[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

WB to give $500 million as budget support

After the IMF’s loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

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WB to give $500 million as budget support

After the IMF's loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

This will ease pressure on the country's dwindling foreign currency reserves.

The Washington-based multilateral lender's budget support is part of a $1.15 billion loan package, of which $650 million will be spent on building the Bay Terminal in the port city of Chattogram.

The WB in the last fiscal year had planned that it would give $250 million cash-based policy support under the Bangladesh First Recovery and Resilience Development Policy Credit (DPC).

The lender is now going to double the amount following the Bangladesh government's request as it is trying to rebuild the forex reserves.

The development comes at a time when the International Monetary Fund's (IMF) board is set to approve a $1.15 billion loan in the third instalment under its $4.7 billion loan programme in the last week of June.

Once the budget support from the WB and the IMF loan is approved, Bangladesh will receive a total of $1.65 billion.

The country's reserves stood at $18.72 billion on Wednesday from $41 billion in August 2021.

Bangladesh was supposed to receive the WB's budget support in the last fiscal year, but the release of the fund was delayed due to the government's inability to fulfill 12 conditions, including the implementation of the revised Bank Company Act, the development lender had tagged.

After meeting the conditions, the government sent the progress report to the WB requesting it to release the fund earlier this fiscal year, finance ministry officials told The Daily Star.

As the government fulfilled the condition of implementing the revised bank company law, the WB asked for an English draft of it.

The WB reviewed the draft and the implementation status for the other conditions of the reform programme. It also evaluated the measures taken by the Bangladesh Bank to bring reforms to the banking sector.

The central bank and the government took some bold steps, including introduction of a market-based interest rate policy by replacing the fixed interest rate policy, and launching the crawling peg system to determine the exchange rate of foreign currencies.

As the reforms took place, the WB is now set to place the loan proposal before its board.

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

 

[Saif]

‘Booming’ economy, struggling people

When it comes to the simultaneous existence of growth and crisis, Bangladesh has become a model.

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'Booming' economy, struggling people
growth and crisis in Bangladesh

VISUAL: SHAIKH SULTANA JAHAN BADHON

When it comes to the simultaneous existence of growth and crisis, Bangladesh has become a model. There is a growth of per capita income on the one hand, and financial hardship, unemployment, hunger, malnutrition, and financial insecurity suffered by the majority of people on the other. Unprecedented expansion of private banks is happening while the banking sector faces a crisis with rising defaulted loans and big theft of bank money. Over the last decade, we have seen a construction boom on the one hand, and the highest rates of deforestation, air and water pollution, and land- and river-grabbing on the other.

The super active propaganda machine of the government as well as their local and foreign partners consistently try to make us believe that the country is on the highway of development, and they often point to big infrastructure projects—most of which are extremely expensive because of high corruption and inefficiency—as proof. Yes, many megaprojects have been taken up during this government's time. But a good number of these megaprojects will be dangerous and/or big liabilities for Bangladesh in the long term. For example, the Rampal Power Plant, in partnership with the NTPC of India, will harm our precious Sundarbans severely. This plant created the path for many more "red category" projects in the area, which means it will massively damage the environment.

There are more coal-based power plants in the coastal areas in collaboration with China and Japan, requiring big loans, which will make these areas more vulnerable to climate change effects. Another project is a combination of both catastrophic risks and immense loans (nearly $12 billion), which is the Rooppur Nuclear Power Plant, in partnership with Russia. There are also big import projects of LNG with the US and other countries. All these projects have contributed to a huge amount of foreign debt, which is putting pressure on the already depleting foreign exchange reserves. It is not possible to find any rationale behind these projects when there are much better alternatives, for example, for energy and power sectors, that are cheaper and environment-friendly.

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[Saif]

Narrowest budget deficit in a decade as govt to curb expenses

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

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Narrowest budget deficit in a decade as govt to curb expenses

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

The government usually keeps the budget deficit at around 5 percent.

During the political turmoil of 2013, ahead of the 2014 national election, the government placed the budget of which the deficit was 4.6 percent.

The upcoming budget will be the first one of the current government. The political situation is stable now, but the economy is facing a prolonged crisis.

In the 2019-20 fiscal year, the government was in a difficult place because of the shutdown of the economy due to coronavirus restrictions. The Ukraine-Russia war also made a global impact on economies in 2022.

Economists now believe that the dwindling foreign currency reserves are the biggest crisis.

Finance ministry officials say they are finding it hard to maintain macroeconomic stability due to the low foreign currency reserves.

According to Ahsan H Mansur, executive director of Policy Research Institute, macroeconomic stability should be the first priority in the upcoming budget, which will be placed in parliament on June 6.

"Earlier, the policymakers were in denial, thinking they could overcome the crisis in a matter of months. At least, they have realised now that they have to do something," he said.

The International Monetary Fund also suggested lowering government expenditure and raising revenue collection.

In the current, 2023-24, fiscal year, the budget deficit is Tk 2,61,785 crore. In the coming one, the amount is likely to be Tk 2,57,000 crore.

This is a departure from the norm because the deficit amount usually rises year on year, officials say.

A budget deficit means the gap between the government's revenue income and the expenditure. The government borrows from the domestic and global development partners to meet the deficit.

Most of the time, the budget size increases by 12 to 14 percent compared to the previous year's budget. But this time around, the Tk 7,96,900 crore budget is likely to be just 4 percent bigger than the previous one.

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[Saif]

Govt missteps led to economic deterioration

A series of missteps taken by the government are to blame for the country’s deteriorating economy, Muinul Islam, former professor of economics at Chittagong University, said yesterday.

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Govt missteps led to economic deterioration

Says Prof Muinul

A series of missteps taken by the government are to blame for the country's deteriorating economy, Muinul Islam, former professor of economics at Chittagong University, said yesterday.

Some quarters, who are now oligarchs by dint of blessings from the ruling class, have played major roles to bring on this crisis, he observed while presenting a keynote paper at a discussion programme.
Bangladesh Workers Party organised the event titled "Economic Reality of Bangladesh: Crisis and Ways of Transition" at the National Press Club in Dhaka.

Some kind of authoritarian rule is going on, and various policies were taken at the behest of some oligarchs, Muinul alleged mentioning some names.

Mentioning the name of one, he said it is indecent for the country to have a businessman like him. That businessman has "removed his name from the list of defaulters by depositing 2 percent".

Muinul said, "Money laundering is the biggest problem but no steps have been taken to control hundi."

Rather, he added, various benefits including tax exemptions have been offered to bring back the laundered money, but not a single taka has returned.

About loan money being laundered, he said, "Tk 5 lakh crore out of total Tk 18 lakh crore loans in the banking sector are defaulted. But Bangladesh Bank does not recognise it. Bank loans are being repaid with borrowed money. A loan is being rescheduled seven to eight times."

Speaking about the lingering high inflation, he said, "Other countries could reduce it, but Bangladesh couldn't. To the contrary, the prices have been pushed up further."

Muinul said now the names of the former police and army chiefs are being discussed. "They are being talked about only because the government wants them to be talked about. Where did former home minister Mohiuddin Khan Alamgir get the money to set up Padma Bank? Why is Bachchu (Abdul Hai) of BASIC Bank still missing? Where are the sons of Sikder who ruined the National Bank?"

He said that Russia has set up projects like Rooppur power plant in India at half the cost. "So why are we spending more money there? A lot of unnecessary infrastructure is being built. Money is being looted through it."

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

 

[Saif]

Saarc nations contribute below 1% of remittance to Bangladesh

Of the $21.61 billion remittance Bangladesh received in FY23, only $44.99 million came from Saarc countries

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Saarc nations contribute below 1% of remittance to Bangladesh
Of the $21.61 billion remittance Bangladesh received in FY23, only $44.99 million came from Saarc countries

Below 1 percent of the remittance Bangladesh received in 2022-23 fiscal year came from the countries under the South Asian Association for Regional Cooperation (Saarc), according to a Bangladesh Bank report on trade among Saarc countries.

Remittance inflow to Bangladesh stood at $21.61 billion in FY23, of which only $44.99 million came from Saarc nations, according to the report titled "Export receipts, import payments, and remittances with Saarc countries".

The highest amount of remittance came from the Middle East, the European Union and North America, but the amount from the Saarc region was very negligible compared to other countries, it read.

Among the Saarc nations, the highest amount of remittance -- 64.46 percent -- came from the Maldives while 26.25 percent came from India and 3.31 percent from Sri Lanka. The amount from others were very negligible.

However, Bangladesh's import payments stood at $10.33 billion for the Saarc region in FY23, which was 15.07 percent of the total of $68.6 billion, the report showed.

Bangladesh made the highest import payment among Saarc nations to India, 91.84 percent, and 6.76 percent to Pakistan.

Of Bangladesh's total export earnings of $43.57 billion, only 4.4 percent originated from Saarc countries, the Bangladesh Bank report said.​