh in a post- revolution setting requires a more comprehensive approach," he said.

Ambassador AFM Gousal Azam Sarker, Chairman, BIISS, presided over the seminar where Major-General Iftekhar Anis, Director-General, BIISS, delivered the welcome address.

Dr Yang Jiemian, Professor, Director of the Academic Advisory Council, SIIS, made a special remark during the session.

There were three working sessions in the international seminar. The first working session titled 'The Impact of Bangladesh's Changing Political Landscape on Regional Dynamics' was moderated by Ambassador Farooq Sobhan, former Foreign Secretary. The second working session titled 'Bangladesh's Political, Economic, and Social Reforms and the Trends' was moderated by Dr Zhang Jiu'an, Associate Research Fellow, Academy of Contemporary China and World Studies. Professor Amena Mohsin, Department of International Relations, the University of Dhaka, moderated the third working session titled 'Strengthening China-Bangladesh Cooperation and Advancing the Comprehensive Strategic Cooperative Partnership'.​

 

[Saif]

Go-ahead given for RCEP dealmaking negotiations

A standing proposal gets the go-ahead from the interim government to begin formal negotiations towards signing on the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region, sources said. Commerce ministry Monday received the approved sum

thefinancialexpress.com.bd

Go-ahead given for RCEP dealmaking negotiations
Joining the bloc may boost BD exports by over 17.37pc: Study
REZAUL KARIM
Published :
Oct 15, 2024 00:13
Updated :
Oct 15, 2024 00:13

A standing proposal gets the go-ahead from the interim government to begin formal negotiations towards signing on the Regional Comprehensive Economic Partnership (RCEP), an emerging economic bloc encompassing the Asia-Pacific region, sources said.

Commerce ministry Monday received the approved summary note sent to Chief Adviser Prof Muhammad Yunus for the nod, they informed.

Recently, the ministry sent the note to the interim government's premier for permission to starting off talks on striking the proposed agreement on the RCEP that accounts for a third of world GDP.

Contacted, commerce secretary Md. Selim Uddin said, "We have received the summary. We have got approval from the CA for starting process regarding signing the deal."

He expects that Bangladesh will be able to net significant trade facilities from a good number of countries if the agreement gets through.

"We in principle have taken a decision to prepare a detailed workout plan which will be formed within next one week," Mr. Uddin mentions.

The immediate-past government kept in abeyance the move to join the world's largest trade regime due to last general election. But, the commerce ministry had sent a summary of the RCEP deal and dos to the then prime minister for necessary approval.

In August 2023, an inter-ministerial meeting under the then government had recommended joining the trade bloc, as an assessment suggested that joining would increase Bangladesh's exports to the global market by more than 17.37 per cent.

The commerce ministry expects to kick-start formal proceedings at the forum headquarters for the country's membership in RCEP after completion of the workout plan, the commerce secretary mentioned.

He said, "We expect to send formal proposal to the RCEP for joining the bloc through the Foreign Affairs Ministry."

Bangladesh has started the process of joining mega trade bloc on hope of a boost to export to the member-countries, but it had been postponed since October 2023, they added.

It expects to send a formal proposal to the depository and temporary secretariat of the world's largest trade bloc at the ASEAN headquarters for the country's membership.

Bangladesh decided in principle to join the emerging vast trade bloc at a workshop held at commerce ministry on August 01, 2023.

The ministry already completed necessary scrutiny and review in this regard, based on commitments fulfilled by Vietnam, a member of the China-mooted bloc.

A high official also says the commerce ministry will have to take cabinet approval to move ahead. Vetting from the law ministry may also be required.

Bangladesh's inclusion in the RCEP will be positive although the existing regional deals with the South Asian Association for Regional Cooperation (SAARC) and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) have hardly made any visible outcomes, says Research Director of CPD Dr Khondaker Golam Moazzem.

He hopes that huge cross-border trade opportunities will be created for Bangladesh after getting membership in RCEP. Besides, Bangladesh can be able to enter important manufacturing hubs, including China. It will also be a part of value chain.

An earlier study conducted by Bangladesh Trade and Tariff Commission (BTTC) showed Bangladesh's trade with RCEP-member countries mostly concentrated on trade in goods.

Bangladesh's export may grow more than 17 per cent and gross domestic product (GDP) 0.26 per cent if free-trade agreement is signed with the bloc members, it mentioned.

The RCEP deal came into force in January 2022 and any country/customs territory is eligible for applying for membership.

As of now, 15 Asia-Pacific nations are party to the world's biggest free-trade domain.

The ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, while its FTA partners are Australia, China, Japan, New Zealand and Korea.

An outstanding feature of the RCEP is that it represents world's largest FTA, comprising about 30 per cent of global GDP and about a third of the world population.

The economic-cooperation forum, spanning Asia-Pacific realm that covers 2.3 billion people, accounts for US$ 25.8 trillion or about 30 per cent of global GDP.

Also, it accounts for $12.7 trillion or over a quarter of global trade in goods and services, and 31 per cent of global foreign direct investment (FDI) inflows.

In the fiscal year (FY) 2020-21, Bangladesh exported goods worth $3.9 billion to and imported goods worth $24.5 billion from these countries.

On the other hand, at the same time, the services export was worth US$1.8 billion and import worth $2.6 billion.

Bangladesh enjoys preferential market access to many of the RCEP countries, either through preferential trade agreement (PTA) or through GSP facilities.

After graduating from the least-developed country (LDC) status in 2026, the duty-free access will no longer be available except for reciprocal general preference under the Asia-Pacific Trade Agreement (APTA).

In such a situation, sustaining the consistent progress achieved by Bangladesh in bilateral export trade with some of the RCEP countries as well as availing the opportunity to some potential destinations in RCEP will be a real challenge.

The study says RCEP includes some of the major export destinations as well as major import sources of Bangladesh. "Considering the bilateral-trade scenario, RCEP remains more as an important partner from the Bangladesh perspective."

Imports from RCEP contribute around 43.92 per cent of the total global imports by Bangladesh, 55.33 per cent of the total tax-revenue and 58.56 per cent of total revenue from customs duty collected under home consumption, as of FY 2020-21.

Thus, the probable accession of Bangladesh to RCEP may, however, have a negative impact on revenue generation from customs duty.

Since some major import sources of Bangladesh like China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved with RCEP, there is a threat of losing a certain amount of revenue from these countries.

More than 68 per cent of total merchandise exports to RCEP are under apparel-product category. Top twenty export items to RCEP mostly consist of apparel products and these twenty products constitute 64 per cent of total exportable.

The study found that the average most-favoured nation (MFN) tariffs for Bangladesh had been comparatively higher than that of the RCEP members.

It says the probable increase in import along with a comparatively protective regime of Bangladesh estimated a probable high revenue loss for Bangladesh compared to that of the RCEP.

"However, as estimated trade creation would likely be higher than the trade-diversion effect for Bangladesh, it may generate additional revenue from other duties and charges, if not reduced due to a possible accession in RCEP," the study mentions as regards a tradeoff.

The Trade and Tariff Commission recommends that the government may express its positive stand regarding the accession of Bangladesh to RCEP through weighing all the pros and cons. In that case, domestic rules and regulations may need to be changed in some cases, if a situation arises.

The RCEP negotiations were formally launched during the 2012 ASEAN Summit in Cambodia. India withdrew from the agreement in November 2019 despite participation from the beginning of negotiations.​

 

[Saif]

Reform and the pressing needs of our economy

As the current political transition in Bangladesh stands, it presents a rare opportunity for massive reform that must not be missed. Navigating this pivotal time requires focus on changes that enhance governance, foster a business-friendly environment, and protect the rights and freedoms of our...

www.thedailystar.net

Reform and the pressing needs of our economy

As the current political transition in Bangladesh stands, it presents a rare opportunity for massive reform that must not be missed. Navigating this pivotal time requires focus on changes that enhance governance, foster a business-friendly environment, and protect the rights and freedoms of our people. This reformative era should aim to build a transparent, competitive ecosystem that boosts investor confidence and curbs corruption.

The challenges of our economy, particularly in the financial sector, cannot be overlooked. High levels of non-performing loans (NPLs) and liquidity crises arise from systemic flaws, a lack of protection, and insufficient accountability. These shortcomings have created opportunities for political interference, resulting in significant losses for our nation.

Our flawed financial frameworks hinder our pursuit of an economy driven by youth and small-and-medium enterprises (SMEs), primarily protecting the interests of lenders. The absence of an exit policy traps borrowers in uncertainty, denying them the chance to turn their situations around. This scenario is a significant drawback for young entrepreneurs. To overcome these constraints, we must create a system that prevents undue interference and upholds accountability and fairness; one where laws serve the greater good, leaders act as enablers of progress, and discrimination is actively addressed.

Political reform is a crucial step for a new governance paradigm -- one that emphasises transparency and accountability at every level. A political system that prevents vested groups from wielding undue influence and resists the politicisation of institutions is essential for progress.

At this critical time, businesses must not be victims of politics, particularly given the disruptions we've seen, like internet blackouts and political activities affecting supply chains. There must be a consensus that the economy should take precedence over politics and that industrial security must be prioritised.

A governance structure fostering inclusivity in decision-making is essential. Regulatory coherence, improved policy coordination, and greater accountability are needed to minimise the risks of arbitrary decisions that harm businesses. A clear separation of functions within government departments is equally crucial to address conflicting priorities effectively.

The failure to integrate plans across various government sectors undermines effective governance and transparency, affecting industries' day-to-day operations, whether in customs, port or tax-related activities. Dismantling siloed governance and embracing effective public-private partnerships are necessary steps.

A smoother transition from LDC status is also crucial for our economy; however, given our limitations in resources, time, administrative capacity and governance challenges, our position regarding this transition must be carefully considered.

An acute focus on infrastructure, logistics, supply chain management and long-term energy policies should take precedence in the reform agenda. Infrastructure development has been a cornerstone for countries like Malaysia, South Korea, and Vietnam, providing valuable lessons for Bangladesh in terms of industrialisation and economic growth.

As things stand, Bangladesh lags behind many of its competitors in the Global Logistics Performance Index. Even during recent floods, our national highway connecting to a major port was submerged, exposing our infrastructure's vulnerabilities and raising questions about our resilience and investment in infrastructure and sustainable energy.

In aligning policies with global competition, we must revisit trade and foreign policies to ensure they are responsive to market realities and position Bangladesh as a competitive player on the international stage. Developing strategic partnerships, enhancing trade agreements and promoting initiatives that attract foreign investment in niche sectors are essential steps.

While prioritising our economic agenda, attention must also be given to protecting SMEs, advancing the ESG agenda and promoting technology and skills adoption. Innovative approaches supported by thoughtful policy frameworks are needed to create synergies that drive meaningful impact.

This reformative era must inspire a collective vision that aligns with our people's hopes and aspirations. It is our moment to break free from past constraints and usher in a new chapter of growth and opportunity. The time for change is now.

The author is a director of the Bangladesh Garment Manufacturers and Exporters Association​

 

[Saif]

Diverse income streams needed for poverty alleviation

Households with diverse income streams, both farm and non-farm, are more resilient and can escape poverty faster, said experts yesterday.

www.thedailystar.net

Diverse income streams needed for poverty alleviation
Say speakers at a roundtable

Participants of a roundtable titled “Pathways to prosperity for extremely poor people” at The Daily Star centre yesterday. The Palli Karma-Sahayak Foundation, European Union, and The Daily Star jointly organised the event marking the International Day for the Eradication of Poverty. Photo: Star

Households with diverse income streams, both farm and non-farm, are more resilient and can escape poverty faster, said experts yesterday.

Research over the last 20 years on the impact of microcredit indicates, both nationally and internationally, that pure microfinance will not have a sustainable impact on poverty alleviation, said MA Baqui Khalil, professor and dean for the School of Business at the University of Asia Pacific.

This is because poor people need insurance, savings, health expenses and other non-financial services beyond credit, he said at a roundtable styled "Pathways to prosperity for extremely poor people (PPEPP)".

Palli Karma-Sahayak Foundation (PKSF), the European Union and The Daily Star jointly organised the event to mark the International Day for the Eradication of Poverty at The Daily Star Centre in Dhaka.

"People with multiple income opportunities are less vulnerable to poverty and can graduate out of it at a faster rate," Khalil said.

If a household has both farm and non-farm activities, it can absorb shocks, and income from multiple sources contributes to savings.

The creation of wage employment is important as an alternative to farm employment to reduce extreme poverty.

"These issues were reflected in the PPEPP project of the PKSF," he added.

In 2019, with lessons learned from various extreme-poverty projects, PKSF undertook a multi-dimensional initiative titled PPEPP with funding from the UK's Foreign, Commonwealth and Development Office (FCDO) and the EU.

The project aims to eradicate extreme poverty for approximately 250,000 households (about 1 million people) in selected poverty-prone districts across the northwestern char areas, the southwestern coastal belt and the Haor region.

The project also includes ethnic minority pockets in Dinajpur and Thakurgaon districts.

Since 2022, the PPEPP project has been funded by the EU and renamed PPEPP-EU, targeting 215,000 households.

It provides a carefully sequenced package of livelihoods, nutrition and primary healthcare, inclusive finance and community mobilisation interventions as the core components.

To address the multidimensional nature of poverty, the project also integrates climate resilience-building, disability inclusion and women empowerment with the core components.

"If we want to bring the issue of sustainable poverty reduction to the forefront, there needs to be a linkage between this project and a market-based linkage," said Mustafa K Mujeri, executive director at the Institute for Inclusive Finance and Development.

"If we can provide them with loans and create such enterprises, then it is possible to move them toward a sustainable livelihood. So, it is necessary to think about how we can link them with cottage, micro and small enterprises," he added.

Poverty and inequality are two different things and should not be conflated together, said Zakir Ahmed Khan, chairman of PKSF.

"What we are doing now is dealing with poverty, not inequality. Poverty is not only a lack of money -- it means many more things."

The PPEPP should be taken as a programme and not as a project, he said.

There must be a connection between sustainability and the market, said Mohammad Muslim Chowdhury, chairman of Sonali Bank.

"Otherwise, we may go from one project to another. If we don't link it with the market and create self-employment opportunities, it won't succeed."

Different projects and programmes should be linked to central policies and aligned with the national strategy.

The programme needs to be implemented comprehensively, he said, adding that the local government should also be linked.

The primary goal of PKSF is to eradicate inequality along with poverty, aiming for zero poverty and the creation of an inclusive and equitable society, said Md Fazlul Kader, acting managing director of PKSF.

Bangladesh has witnessed remarkable growth and development, but unfortunately, extreme poverty still exists, said Michal Krejza, head of cooperation at the delegation of the EU to Bangladesh.

For example, in the southern coastal belt, the incidence of extreme poverty is quite high and is increasing in some areas due to the impacts of climate change.

To make these people less vulnerable, better access is needed to basic public services such as education, health care, safe drinking water and sanitation, and safe and nutritional food, he said.

"They need skills development and jobs. Those for whom the need is the highest often have the poorest access."

Since its inception of the project in 2019, 72 percent of the extremely poor households covered by the project have risen above the international poverty line, he added.

Macroeconomic policies do have a significant impact on poverty reduction at the national level, said Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh.

"The impact on poverty comes from the kind of macroeconomic policies we have. Macroeconomic stability is essential and macroeconomic policies for economic growth are also essential," he added.

Bangladesh has done very well on many things including poverty, said Mahfuz Anam, editor and publisher of The Daily Star.

"But what remains is also a massive task. Let us not get into some sort of a comfort zone that we have done well."

As the most densely populated country, whatever the country achieved really stands threatened because of climate change and Bangladesh needs global support, he added.​

 

[Saif]

Gross forex reserves cross $25b in steady rebound

A steady rebound on the back of changed milieus helps Bangladesh see its gross foreign-exchange reserves climb over US$25 billion again amid tightfisted import payments and higher remittances, officials said. The forex reserves rose to $25.14 billion on October 15 from $24.97 billion on Octo

thefinancialexpress.com.bd

Gross forex reserves cross $25b in steady rebound
Lower imports-outflows, higher remittances help in changed milieus
Siddique Islam
Published :
Oct 17, 2024 00:37
Updated :
Oct 17, 2024 00:37

A steady rebound on the back of changed milieus helps Bangladesh see its gross foreign-exchange reserves climb over US$25 billion again amid tightfisted import payments and higher remittances, officials said.

The forex reserves rose to $25.14 billion on October 15 from $24.97 billion on October 08 as per traditional calculation method of the Bangladesh Bank (BB). It was $24.86 billion on September 30.

As per the International Monetary Fund (IMF) Balance of Payments International Investment Poisson Manual-six edition, generally known as BMP6, the reserves rose to $19.93 billion during the period under review from $19.83 billion, according to the central bank's latest data released Wednesday.

The IMF-calculated figure was $19.86 billion on September 30.

Forex reserves--one of the major macroeconomic indicators of an economy--fell to $24.53 billion in terms of gross calculation by the central bank after clearing $1.37 billion import payments to the Asian Clearing Union (ACU) on September 07 last while the amount stood at $19.46 billion as per IMF's BMP6 arithmetic.

"Higher inflows of remittances have helped the country see forex reserves cross $25-billion mark further," a senior official of the central bank told the FE while replying to a query.

He also said Bangladesh received $1.21 billion in inward remittances during the first 14 days of October.

Meanwhile, the flow of inward remittances grew over 33 per cent to $6.54 billion in the first quarter (Q1) of the current fiscal year (FY), 2024-25, from $4.91 billion in the same period of FY '24.

This surge indicates a growing trend of expatriates utilising formal banking channels to send money to Bangladesh, bankers said, adding that this increase is a shift away from informal methods like hundi since the formation of the new government.

Besides, the purchasing of the US currency from the commercial banks directly has contributed to growth in the forex reserves in recent days, another central banker explains.

Nearly $50 million has so far been bought from the commercial banks in October as part of the regulator's intervention in the market, the central banker adds.

On the other hand, the selling of the greenback from the central bank almost suspended recently as part of a move to build up the recently depleted forex reserves in Bangladesh.

"We've sold only $10 million so far to the commercial banks in the month of October 2024," the BB official adds.

However, the actual import in terms of settlement of letters of credit (LCs) fell by 5.58 per cent to $16.10 billion during the July-September period of the FY'25, from $17.05 billion in the same period of the previous fiscal year, due to political unrest as well as uncertainty associated with post-unrest regime.

On the other hand, the opening of fresh LCs, generally known as import orders, dropped by 8.44 per cent to $15.65 billion in the first three months of this fiscal from $17.09 billion in the same period of FY'24.

Bangladesh's forex reserves had surged to $48.04 billion on 24 August 2021, setting a new record, from $46.58 billion of the previous working day. The rise was propelled by the receipt of $1.45 billion from the IMF as general allocation of Special Drawing Right (SDR).​

 

[Saif]

Budget support from WB, IMF, ADB: Bangladesh may get $5.65b by this fiscal year

The government is expecting at least $5.65 billion in budget support this fiscal year from the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) to expedite reforms.

www.thedailystar.net

Budget support from WB, IMF, ADB: Bangladesh may get $5.65b by this fiscal year

The government is expecting at least $5.65 billion in budget support this fiscal year from the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) to expedite reforms.

Of the expected funds, the IMF is likely to provide $3 billion, the World Bank $1.5 billion and the ADB $1.15 billion.

Around $3 billion of the funds could come by December for stronger support to ensure good governance in banking and other sectors, according to officials at the finance ministry, Bangladesh Bank and the three development partners.

The global and regional lenders may impose several conditions for the loans, including some on revenue, public expenditure, and dissemination of data, finance ministry officials said.

A high-powered government delegation led by Finance Adviser Salehuddin Ahmed will visit the US from October 21-29 to attend the World Bank-IMF Annual Meetings.

They will sit with World Bank and IMF officials on the sidelines of the main event to discuss the fresh financings, their modalities, and reform conditions.

High-ranking officials of the World Bank and the IMF have assured the government of providing necessary funds to boost the depleting foreign currency reserves after the interim government took charge in August.

The IMF is likely to approve $3 billion in fresh loans under a separate programme, in addition to the $4.7 billion in funds approved in January last year, under which Bangladesh has got $2.3 billion in three tranches so far.

The IMF may disburse the fresh funds in multiple tranches as well. However, the modality of the loans will be finalised during talks in Washington this month.

A finance ministry official said they are hopeful about getting more than $1 billion under the two IMF programmes this year, subject to the IMF board's approval in December.

An IMF team is likely to visit Dhaka in November to set the reform conditions for the fresh funds and also review the existing loan programme.

The World Bank is expected to clear $1.5 billion in fresh funds in the ongoing fiscal year, including $1 billion under two programmes by December.

A finance ministry official said the World Bank will provide $750 million to strengthen economic governance and reform programmes.

Another $250 million will be provided for capacity building of the finance ministry, Bangladesh Bank, National Board of Revenue (NBR), and Bangladesh Bureau of Statistics (BBS), said the official.

From the ADB, the government expects $1.15 billion by the end of this fiscal year. The funds will include $650 million expected by December for a programme to strengthen economic management and governance.

The interim government also sought $1 billion from the ADB for the banking sector and another $1 billion for the energy sector.

Out of these, there has been significant progress in getting the $1 billion for the banking sector. The ADB could provide $500 million of the funds by June next year.

The Bangladesh delegation will also hold talks with officials of the World Bank Group's Multilateral Investment Guarantee Agency (MIGA) and International Finance Corporation (IFC), and the US Treasury Department during the WB-IMF Annual Meetings.

IFC in 2022 proposed to issue Taka-denominated bonds worth $4 billion among local investors, either through public issuance or private placement, to lend the proceeds to projects in Bangladesh.

There has not been much progress regarding the proposal, but recently the member of the World Bank Group has shown renewed interest in the matter.

MIGA has offered Bangladesh Bank $1 billion in guarantee facilities for international trade to reduce import costs.

MIGA and IFC's proposals will be discussed further during the Bangladesh delegation's visit to Washington, a central bank official said.

POSSIBLE CONDITIONS

Officials said the conditions for the fresh World Bank and IMF loans may include the separation of tax policy from revenue collection administration. The lenders have been raising the issue for a long time, but it could not be realised due to a lack of interest from NBR officials.

The lenders may also want the existing multiple VAT rates replaced with a uniform rate, and the introduction of a modern electronic VAT system to increase revenues and improve compliance.

The World Bank recommended these reforms in its latest development update for Bangladesh last week.

It suggested enhancing efficiency in expenditure by aligning national savings certificate interest payments with market rates and controlling subsidy spending.

The report recommended implementing market-based tariffs in the power sector and transitioning from fertiliser subsidies to a voucher-based programme. It suggested replacing emergency procurement with competitive bidding to reduce generation costs.

A finance ministry official said the lenders may impose a condition under which the BBS will have autonomy and publish data independently.

Currently, BBS sends data to government high-ups for approval before publication.​

 

[Saif]

Bangladesh Remittance Fair to begin in NY October 20

Two-day Bangladesh Remittance Fair will begin at Jamaica Performing Arts Centre in New York on October 20 to increase remittance flow from the USA to Bangladesh.

www.newagebd.net

Bangladesh Remittance Fair to begin in NY October 20
Bangladesh Sangbad Sangstha . Dhaka 18 October, 2024, 23:57

Two-day Bangladesh Remittance Fair will begin at Jamaica Performing Arts Centre in New York on October 20 to increase remittance flow from the USA to Bangladesh.

The theme of the fair is ‘New Opportunities, New Markets, New Partnerships’.

The Bangladesh-American Chamber of Commerce and Industry, Mukto Dhara New York and the US-Bangla Business Link are jointly organising the event powered by Dhaka Bank.

Islamic Bank, National Bank and Bank Asia will be honoured in the event as the top remittance-receiving banks.

Focusing on promoting legal remittance flows and sustainable growth, the fair aims to explore how to increase these foreign earnings and encourage expatriates to utilise legitimate channels for remittance, thereby further energizing the economy.

The participating institutions include banks, financial institutions, money transfer operators, remittance channel partners, mobile financial services, offshore banking service providers and expatriate small entrepreneurs.

Over 30 financial institutions from both Bangladesh and the United States, including IFIC Bank, Islami Bank, Standard Bank, Social Islamic Bank Limited, Dhaka Bank, Chevron Express and Standard Express, will take part in the event.

The fair will also feature seminars and symposiums on remittances, along with awards for the top 10 Bangladeshi-American remittance senders.

Moreover, awards will be given to the top three money exchange or remittance channel companies.

The fair will remain open from 4:00pm to 10:00pm NY time on both days at the venue where popular artists Pousali Banerjee and Shah Mahbub will enthral the audience through performances on October 20.​

 

[Saif]

High tax expenditure: A paradox in Bangladesh’s tax system

Bangladesh has an unusually high tax expenditure to GDP ratio despite having low revenue generation through direct tax.

www.thedailystar.net

High tax expenditure: A paradox in Bangladesh’s tax system
High tax expenditure in Bangladesh

VISUAL: ANWAR SOHEL

Revenue efforts—i.e., revenue generated from the national income or GDP, which is defined as tax to GDP ratio—have historically been low in Bangladesh. Between 2011 and 2023, the country's revenue efforts declined from 11 percent to 8.3 percent in 2023—a 2.7 percentage point drop over the 12-year period when the per capita GDP increased by about 200 percent. Since the trend in per capita GDP is increasing, suggesting that income is increasing (hence broader tax base), more revenue should be generated (even when the tax rates remain the same). Thus, the falling trend of revenue efforts point to an inefficient revenue system in Bangladesh.

A paradox in our tax system is maintaining a high tax expenditure ratio (or simply put, revenue forgone) when the revenue efforts are dismal. Tax expenditure refers to special provisions of the tax code, such as exclusions, deductions, deferrals, credits, and tax rates that benefit specific activities or groups of taxpayers. The outcome is a loss of revenue. Although data on tax expenditure in Bangladesh is not available every year, according to a recent study (March 2024) by the National Board of Revenue (NBR), the estimated total tax expenditure for direct tax in FY21 amounts to 3.56 percent of GDP. Although some of the tax expenditures may be justified on merit grounds, such a high level of tax expenditure against very low revenue efforts is clearly untenable. If one adds VAT and custom duty, the total tax expenditure may well be above five percent of GDP.

Furthermore, since the methodology to estimate tax expenditure is usually subjective, the final estimate is generally underestimated. The Global Tax Expenditure Database (GTED) progress report published in 2022 highlights this aspect. According to the report, over the past three decades, "the global average of reported revenue forgone from TEs was close to four percent of GDP and more than 24 percent of tax revenues. Yet, real numbers are probably significantly higher, since one of the main issues we encountered when building up the GTED was widespread underreporting." If this aspect is considered in Bangladesh, tax expenditure may be even higher, perhaps around seven to eight percent of GDP.

The GTED progress report compiled tax expenditure data of 95 countries who have been grouped into four categories: lower income countries (LICs); lower-middle-income countries (LMICs); upper-middle-income countries (UMICs); and high-income countries (HICs). The average tax expenditure of LICs (14 countries) in 2021 was 2.8 percent of GDP. In the same year, it was three percent for LMICs (20 countries), four percent for UMICs (23 countries), and 4.7 percent for HICs (38 countries). Compared to this data, Bangladesh's tax expenditure estimate (only for the direct tax) of 3.6 percent appears to be high.

Since transparency in this field has been limited, it is difficult to measure the benefits of this mechanism. Thus, a major concern with such high tax expenditure is uncertainty or ambiguity regarding its impacts on the economy and society. Since there has been no assessment to justify the existing tax expenditure, this practice should be limited. Consider a situation where a one percent cap has been imposed on the tax expenditure, which would release revenue of about four percent. In such a situation, revenue efforts will jump to 15 percent of GDP. The forgone revenue of four percent may be put to better use where one percent may go to social sectors, one percent may go to infrastructure, one percent to agriculture, and the rest to skills and productivity enhancement programmes.

Another justification for such an approach—i.e., enhanced public expenditure through realised revenue by capping the tax expenditure—is that expenditure allocations are usually subject to better transparency and scrutiny via the medium-term budget framework (MBTF) carried out by line ministries and the finance ministry, and the Annual Development Programme (ADP) conducted by the Planning Commission.

In 2023, the Policy Research Institute's (PRI) Centre for Domestic Revenue Mobilisation (DRM) carried out an exercise to justify the need to enhance expenditure in the merits sector through additional revenue mobilised through the direct tax system. Simulations were conducted to identify the impact of raising revenue from personal income tax with an analysis to understand the effects on the national economy. The simulations assume that the additional revenue raised is spent on infrastructure, social sector, social protection, agriculture and other public spending areas. Specifying public spending assumes the same proportional split between sectors, as is currently the case. The core finding from PRI's exercise shows that increases in personal income tax led to increases in GDP growth and labour income. This is primarily through the effect of allowing the government to invest more in public services. If revenue from personal income tax were to increase by two percentage points, economic growth would likely rise by 0.5 percent on top of the existing growth rates. Moreover, such a move may increase labour income by three percent.

The above analysis suggests that the practice of maintaining high tax expenditure is not feasible on grounds of forgone revenue, lack of transparency, and low value for money. Immediate action must be taken to improve the fiscal system in Bangladesh utilising this low-hanging fruit. Some strategic recommendations in this regard are: i) put a cap on the overall size of tax expenditure at the maximum level of one percent of GDP for the next two fiscal years; ii) form a high power committee to make decisions on who should be eligible for receiving tax expenditure benefits. The criteria may focus on employment generation, poverty reduction, productivity growth, and welfare of women, children and minority groups; and iii) the NBR/government should earn the right to provide tax expenditure. For instance, it could implement a formula where an additional 0.25 percent of tax expenditure is provided for every two-percentage-point gain in tax efforts. However, the overall ceiling should be around two percent of GDP.

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

 

[Saif]

Macroeconomic recovery for whom?

Fitch, the US-based global credit-rating agency, forecasts a good tiding for Bangladesh economy provided that the government pursues reform. The uncertainty arising out of the political changeover over the economy, the agency maintains, is likely to be short-lived and the country's mid-term macroec

thefinancialexpress.com.bd

Macroeconomic recovery for whom?
FE
Published :
Oct 23, 2024 22:13
Updated :
Oct 23, 2024 22:13

Fitch, the US-based global credit-rating agency, forecasts a good tiding for Bangladesh economy provided that the government pursues reform. The uncertainty arising out of the political changeover over the economy, the agency maintains, is likely to be short-lived and the country's mid-term macroeconomic outlook is positive. However, the rating agency duly recognises the adverse effects of the shockwaves of the violent movement that toppled the immediate past government. Thus it has downgraded the country's output growth from its earlier projected 5.3 per cent to 4.5 per cent following identical slashing of growth projection by the International Monetary Fund (IMF) from 6.6 per cent for the fiscal year 2024-25. The other Bretton Woods Institution, the World Bank, also revised the growth projection downward to 4.0 per cent last week. The rating agency, however, sees an economic recovery in 2026 when the country may witness an economic upturn riding on a 5.7 GDP growth rate.

This recovery is, however, conditional. If external metrics like that of remittance sent by workers abroad remain stable, only then can it experience a turnaround. Improved macroeconomic performance alone cannot guarantee a country's social progress because much depends on how the national wealth is created and distributed. Under oligarchy, plutocracy or kleptocracy, outsize wealth may be created depriving the majority of its benefits. International agencies may wax eloquent about developments of any such order but outrageous socio-economic inequality marked by abject poverty for a hapless segment of society can negate the macroeconomic success. As many as 41.7 million people in Bangladesh now live in extreme poverty, according to a report titled "2024 Global Multidimensional Poverty Index released jointly by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative of the Oxford University. Of them 6.5 per cent are particularly vulnerable to food insecurity.

Right now, inflation has been raging after a slight lull in the previous month. Earlier, disruption of the supply chain was thought to be responsible for the latest soaring inflation but it has proved wrong. Although the World Bank projects an easing of inflation to 9.0 per cent in the fiscal 2025, signs are to the contrary. Market manipulation and exchange of several hands all along the supply chain before agricultural produce and other commodities reach the consumers have now been blamed for abnormal price escalation. The low-income segments in society are increasingly becoming disillusioned with the administrative measures because they read in the anti-discrimination movement some relief was on their way. Many of the lower classes also felt prompted to join the movement with hope for better days. Now they are utterly disappointed.

The year 2026, when Bangladesh economy is expected to recover reasonably and create employment opportunities, is a long way off for the poor and the marginal and even the lower-middle class people. Their urgency is so pressing that any further wait for brighter economic prospects proves very painful. Yet another round of price rise of essentials including rice of late makes matters worse for them. It would be prudent to focus on microeconomic resurgence. The sector of small and medium enterprises (SMEs) has failed to avail of the stimulus packages meant for industrial recovery in post-pandemic period mostly because of a lack of collateral. If appropriate policies are formulated and effective monitoring along with support for marketing products of such enterprises is put in place, economy at the grassroots level can buoy up and create employment opportunities.​