[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

‘Gone are those days of subsidies, cheap money and low interest rates’: Finance adviser

Finance Adviser Dr Salehuddin Ahmed on Sunday made it clear that the government would not continue to provide subsidies and cheap money to the private sector. He also mentioned that the interim government would leave just a footprint of reform since it could not complete the reform programme withi

thefinancialexpress.com.bd

‘Gone are those days of subsidies, cheap money and low interest rates’: Finance adviser
FE Online Report
Published :
Jan 05, 2025 18:21
Updated :
Jan 05, 2025 19:05

Finance Adviser Dr Salehuddin Ahmed on Sunday made it clear that the government would not continue to provide subsidies and cheap money to the private sector.

He also mentioned that the interim government would leave just a footprint of reform since it could not complete the reform programme within its tenure because it would depart soon.

“They want confidence. They want assurance. They want support. They want all kinds of concessions. One thing I very clearly said, gone are those days of subsidies, cheap money, and low interest rates. These are not the signs of a competitive economy,” the finance adviser told a discussion meeting on ‘Enhancing Saudi-Bangla Economic Enhancement’ organised by the foreign ministry.

“Please don’t expect that the government will do everything,” he urged the businesspeople.

Dwelling on the policy reforms, the finance adviser said the government would not be here for a very long time.

“Our plan is to retire very soon, retire or leave very soon. But we want to leave a footprint. That is our challenge, as we cannot finish everything within one and a half year, or two years,” Dr Salehuddin said.

Citing the example of the RMG industry, Dr Salehuddin, who is also a former governor of the central bank, said that despite having started its journey long ago, the sector still wanted incentives.

Brushing aside apprehensions that foreign buyers would leave Bangladesh, he said that leading global buyers like GAP, Mark Spencer and H&M had assured him that they would remain.

He said that donors were very positive about this government and have already committed 1.6 billion dollars recently. “We are expecting another 700 million dollars soon,” he added.

Terming trade as the most important vehicle for economic development, he said that it was essential to improve bilateral trade ties with countries like Saudi Arabia for boosting the economy.

Dr Salehuddin said that the government was reviewing the timeframe for the graduation and was preparing for a soft transition.

He pointed out that the government was working to create an enabling environment for businesses and investors.

In this regard, he recalled how world-renowned companies like Saudi Aramco and Samsung were not given due importance during the previous regime, which forced them to move to other countries.

He stressed the need for correcting wrong policies to ensure a proper investment climate, saying that while the challenges in this regard were formidable, they were also surmountable.

Addressing the programme, foreign adviser Touhid Hossain said that the current government was committed to making things easier for investors.

“The government is working to create a better atmosphere and a welcoming environment for entrepreneurs,” he said.

He underscored the need for developing the skills of people before sending them to countries like the Kingdom of Saudi Arabia (KSA).

The foreign advisor noted that the same number of people could earn much greater incomes and contribute much more to the country if they were given training.

Foreign Secretary Md Jashim Uddin, who presided over the meeting, said that such discussions contribute to enhancing bilateral engagement.

Secretary (East) of the foreign ministry Nazrul Islam delivered the welcome speech in the meeting.

Saudi Ambassador in Dhaka Essa Yousef Alduhailan stressed the need for addressing challenges such as logistics bottlenecks and tariff barriers, as outlined in the report presented in the meeting.

“I also take this opportunity to reaffirm the kingdom’s unwavering commitment to supporting Bangladesh’s development aspiration and strengthening our partnership for shared prosperity,” he said

“Actually, the Saudi Bangladeshi relationship is a multi-dimensional relationship” he added, emphasising that Saudi Arabia would always stand and support Bangladesh ‘critical journey’ to become a developed country.

He noted that from 2020 to the end of 2023, more than 30 high-level visits took place, including ministerial visits and delegations.

“Over 160 Bangladeshi businessmen have visited Saudi Arabia to explore potential opportunities, with significant discussions on bilateral trade and investment”.

Expressing his government’s commitment to accommodating skilled workers from Bangladesh, he said it would provide significant economic benefits to Bangladesh.

While presenting the report at the discussion, Masrur Reaz, Chairman and the CEO of Policy Exchange, Bangladesh, said that as Saudi Arabia looks for new opportunities, Bangladesh presents several potential sectors for investment, including green energy, fertiliser, electronic manufacturing, infrastructure and logistics, petroleum refining and petrochemical products, tourism and hospitality, education and skills development, shipping lines, and construction.

These sectors offer promising avenues for Saudi Arabia to diversify its investment portfolio while contributing to the economic growth and development of Bangladesh, he added.

"Saudi Arabia is the destination for roughly 36 per cent of total overseas employment for Bangladesh, and the cumulative number of people leaving for KSA has roughly doubled since 2016.

"Saudi Arabia has long ranked as the largest origin of official remittances to Bangladesh, and it [Bangladesh] is the 7th largest recipient of remittances, with higher employment from KSA.”

“Despite these challenges, Saudi Arabia remained a dominant source of remittance income for Bangladesh,” he said, adding that these substantial inflows from key countries highlight the critical role of the Bangladeshi diaspora in bolstering the national economy, emphasising the importance of remittances for household incomes and overall economic stability.

He recommended an improvement in regulatory environment for businesses through modernising archaic laws, including the Companies Act, Bankruptcy Act, and tax policies.

He also suggested strengthening contract enforcement (ADR), faster disposal of commercial cases, business taxation, and strengthening regulatory governance through the introduction of systematic tools such as RIA.

The report recommended strengthening export competitiveness through broad-based global value chain capabilities.

It also advised reducing average rates of protection, harmonising tariff schedules across all intermediate and final goods, adopting a national environmental and social compliance framework and implementing efficient trade facilitation.

​

 

[Saif]

ADB to provide $1b annually for Bangladesh’s development

ADB Country Director Hoe Yun Jeong came up with the assurance when he met Environment, Forest and Climate Change Adviser Syeda Rizwana Hasan at the Forest Department Sunday

en.prothomalo.com

ADB to provide $1b annually for Bangladesh’s development
Yun Jeong said ADB will provide Bangladesh with US$ 1 billion annually in concessional financing over the next five years
BSS
Dhaka
Published: 05 Jan 2025, 18: 34

ADB Country Director Hoe Yun Jeong meets Environment, Forest and Climate Change Adviser Syeda Rizwana Hasan at the Forest Department, Dhaka on 5 January 2025 PID

Asian Development Bank (ADB) will provide US$ 1 billion to Bangladesh annually in concessional financing over the next five years.

ADB Country Director Hoe Yun Jeong came up with the assurance when he met Environment, Forest and Climate Change Adviser Syeda Rizwana Hasan at the Forest Department Sunday.

During the meeting, they discussed ADB’s commitment to supporting Bangladesh’s climate resilience and environmental sustainability.

Rizwana emphasised ADB’s increased focus on climate-focused and socially inclusive activities over traditional infrastructure projects.

Highlighting her government’s ambitious plans to restore eight major rivers across the country’s eight divisions, she urged ADB to prioritise river cleaning initiatives around Dhaka.

The environment adviser also stressed the need for tangible actions on the ground instead of merely formulating action plans.

She called for concessional loans and sought ADB’s support in addressing key environmental challenges, including solid waste management, sewage treatment, salinity intrusion, waterlogging, and human-elephant conflicts.

Yun Jeong said ADB will provide Bangladesh with US$ 1 billion annually in concessional financing over the next five years.

He assured enhanced financial support, including grants, to advance Bangladesh’s environmental goals.

The ADB country director expressed strong interest in river cleaning projects. In addition, he highlighted ADB’s commitment to increasing community engagement and public consultations during project implementation.

The environment secretary, chief conservator of forests and representatives from ADB were present at the meeting.​

 

[Saif]

Professor Yunus asks BEPZA to promote Bangladesh abroad

Chief adviser Professor Muhammad Yunus on Monday asked the Bangladesh Export Processing Zones Authority to create a team for economic diplomacy and help promote Bangladesh abroad...

www.newagebd.net

Professor Yunus asks BEPZA to promote Bangladesh abroad
Staff Correspondent 06 January, 2025, 16:13

Chief adviser Muhammad Yunus receives BEPZA’s annual report from executive chairman Major General Abul Kalam Mohammad Ziaur Rahman in an event at the CA’s office at Tejgaon in the capital Dhaka on Monday. | PID/Focus Bangla photo

Chief adviser Professor Muhammad Yunus on Monday asked the Bangladesh Export Processing Zones Authority to create a team for economic diplomacy and help promote Bangladesh abroad.

He underlined the need for promoting Bangladesh abroad in collaboration with the foreign affairs ministry to bring more investments to the country’s industrial sectors.

‘Create a team for economic diplomacy and promote Bangladesh abroad,’ Professor Yunus told the BEPZA officials, asking the body to collaborate with the Ministry of Foreign Affairs for the purpose.

The chief adviser issued the directive when BEPZA submitted its annual report for the 2023-24 financial year to him at his Tejgaon office in Dhaka, according to a press release from the CA press wing.

He also asked BEPZA officials to engage Bangladeshi students studying abroad, especially in China and Japan, to help investors overcome language barriers before making investment choices.

BEPZA executive chairman Major General Abul Kalam Mohammad Ziaur Rahman said that they were already receiving positive responses from investors following the July-August uprising in Bangladesh and the repeatedly changing global political landscape.

‘In the past three weeks, we have received a $135 million investment proposal from the Chinese investors. Talks are underway for more investments,’ he told the chief adviser.

He said that eight export processing zones are currently operational in Bangladesh, housing 452 factories.

There are 136 more factories currently under construction in the zones.

Among the operational factories, over 100 are owned by the local investors, and the rest are mostly joint ventures.

Of the factories, 52 per cent produce ready-made garment items, textile items, and garment accessories. The remaining factories are multifarious, producing miscellaneous items such as coffins and toys.

The BEPZA executive chairman informed the chief adviser of some of the demands of the investors, including uninterrupted gas and power supply, bonded warehouse facilities in the BEPZA areas, Chattogram-Sanghai direct air connectivity, and visa counsellor service in the Chinese city of Shanghai, said the release.

The chief adviser asked the authorities to explore the possibility of setting up solar power plants in export processing zones and work on gas exploration and develop a distribution system.

He also asked the authorities to see if Bangladesh could benefit from importing energy from neighbouring countries.

Special envoy to the chief adviser Lutfey Siddiqi, who was present on the occasion, put an emphasis on targeted economic diplomacy.

Bangladesh Investment Development Authority chairman Ashik Chowdhury said that Bangladesh should incentivise investors to invest in export processing zones.

‘We should make BEPZA and BEZA more attractive and promote the facilities available in the area across the globe to bring more investments,’ he said.

The principal secretary to the chief adviser, Md Siraj Uddin Miah, was also present.​

 

[Saif]

Cryptocurrencies in Bangladesh: a growing shadow economy

Cryptocurrencies like Bitcoin and Ethereum have introduced a transformative way of handling money, offering a decentralized, digital alternative to traditional currencies. Built on blockchain technology, these virtual currencies use cryptography for secure transactions, making them resistant to man

thefinancialexpress.com.bd

Cryptocurrencies in Bangladesh: a growing shadow economy
Mir Md Tasnim Alam
Published :
Jan 06, 2025 21:50
Updated :
Jan 06, 2025 21:50

Cryptocurrencies like Bitcoin and Ethereum have introduced a transformative way of handling money, offering a decentralized, digital alternative to traditional currencies. Built on blockchain technology, these virtual currencies use cryptography for secure transactions, making them resistant to manipulation by central authorities. Unlike traditional currencies that are issued and controlled by governments, cryptocurrencies operate outside of any centralized regulation, which is both what makes them unique and, at times, controversial.

In Bangladesh, cryptocurrencies remain a contentious issue. Officially, the government has restricted their use for transactions due to concerns over money laundering and unregulated trade. Despite this, there is a thriving underground market where individuals regularly engage in cryptocurrency trading, largely unnoticed by the authorities. Apps such as Binance and KuCoin, which are designed for trading crypto, are easily accessible through the Google Play Store and Apple App Store in Bangladesh. This unrestricted availability, combined with the lack of strict verification requirements, allows users to trade cryptocurrencies freely, including large sums, despite the official restrictions.

The process of acquiring cryptocurrencies in Bangladesh typically happens in one of two ways. One method involves purchasing crypto using international credit or debit cards that are endorsed in US dollars. This allows banks to track the movement of funds and potentially identify individuals involved in crypto trading. However, there is also a more secretive method that involves local agents. These agents, scattered across the country, buy and sell cryptocurrencies like Bitcoin and USDT (Tether) in exchange for Bangladeshi Taka. They charge a small commission on each transaction, making a profit from the buy-sell spread. Investors buy cryptocurrency with the hope that its value will appreciate and later sell it back to these agents, converting their holdings into Taka. This process mirrors the operations of the stock market, with one key difference: there is no central authority regulating the trade, nor is there any taxation on the transactions.

However, the darker side of the cryptocurrency trade in Bangladesh cannot be ignored. Many individuals are using cryptocurrencies as a tool for money laundering, transferring funds across borders with little to no oversight. The process typically works like this: a person buys cryptocurrency from a Bangladeshi agent using Taka, then sells it to an agent in another country, such as the USA, converting their cryptocurrency into foreign currency. The foreign agent then deposits the equivalent amount in dollars into the individual's bank account, completing the illicit transaction. This decentralized nature of crypto trading, along with the use of anonymous wallets like TRC20, makes it difficult for authorities to trace the flow of money and monitor suspicious transactions.

In addition to money laundering, the country has witnessed an alarming rise in Ponzi schemes and scams in the cryptocurrency space. One of the most notable cases was the MTFE scam, which drew thousands of people with promises of daily returns of 5 per cent on their investments. Unlike legitimate platforms like Binance or KuCoin, MTFE did not allow users to buy or sell crypto using Taka or traditional bank accounts. Instead, investors were required to transfer USDT from other crypto exchanges into their MTFE accounts via the TRC20 wallet. Eventually, MTFE disappeared overnight, taking with it the funds of many unsuspecting investors. Similar platforms, such as MT4, MT5, and Exness, continue to operate in Bangladesh, luring individuals with the promise of quick profits. These operations are often unsustainable and operate under the guise of legitimate businesses, but eventually, they too will collapse, leaving investors with nothing.

Further complicating the situation are online gambling platforms that accept cryptocurrencies as payment. After purchasing crypto from local agents, users often transfer their funds to these gambling apps, where they engage in high-risk betting. While some may win, the majority lose, contributing to a larger pattern of financial instability. What is clear, however, is that the crypto market in Bangladesh is not only unregulated but also growing increasingly volatile and risky.

To combat these issues, the government must take decisive action. One key step would be to hold cryptocurrency agents accountable for their activities, as they play a significant role in facilitating illegal trades. If crypto trading is illegal, it is crucial to question why platforms like Binance and KuCoin continue to operate in the country. It is important to remember that cryptocurrency trading is not illegal everywhere. In countries like the USA, individuals are required to link their crypto accounts to their Social Security Number (SSN), ensuring transparency and proper taxation of all profits. Bangladesh could adopt a similar system to regulate cryptocurrency trading, creating a framework that ensures accountability and oversight. If not a complete ban, such measures could strike a balance between harnessing the potential of cryptocurrencies and safeguarding the country's financial stability.

The government's primary concern should be safeguarding of the nation's financial stability. While global figures like Lionel Messi may sport jerseys emblazoned with the Binance logo, this should not distract the government from its responsibility to protect its economy. The rapid growth of crypto agents and the widespread involvement of people in these shadowy transactions are troubling signs. If the country is to maintain control over its financial system and ensure the safety of its citizens, decisive action is needed to curb the rise of unregulated cryptocurrency trading.

Scientist, Satelytics Inc., USA​

 

[Saif]

Bangladesh’s current situation stable for investment: EIB VP

The visiting European Investment Bank, vice-president Nicola Beer, on Tuesday said that her bank was backing Bangladesh interim government and the country’s current state was suitable for European investment.

www.newagebd.net

Bangladesh’s current situation stable for investment: EIB VP
Bangladesh Sangbad Sangstha . Dhaka 07 January, 2025, 21:36

Visiting European Investment Bank vice-president Nicola Beer holds meeting with foreign adviser Md Touhid Hossain at foreign ministry in Dhaka on Tuesday afternoon. | BSS photo

The visiting European Investment Bank, vice-president Nicola Beer, on Tuesday said that her bank was backing Bangladesh interim government and the country’s current state was suitable for European investment.

‘The current situation (in Bangladesh) . . . I see it’s stable for investment, so we go on with what we already decided together (with Dhaka). So, this was the reason why I was speaking about further signatures during this year’s time,’ she told reporters after holding a meeting with foreign adviser Md Touhid Hossain at the foreign ministry in Dhaka on Tuesday afternoon.

Responding to a question regarding the upcoming election, Beer said that it is up to the Bangladeshi ‘citizens and bodies to decide on the moment of elections’.

The EIB vice-president began her three-day Bangladesh visit on Tuesday to review the existing partnerships, discuss various issues and explore expanded investment cooperation with the interim government.

Beer said that the EIB was closely aligned with the Bangladesh interim government’s programme of reforms and plans for leading the country to elections soon.

‘I think we are quite near when it comes up for the programme of the interim government to reform and lead it to elections, quite soon,’ she said.

The EIB vice president said that her bank supported this interim government’s efforts and was working with various ministries to identify priority investments, particularly in sectors like water and sanitation.

‘We now can also speed up what are the priorities of investments here,’ she added.

Beer highlighted the EIB’s ongoing collaboration with Bangladeshi authorities to finalise significant projects within the year and expressed optimism about furthering investment opportunities.

‘I only can assure you that the European Union as a whole is standing behind this interim government together with the Bangladeshi people, to serve the Bangladeshi citizens for the future to come,’ she added.

The EIB vice-president also underlined the importance of energy, water and sanitation as pivotal sectors for development.

‘Energy is a crucial part of our agenda. We have a framework loan, we want to bring it really down now also in the project and this is something we will look further and try to speed up,’ she added.

Beer also expressed her eagerness to engage with local ministries, economic leaders, and citizen groups to understand their challenges and aspirations.

Responding to a query on specific investment proposals, Beer said that those were still under discussion.

‘We reaffirm the support of the European Union and also of its bank as European Investment Bank. And now we’ll see the different projects and maybe also new proposals with the other ministries and sectors. So maybe you ask me in two days’ time,’ she said.

Regarding international relations, Beer emphasised the EIB and European Union’s shared goal of strengthening Bangladesh’s regional standing.

Reaffirming the European Union’s unwavering support for the Bangladeshi people, she said that the EU wanted to position Bangladesh as a strong nation on equal footing in the region.

The EU ambassador to Bangladesh Michael Miller, among others, accompanied her during the meeting with adviser Hossain.

Beer, during her stay in Dhaka, is also scheduled to hold meetings with finance and planning adviser Salehuddin Ahmed, power, energy and mineral resources; railways adviser Muhammad Fouzul Kabir Khan; environment, forest and climate change, water resources adviser Syeda Rizwana Hasan, local government, rural development and co-operatives adviser Asif Mahmud Shojib Bhuyain and Bangladesh Bank governor Ahsan H Mansur.

She will also have a breakfast meeting with the representatives of the KfW, AfD, ADB, IMF, WB, IFC and JICA.

The vice-president will have interactions over dinner with the European Union Chamber of Commerce in Bangladesh.

She is likely to visit Ghandharbpur Water Treatment Plant on Thursday before wrapping up her visit.

The EIB, owned by the 27 EU member states, is the world’s largest multilateral financial institution and serves as the European Union’s investment bank.

The EIB finances and invests both through equity and debt solutions companies and projects that achieve the policy aims of the European Union through loans, equity and guarantees.

Since its establishment in 1958, the EIB has invested over a trillion euros in projects in Europe and countries worldwide.​

 

[Saif]

Monetary policy likely in last week of January

Bangladesh Bank will soon announce its monetary policy for the second half of the ongoing fiscal year (2024-25) with the aim of addressing several economic challenges plaguing the country.

www.thedailystar.net

Monetary policy likely in last week of January

Bangladesh Bank will soon announce its monetary policy for the second half of the ongoing fiscal year (2024-25) with the aim of addressing several economic challenges plaguing the country.

Sources at the central bank confirmed that the next monetary policy is being formulated, and that Governor Ahsan H Mansur will likely declare it by the last week of January.

This will be the first monetary policy announced by Mansur since he became governor of Bangladesh Bank following the political changeover on August 5.

As part of its efforts, the central bank has invited all interested individuals and institutions to send their suggestions, opinions, and feedback regarding potential policy measures by January 15.

Additionally, the monetary policy department of Bangladesh Bank will hold meetings with internal and external stakeholders as well as economists from January 12.

As part of its efforts, the central bank has invited all interested individuals and institutions to send their suggestions and feedback

But beforehand, the monetary policy department will hold a meeting with its executive directors and other senior officials at the central bank headquarters that same day to take their suggestions.

The department will then hold a discussion with the country's leading research organisations on January 14 on potential policy measures.

The organisations include the Bangladesh Institute of Development Studies, Policy Research Institute of Bangladesh and South Asian Network on Economic Modelling.

The Institute for Inclusive Finance and Development, Centre for Policy Dialogue, Research and Policy Integration for Development, reputed economists, bankers, businesspeople, and journalists will also attend the event at Lakeshore Hotel in Gulshan, Dhaka.

The central bank committee forming the monetary policy will ultimately summarise the observations from various quarters regarding its goals and format, including measures for regulating currency and lending rates, before finalising it on January 20.

Then on January 22, the board of directors of Bangladesh Bank will approve the policy and set a date for announcing it to the public.

Inflation in Bangladesh has been hovering above 9 percent since March 2023, with the central bank's existing contractionary monetary policy yet to cool consumer prices.

Bangladesh Bank has hiked the policy rate several times to 10 percent since then. The policy rate is the interest rate at which commercial banks borrow from the central bank.

But in December of the just concluded calendar year, inflation had eased slightly to 10.89 percent from 11.38 percent the previous month, according to the Bangladesh Bureau of Statistics (BBS).

Other than inflationary pressure, the overall economy has been facing uncertainties ever since the fall of the Awami League government on August 5, as reflected in private sector credit growth.

In November last year, private sector credit growth fell to a three-and-a-half-year low of 7.66 percent, with the previous lowest being 7.55 percent in May 2021.

The volume of defaulted loans reached a gargantuan Tk 2,84,977 crore as of September last year, with some banks becoming unable to provide fresh loans amid a subsequent liquidity crunch.

However, the foreign exchange market has shown some flexibility as of late thanks to the recent uptick in incoming remittance.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development, said hiking the policy rate to 10 percent has had no impact on alleviating the inflationary pressure.

"So, it would not be wise to raise the policy rate any further," he added.

Mujeri, also a former chief economist of Bangladesh Bank, said the central bank has one weapon for addressing inflation, which was the policy rate.

But increasing it now will only turn detrimental for the economy instead of tackling inflation, he added, citing how deposit and lending rates have risen for changes in the policy rate.

Mujeri suggested that other than augmenting its tight monetary stance, Bangladesh Bank has to find out the reasons for inflation in order to take effective measures to reduce it.​

 

[Saif]

It's high time to remove hurdles to FDI

Foreign Direct Investment (FDI) plays a pivotal role in the economic growth of any country. For Bangladesh, achieving its ambitious development goals hinges significantly on attracting substantial FDI. However, despite the country's economic potential and strategic geographic location, a multitude

thefinancialexpress.com.bd

It's high time to remove hurdles to FDI
MIR MOSTAFIZUR RAHAMAN
Published :
Jan 08, 2025 21:50
Updated :
Jan 08, 2025 21:50

Foreign Direct Investment (FDI) plays a pivotal role in the economic growth of any country. For Bangladesh, achieving its ambitious development goals hinges significantly on attracting substantial FDI. However, despite the country's economic potential and strategic geographic location, a multitude of challenges continues to discourage foreign investors.

Recently, economists and experts while discussing these issues at an event, identified critical barriers to FDI. These range from regulatory ambiguity and weak policy enforcement to inefficiencies of an overly centralised governmental apparatus. As the interim government takes charge and embarks on a series of reforms, this juncture presents an opportune moment to address these challenges and transform Bangladesh into an investor-friendly destination.

One of the foremost impediments to FDI is the country's complex and ambiguous regulatory framework. The business landscape in Bangladesh is often marred by overlapping jurisdictions, unclear guidelines, and inconsistent policy enforcement. Investors are frequently left grappling with uncertainty, which undermines their confidence in the system.

Moreover, weak regulatory service delivery and lack of accountability further exacerbate the problem. Foreign investors are often subjected to lengthy bureaucratic procedures, which not only delay projects but also increase operational costs. This creates a perception of risk that outweighs the potential benefits of investing in the country.

Bangladesh's regulatory environment is a labyrinthine network involving 23 government agencies tasked with catering to investor needs. Aspiring investors are required to secure up to 150 approvals, registrations, certificates, or clearances. Such an intricate system not only consumes time but also creates opportunities for corruption and inefficiency.

The interim government has already recognised the urgency of addressing these challenges. Its recent initiatives, including reshuffling the judiciary, civil administration, and security forces, reflect a commitment to improving governance and combating corruption. However, structural reforms must extend beyond these measures to make a tangible impact on FDI inflows.

A priority task should be the simplification and digitalisation of regulatory processes. The government must establish a one-stop service platform where investors can access all necessary approvals and information under one roof. By reducing bureaucratic red tape, the country can significantly enhance its ease of doing business.

To attract foreign investment, Bangladesh needs to demonstrate its commitment to transparency and accountability. Establishing clear policies, ensuring consistent enforcement, and fostering a culture of integrity within regulatory bodies will go a long way in building investor trust. Anti-corruption measures must also be strengthened, with a focus on ensuring that laws are applied uniformly and fairly.

Physical and digital infrastructure also plays a crucial role in attracting FDI. Despite progress in some areas, Bangladesh still lags behind in terms of transportation, energy, and connectivity. Investments in these sectors will not only improve the business environment but also enhance the country's competitiveness on the global stage.

As the interim government spearheads reform initiatives, it is imperative to adopt a holistic and coordinated approach. This is a rare opportunity to overhaul entrenched inefficiencies and establish a foundation for sustainable growth. Addressing the challenges outlined above will not only attract FDI but also create a ripple effect, fostering innovation, creating jobs, and enhancing the overall quality of life for citizens.

The path to becoming a preferred investment destination is not without obstacles. Yet, with decisive action, Bangladesh can overcome these challenges and unlock its full potential. The time for reform is now, and the onus lies on the government to create an environment where the promise of growth outweighs the perceived risks.

By addressing the root causes of regulatory inefficiencies and ensuring a transparent, stable, and investor-friendly environment, Bangladesh can turn its FDI aspirations into reality. This is not just about attracting capital; it is about securing the nation's future as a competitive player in the global economy.​

 

[Saif]

Interest rate on savings certificates to be raised

The interim government is set to increase the interest rates against various savings certificates to upwards of 12 percent as it looks to provide some relief to the fixed income group squeezed by the elevated inflation.

www.thedailystar.net

Interest rate on savings certificates to be raised

The interim government is set to increase the interest rates against various savings certificates to upwards of 12 percent as it looks to provide some relief to the fixed income group squeezed by the elevated inflation.

At present, the interest rates provided against the four savings certificates under the Department of National Savings ranged from 11.04 percent to 11.76 percent.

The savings instruments are: the five-year Bangladesh savings certificate, the three monthly profit-bearing Sanchayapatra, the five-year family savings certificate and the five-year pensioners' savings certificate.

The government will introduce the new system for the savings certificates which will be linked to the government's treasury bond interest rates.

The new system will be effective from January 1, said a finance ministry official, adding that the official notification would come soon.

The chief adviser has approved the new system and the relevant documents have been sent to the Internal Resources Division of the finance ministry for issuing the notification.

According to the proposal, the interest rates against savings certificates will be fixed following the weighted average interest rates of the five-year and two-year treasury bonds.

The interest rates against the treasury bonds will be reviewed every six months and the savings certificates' interest rates will be re-fixed.

Besides, in case of re-fixing the interest rates against savings certificates, a premium of at most 50 basis points will be added to the weighted average treasury bond interest rates.

There are three types of interest ceilings for the four savings certificates at present.

As per the new system, the interest rate against the five-year Bangladesh savings certificate will be 12.4 percent for up to Tk 7.5 lakh. For savings of Tk 7.5 lakh and above, the interest rate will be 12.37 percent.

At present, a beneficiary gets 11.28 percent interest for up to Tk 15 lakh after the maturity period, 10.30 percent for between Tk 15 lakh and Tk 30 lakh, and 9.3 percent for more than Tk 30 lakh.

In the case of the three monthly profit-bearing Sanchayapatra, the new interest rate will be 12.3 percent to 12.25 percent. Under the existing system, the interest rates are 11.04 to 9 percent.

In the case of the family savings certificate, the new interest rates will be from 12.5 to 12.37 percent while the existing interest rates are 11.5 to 9.5 percent.

Also, the interest rates against the pensioners' scheme will be 12.55 to 12.37 percent under the new system. At present, it is 11.76 to 9.75 percent.

Meanwhile, interest rates against the other savings instruments -- the wage earners bond, the US dollar investment bond and the US dollar premium bond -- will remain unchanged.​

 

[Saif]

Banks see rising deposits for higher interest rates

Bank deposits grew in the third quarter of 2024 as many people were encouraged by rising interest rates to park their money at commercial lenders..In the July-September period of the previous calendar year, bank deposits rose 7 percent year-on-year to Tk 18.25 lakh crore, with bank branche

www.thedailystar.net

Banks see rising deposits for higher interest rates

Bank deposits grew in the third quarter of 2024 as many people were encouraged by rising interest rates to park their money at commercial lenders.

In the July-September period of the previous calendar year, bank deposits rose 7 percent year-on-year to Tk 18.25 lakh crore, with bank branches in rural areas registering higher deposit growth compared to their urban counterparts.

The significant hike in interest rates was a key driver behind the growth in bank deposits, said Syed Mahbubur Rahman, managing director and chief executive of Mutual Trust Bank PLC.

Besides, banks have carried out a lot of campaigns to attract depositors, he added while informing that they expect the uptrend of deposits to continue.

The weighted average interest rates on deposits rose to 5.88 percent in the July-September quarter last year from 4.55 percent during the same period of the previous year, according to data of the Bangladesh Bank.

But when comparing the April-June quarter, bank deposits declined by 0.73 percent year-on-year due to widespread unrest centring a mass movement that ousted the Awami League government on August 5.

Overall bank deposits stood at Tk 18.38 lakh crore by the end of last June.

Private commercial banks, including Islamic banks, constitute 68 percent of the total deposits at present.

However, the central bank data shows their deposits shrank 0.33 percent to Tk 12.58 lakh crore by the end of last September from Tk 12.62 lakh crore three months prior.

The crisis ridden Islamic banks recorded the steepest decline in deposits during the July-September period. Meanwhile, state banks closely followed even though both public and private banks saw deposit growth for about one year since the end of September 2023

On the other hand, loans and advances maintained an uptick for four quarters ending with the July-September period of 2024.

Loans and advances increased by 10 percent year-on-year to Tk 16.19 lakh crore by the end of September last year.

Between June and September of 2024, loans and advances to bank borrowers grew by 1.43 percent mainly in urban areas.​

 

[Saif]

What makes Bangladesh's economy more troubled to progress?

There is no certainty that the economic aspects won’t deteriorate further.

www.thedailystar.net

What makes Bangladesh's economy more troubled to progress?

Visual: Salman Sakib Shahryar

If there is any element of truth in the saying, "Morning shows the day," the interim government has failed to show a bright morning in terms of stabilising the economy. The two economic vices—inflation and unemployment—were at the root of the student-led mass uprising in July-August 2024, yet both reign supreme even after five months of the interim government's inception. And there is no certainty that the economic aspects won't deteriorate further, suggesting that the government should now think seriously about holding an inclusive election at its earliest capacity.

That was not the deal when the interim government took office on August 8 last year. Massive corruption and an authoritarian rule masquerading the façade of democracy contributed to the drastic ouster of the Awami League regime. In that backdrop, almost all political parties and the public demanded the sequencing of reforms first before holding an election. As time passed by, many, if not all, influential political parties are demanding the election first before delivering reform in the economy. The question of how far a non-elected government can go for time-consuming reforms within its limited capacity has become the talk of the town in recent days. And that very political landscape has made the economy more troubled than ever before.

The economy is not heading in the right direction because of two things: i) inherited mismanagement from the previous regime; and ii) conflicting priorities and intrinsic bumpiness of the interim government. The government seems to be engaged in unnecessary political debates by indulging untimely sociopolitical issues related to the constitution and history. This is unwarranted, particularly when the priority should be to curb inflation and to reduce unemployment.

Although the Bangladesh Bank governor expects the inflation rate to drop to around seven percent by June this year, the rising price of the US dollar doesn't lend credence to it. The indomitable practice of localised extortions and organised syndication are sending the prices of necessary commodities beyond the reach of the extreme poor and lower-middle class that occupy a lion's share of the population.

A minimum level of macroeconomic stability will be hard to achieve if the interim government keeps its attention on political confusion, noneconomic diplomacy, racial discontent, and a huge vagueness about its own strategic intent. Simply a market-based exchange rate or interest rate doesn't create macro stability when the rulers have a nebulous roadmap to follow. Printing Tk 22,500 crore to resuscitate the drowned banks seems necessary at the time, but it will refuel inflation despite the parallel mop-up attempts, which are inadequate.

As the Bangladesh Bank data on LC settlements suggest, imports of consumer goods fell by 13.4 percent during the July-November period of 2024 over its corresponding period of 2023, suggesting a further pressure on inflation due to the supply shortage. At the same time, a decline in imports for capital machinery by 21.9 percent will invariably hurt the country's productive capacity and growth potential. A decrease in the imports of intermediate goods by 15.4 percent over the same period will dampen industrial production, which already suffers from labour unrest, layoffs, and sporadic closures.

These factors will largely contribute to the weakening of GDP that is expected to see four percent growth this fiscal year, as per the World Bank forecast. Bangladesh heads to an untimely stagflation, which has tormented many economies in the 1970s in the wake of the oil shocks. A Phillips curve, which exhibits a typical trade-off between unemployment and inflation, disappears during stagflation when both stagnancy and inflation force the toiling mass to walk through a tightrope. Stagflation makes the economy nosedive and induces youth frustration to erupt, the primary symptoms of which are looming. The student force seems to remain hugely unsettled in the education sector, damaging the quality of human capital for the future.

Despite these negative signals, one piece of good news is that remittances in December 2024 made a record inflow of $2.64 billion. There are three reasons behind it: i) a fair value for the dollar that reached up to Tk 126 per dollar; ii) continuation of the 2.5 percent incentive in addition to the fair dollar price made the hundi channel less attractive; and iii) Bangladeshis tend to send more money during the dry season, which is good for marriages, festivities, construction of buildings, and purchases of durable commodities. However, this trend may fall again when the central bank switches back to capping the dollar price at Tk 123.

Remittances alone aren't enough to ensure a good growth in foreign exchange reserves. A fall in imports will impede growth in exports. Although forex reserves slightly edged up to around $21.4 billion on the last day of 2024, its growth will be eroded if foreign direct investments (FDIs) don't pick up. FDIs in FY2024 declined by 8.8 percent, and the trend has even worsened during the interim regime. FDIs in the July-October period of FY2025 saw a collapse by 19.8 percent, suggesting that the foreign capitalists are not considering Bangladesh right now as a hotspot for investment. FDIs don't flow in unless domestic private investment shows an uptick, and here lies a problem with the interim government's capability for creating a credible business environment.

If the government is passionate about reforms, why did it deliver the contract of ground-handling of the third terminal of Dhaka airport to a branded inefficient company, Biman, whose stories of corruption are rampant? Why would it keep the Financial Institutions Division (FID), which made default loans worse? Why would it jump into non-productive expenses for buying weapons from China and Pakistan right now? This decision can wait for an elected government. There are other priorities which the interim government has not only failed to address, but it has also confused the economy, which is facing terrible headwinds, with its poor managerial leadership.

Dr Birupaksha Paul is professor of economics at the State University of New York at Cortland in the US. His recent book is 'Sangkatkaler Orthoniti.'​

 

[Saif]

Forex reserve drops to $20b

Bangladesh’s gross foreign exchange reserve, calculated as per the International Monetary Fund’s guidelines, has dropped to $20 billion, following a $1.67-billion payment to the Asian Clearing Union against import bills for November and December of 2024...

www.newagebd.net

Forex reserve drops to $20b
Staff Correspondent 09 January, 2025, 23:12

New Age file photo

Bangladesh’s gross foreign exchange reserve, calculated as per the International Monetary Fund’s guidelines, has dropped to $20 billion, following a $1.67-billion payment to the Asian Clearing Union against import bills for November and December of 2024.

According to Bangladesh Bank data, the reserve fell to this level on Thursday, shortly after standing at over $21.6 billion in the previous day.

The payment is made in every two months.

However, according to conventional valuation by the Bangladesh Bank, the foreign exchange reserve dropped to $24.9 billion.

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

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

However, high overdue and current import payments have hindered reserve growth even though remittance inflows and export earnings rise.

Banks have had to use dollars for these payments, keeping the reserve volume from building up further.

The BB stopped selling dollars directly from its reserve to banks and instead has sourced dollars from the interbank market to meet government obligations.

This means that banks must cover all import payments with their own foreign currency, preventing reserve accumulation.

BB officials said that remittance inflows surged after political changes on August 5, 2024, reaching $13.77 billion in July-December of the 2024-25 financial year, compared with those of $10.9 billion in the same period of the past year.

The BB sold about $34 billion from its reserve in the past three financial years, which contributed most to the reserve depletion. The reserve was $48 billion in August 2021.

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

The Bangladeshi taka weakened against the US dollar, reaching Tk 123 for a dollar, driven by a dollar shortage and pressures on banks to settle import payments.

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

This ongoing dollar crisis has significantly impacted banks’ ability to settle import payments and open letters of credit, creating challenges for businesses.​

 

[Saif]

I don’t have Aladdin’s lamp to fix market: Sheikh Bashir

We have liberalised rice imports to address the irregularities that we noticed in the rice market, he said

en.prothomalo.com

I don’t have Aladdin’s lamp to fix market: Sheikh Bashir
Special Correspondent
Dhaka
Published: 09 Jan 2025, 21: 31

Sheikh Bashir Uddin Prothom Alo

Commerce adviser Sheikh Bashir Uddin described the recent hike in rice prices as a temporary issue but indicated that it would take some time to stabilise the market.

“I don’t have Aladdin’s lamp so that I would switch it on and the market would be fixed from tomorrow in the aftermath,” he said while speaking to the media after a meeting with a Turkish delegation at the secretariat on Thursday.

Addressing the price hike, the commerce adviser said, “Our data indicates no shortage in rice stocks. However, we have liberalised rice imports to address the irregularities that we noticed in the rice market.”

He further explained that those hoarding rice would have no choice but to release their stocks once imports begin. It would help normalise the market.

A journalist brought up allegations that billions of taka are being withdrawn from the market, inviting sufferings to the masses. In response, Sheikh Bashir Uddin said, “There is no scope to deny it. This situation seems temporary to me.”

Detailing government initiatives, the adviser noted that import duties on rice were reduced from 63 per cent to 3 per cent. Besides, under a food ministry initiative, hundreds of thousands of tonnes of rice are being imported from Myanmar, Pakistan, and India.

“The Aman harvest is underway, and Boro rice will arrive by April. We expect the market to stabilise in the meantime,” he added.

Asked if any new syndicate is manipulating the market, Sheikh Bashir Uddin responded, “If you identify the syndicate, it would make our job easier.”

Besides, the adviser mentioned that the authorities had canceled 3.7 million family cards issued by the Trading Corporation of Bangladesh (TCB) due to overwhelming corruption in the selection process. He, however, insisted that no actual beneficiaries were affected by the decision.​

 

[Saif]

A looming fiscal crisis for Bangladesh

High debt and weak revenue earnings demand clear policy thinking on the government's part.

www.thedailystar.net

A looming fiscal crisis for Bangladesh
High debt and weak revenue demand clear policy thinking

VISUAL: STAR

The government debt increasing by 13.3 percent last fiscal year to a record Tk 18.3 lakh crore is concerning, particularly given its low revenue mobilisation. Here, it has to be said that the former Awami League government is primarily at fault. When it returned to power in 2009, the country's total debt was just $33.66 billion. At the time of its ousting from power on August 5, 2024, the AL government left behind a national burden of $156 billion in local and foreign loans. Aside from wasteful expenditure and mammoth corruption, its failure to improve revenue growth means that Bangladesh's debt-GDP ratio now stands at 36.3 percent. While this is still within the safe limit per the IMF standards, it remains concerning when considered alongside the country's weak revenue earnings and dwindling dollar reserves, economists warn.

The most pressing issue now is the liquidity shortage in both local and foreign currencies. On the one hand, revenue collection remains weak, while interest payments have risen sharply. On the other hand, Bangladesh is receiving fewer foreign loans, creating challenges for meeting interest payments and settling outstanding bills. The recently submitted white paper on the economy already highlighted these risks. It also projected that by the end of June 2025, the total debt could rise to 41.3 percent of GDP.

According to the debt bulletin report, government expenditure on interest payments increased by 21 percent in the last fiscal year, reaching Tk 1.1 lakh crore, which accounts for one-sixth of the national budget. This indicates that a significant portion of the government's expenses is already allocated to paying interest on its debt, thereby reducing its fiscal flexibility. This constraint may worsen in the future as tighter monetary policies, necessitated by high inflation, drive up interest rates on treasury bills and bonds.

Meanwhile, Bangladesh's per capita foreign debt has more than doubled over the past eight years. The government may be compelled to take on more loans in order to clear foreign arrears to ensure the continued supply of power and fertilisers. While this approach may offer a short-term solution, the government must ultimately prioritise increasing revenue collection, as it is the only sustainable long-term solution to the debt servicing challenge. In this context, it is disappointing that the interim government has recently increased VAT and supplementary duties on nearly 100 goods and services, despite concerns that these measures could further fuel inflation.

Instead, the government should focus on addressing tax evasion, which remains a significant issue. The previous government also erred in neglecting this problem and relying on indirect taxes, which are inherently regressive. We urge the interim government to reconsider its policy approach and emphasise progressive taxation as a means to manage the growing debt burden.​

 

[Saif]

Economic diplomacy in int'l relations

Modern-day diplomacy is all about enhancing collaboration between countries through promotion of trade and investment. Even the big power politics is centred around competition between big economies to get the better of the other in the field of trade and investment. Especially, for countries not p

thefinancialexpress.com.bd

Economic diplomacy in int'l relations
FE
Published :
Jan 10, 2025 21:18
Updated :
Jan 10, 2025 21:18

Modern-day diplomacy is all about enhancing collaboration between countries through promotion of trade and investment. Even the big power politics is centred around competition between big economies to get the better of the other in the field of trade and investment. Especially, for countries not pursuing a policy of expanding their spheres of influence through military power, economic, i.e., trade diplomacy is the best option to enhance cooperation among one another. In other words, a state's foreign policy objective here is mainly to use diplomacy not as a tool to promote any political ideology, but to benefit mutually through ensuring each other's economic growth. In a narrower sense, economic diplomacy boils down to export promotion and inward investment. So it is also called commercial diplomacy. With trade liberalisation gaining ground globally in the late seventies of the last century, Bangladesh, too, entered the era of trade diplomacy. But due to a lack of democracy in the political culture, the country's trade diplomacy could not flourish. Now that a favourable political climate has been created under the incumbent interim government, all concerned should grab the opportunity and leave no stone unturned to catapult the nation into the era of advanced trade or commercial diplomacy.

To this end, the government will be required to play a proactive role in building rapport between practising diplomats and the business community within the country as well as abroad so they may adapt well to the global trend and bring home positive results for the economy. But given that the age-old bureaucracy is still entrenched in pre-modern mindset inheriting the colonial legacy, it will not come of age automatically. In that case, those from bureaucracy engaged in the country's diplomatic service should undergo necessary re-education and training to learn the art of modern trade diplomacy. It would be worthwhile to note at this point that an apex trade body of the country, Bangladesh Textile Mills Association (BTMA), organised a meeting with a visiting UK-based trade mission, UKBCCI (UK Bangladesh Catalysts of Commerce and Industry), an umbrella organisation embodying successful British-Bangladeshi entrepreneurs in the UK and Bangladesh.

Obviously, as part of an effort to look for avenues for promoting trade cooperation between Bangladesh and the UK, the main focus of the discussion was to achieve the goal through innovative use of trade diplomacy. One way of doing that, as the visiting UK member of parliament, Rupa Huq, for instance, told the said discussion event, was through reaching a Free Trade Agreement (FTA) between UK and Bangladesh. Notably, the British MP, in question, happens to be part of the business team, UKBCCI. So, the event provided a good opportunity for both the working diplomats and those in the making to hone their skill from such occasions where the representative of an advanced Western economy is actively pursuing trade diplomacy alongside the members of business community from either nation. However, trade diplomacy is no magic concept, it has to be with the trend of the time. So, when Artificial Intelligence (AI) is fast emerging as the driving force to propel global trade and industry further forward, Bangladesh cannot stay behind. Needless to mention, the nation's diplomacy has to adapt itself to the dominant trend. Also, the businesses now evincing high growth potential these days include technologies, agriculture and AI.

The development is a reminder for the country to diversify its export basket which at present is overwhelmingly dominated by only a single group of items from the apparel industry. So, to ensure that Bangladesh thrives economically in the years ahead, it should emphasise international relations based on sound economic diplomacy.​

 

[Saif]

The most challenging year for the economy

Reflecting on the five months of the interim government’s work, I’m reminded of those midnight performances. It seems there is a ruckus in the green room over an issue.

en.prothomalo.com

The most challenging year for the economy
Birupaksha Paul
Updated: 09 Jan 2025, 19: 35

On winter nights, I used to cross the Bhogai River in Nalitabari and go to watch jatra (traditional theatre) in the school ground. Back then, I was young, so even if people called me "Fatra" (irresponsibility and carefree), I didn't care. From that experience, I remember that if by midnight the songs like "Salam Salam Hazar Salam" or "Ek Sagar Rakter Binimoye" didn’t start at the theater, you could tell something was wrong backstage. Perhaps, the theatrical performance might have been ruined that night.

Reflecting on the five months of the interim government’s work, I’m reminded of those midnight performances. It seems there is a ruckus in the green room over an issue. Given the instability in the government and self-created issues, it can be said that 2025 will be the most challenging year for Bangladesh's economy.

The debate within the government over whether reforms should come before elections or vice versa will further add to the uncertainty of 2025. Even if elections are held, the problems might not be resolved until 2026. The root cause of the student and mass uprisings was economic issues—high inflation and unemployment.

The government should have tackled these two issues first. Instead of creating half a dozen reform committees, it was more urgent to form two task forces to address inflation and unemployment. Inflation is a short-term problem, but that doesn't mean it will go away quickly.

If inflation isn't reduced quickly, other complications arise. Just as prolonged cold or flu can turn into pneumonia, prolonged inflation leads to "stagflation," which is a situation of economic stagnation and high price instability. The United States experienced this kind of stagnation during the 1970s and early 1980s, and even president Jimmy Carter became unpopular as a result.

Controlling inflation is primarily the responsibility of the central bank, but a large part of Bangladesh’s current inflation stems from extortion and syndicates. The central bank has little power to deal with this. The government must take responsibility for maintaining peace, order, and security. This is where the issue arises, and it does not require a task force.

The home ministry has essentially become an "inactive" ministry. If this continues, growth will decrease, which is undesirable, especially given the global economic improvement in 2024. After president Trump assumes office in 2025, although a cold trade war may begin with China, the Western economies will be in a stronger position because central banks still have room to cut interest rates to stimulate the economy. Bangladesh, however, doesn’t have this advantage due to high inflation, which is making the situation worse.

Unemployment cannot be solved overnight. It requires a medium-term solution. The government should have recognized it as the nation's "number one problem" and formed task forces to address it accordingly. If the post-independence government had not identified population growth as the "number one problem," the population growth rate would not have fallen from 2.5 per cent to 1 per cent today. Pakistan, which did not focus on this, still has a growth rate of about 2 per cent, while India’s is 0.8 per cent, and Sri Lanka’s has even gone negative. As I read in my childhood, “Without effort, no one can achieve their desires.” In economics, the first step in solving any problem is recognizing it and then taking appropriate action.

There is no way to reduce unemployment without investment, especially private sector investment. No matter how good the relationship between the head of the interim government and world leaders, they won’t increase direct investment or FDI based on that relationship. Once an elected government is in place, they will invest based on its character. So, in the meantime, any hope for foreign investment is futile. The real hope lies in internal individual investment, but that has become stagnant or is even declining in some cases.

There have been frequent reports of factories closing and workers losing jobs. No white paper has been published on this issue, so unemployment has continued to rise over the past five months. The newspapers confirm this. Therefore, it is crucial that the election schedule is announced soon to reduce instability. It seems there is a ruckus in the government’s green room about this, and there are inconsistencies in their statements, which have halted investment. On the other hand, the government lacks the capacity to increase investment because there are concerns that tax revenues will be the weakest his fiscal year in comparisons to the past years.

Although reserves are increasing slowly, neither inflation nor unemployment will benefit significantly from it. Reserves are rising because the exchange rate is closer to the market, and remittances are increasing. However, exports have not increased, and imports have significantly decreased. From July to November 2023, compared to the same period in 2024, imports of consumer goods fell by 13 per cent, capital goods by 22 per cent, and intermediate goods by 15 per cent.

In other words, a major reason for the increase in reserves is the reduction in imports. Reducing weight by exercise and reducing it by starving are two different things, and the latter is dangerous. When the import of consumer goods decreases, the supply in the market decreases, and prices rise. Similarly, when the import of capital and intermediate goods decreases, future investment and economic capacity also decline. Some of this has already impacted the growth of national income, which, according to the World Bank, will drop to 4 per cent this fiscal year, the lowest in the last 22 years, excluding the COVID period.

By mid-January, the reform committees will start publishing their reports one by one. This will increase instability, not decrease it. Those whose interests are not protected will take to the streets. This has become the easiest thing to do, almost a duty. Even then, there is little expectation for the committees' work. It seems that these committees will suddenly emerge as "heroes" from the green room, which is an unrealistic expectation.

It is somewhat predictable what the white paper committees will do, but the reform committees could end up being the opposite, potentially becoming a “time bomb” of instability. Many questions are being raised about the capabilities of these committees, and there’s a risk that all the reforms will collapse and force the election to become the central issue.
In Bangladesh’s history, during every election or government transition, instability increases and growth decreases. In 1943, Polish economist Michael Kalecki introduced the idea of a "political business cycle." In 1975, William Nordhaus applied it to the United States.

Some of the significant years when Bangladesh’s growth slowed down include 1975, 1982, 1991, 1996, 2002, and 2009. It seems that 2025 will be no exception. Thus, overall, 2025 will be a challenging year for Bangladesh. However, the government's responsibility will be to reduce conflicts and disagreements, take a strong and clear position, and then conduct a fair election to minimize the loss of growth.

*Dr. Birupaksha Paul is a Professor of Economics at the State University of New York at Cortland​