[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Widening tax net urgent to raise tax-GDP ratio: ICAB

The Institute of Chartered Accountants of Bangladesh on Saturday said that widening the tax net was the demand of time to increase the country’s tax-gross...

www.newagebd.net

Widening tax net urgent to raise tax-GDP ratio: ICAB
Staff Correspondent 08 June, 2024, 23:23

The Institute of Chartered Accountants of Bangladesh on Saturday said that widening the tax net was the demand of time to increase the country's tax-gross domestic product ratio.

In a post-budget press conference organised by ICAB in the capital Dhaka, accounting professionals said that they appreciated the reduction of tax on private companies and one person companies, essential items and making tax rates applicable for two years in the proposed budget for the 2024-25 financial year.

Finance minister Abul Hassan Mahmood Ali placed the proposed budget for the 2024-25 financial year at Jatiya Sangsad in the capital Dhaka on June 6.

The institute said that the proposed budget gave an opportunity to legalise undisclosed money with a 15-per cent tax, but did not provide a distinction between legitimate and illegitimate incomes.

Mohammed Forkan Uddin, president of ICAB, said that the institution appreciated the emphasis put on online document verification system in the proposed budget.

The ICAB president also said that borrowing from internal sources to meet the budget deficit could fuel the already rising inflation.

He also said that ICAB appreciated the changes in the VAT and supplementary duty.

ICAB chief executive officer Snehashish Barua said that if the government took more loans from banks, investment in the country could reduce and higher revenue collection target might be disrupted.

Former ICAB president Md Humayun Kabir, among others, was present in the press conference.​

 

[Saif]

Import duty cut for LDC graduation: Long way to go for readiness

The government has proposed removing and reducing import duties and supplementary duties on 282 products in fiscal year 2024-25 as it continues its efforts to prepare the nation for its graduation out of the Least Developed Country grouping.

www.thedailystar.net

Import duty cut for LDC graduation: Long way to go for readiness

Visual: Biplob Chakroborty
The government has proposed removing and reducing import duties and supplementary duties on 282 products in fiscal year 2024-25 as it continues its efforts to prepare the nation for its graduation out of the Least Developed Country grouping.

Experts, however, say the moves are inadequate and the government is leaving a lot to do before the country graduates in 2026.

In the current fiscal year, it withdrew import duties on 191 products and supplementary duties on 234 products.

Next year, it wants to withdraw supplementary duties on 19 more products and reduce supplementary duties on 172 and withdrawal duties on 91 others.

Once Bangladesh graduates in November 2026, it may lose yearly $8 billion worth of exports to erosion of trade preferences.

Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), said the measures for dealing with the post-graduation challenges were inadequate.

He said the government was cutting supplementary duties, regulatory duties and has recommended further duty cuts on a few products and their number was not big.

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

 

[Saif]

What are we doing wrong in attracting FDI?

What can we do better? Why is Vietnam successful and not us?

www.thedailystar.net

What are we doing wrong in attracting FDI?

Foreign Direct Investment (FDI) is the holy grail of this century. Every country seeks to draw FDI and increase its share of this rare commodity. Readers need no reminder that FDI is a limited resource and is traded in a competitive market since all countries, including the significant players—Ireland, India, China, and the USA—are contenders in this chase.

Vietnam, which broke out of the clutches of foreign control only in 1975, has emerged as an economic powerhouse thanks to the influx of FDI. We can learn a lot from the path it charted out for itself since Bangladesh is strategically located in the same region with the potential to leverage not only its domestic market potential but also its proximity to India and China to become the next hub of the international supply chain, including electronics, textiles, IT, and pharmaceuticals. Once they relocate to Bangladesh, these industries could export from here, serving global markets in pharmaceuticals, technology services, medical devices, food and beverages, and financial services.

The question on everyone's mind is whether the recent troubles in our economic front will hurt our chances of attracting FDI. The recent budget has incorporated no new measures to make FDI more attractive to investors. The Fitch ratings downgraded Bangladesh's sovereign credit rating (SCR) to B+ from BB-. That will impact FDI, in addition to driving up the cost of borrowing.

The SCR downgrade did not surprise anyone, but I wanted to know what factors caused this downgrading. Does it matter to us? And how consistent have the ratings been in identifying the potential risk to investors? I wanted to find out if these credit rating agencies have considered all the information available, including political, social, economic, environmental, and financial issues. As I was exploring, I discovered that a lot of emphasis, or weight as they call it in technical jargon, is assigned to the foreign exchange balance, financial stability, and, of course, the mood of the investors in the country itself. It is also known that building stronger FDI links with the local economy through supplier development programmes and FDI linkage initiatives help decrease information gaps for investors and boosts local business opportunities.​

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

 

[Saif]

Economic immorality called out

Bangladesh is heading towards an economic system devoid of moral values, which is causing a breakdown in financial discipline, spoiling the business climate, and discouraging honest taxpayers, said noted economist Wahiduddin Mahmud.

www.thedailystar.net

Economic immorality called out
Economists paint a grim picture for Bangladesh at discussion

Bangladesh is heading towards an economic system devoid of moral values, which is causing a breakdown in financial discipline, spoiling the business climate, and discouraging honest taxpayers, said noted economist Wahiduddin Mahmud.

He was one of the speakers who took part in a discussion on the proposed budget for the fiscal year 2024-25 at a city hotel yesterday.

The Editors' Council and the Newspaper Owners' Association of Bangladesh (Noab) organised the event.

Wahiduddin observed, "We are talking about being a Smart Bangladesh. If smart people have no values, it becomes horrifying.

"How we can restore the values in the economy should be analysed and focused on."

Citizens too have a responsibility, as many engage in corruption to evade taxes or get benefits by bypassing rules and procedures, he added.

Wahiduddin, also a former finance adviser to a caretaker government, said the main source of this economy devoid of values is the political power system. When the power illegally goes to the loyal people and vested groups, it is used for immoral activities.

In the interest of the economy, the government must keep some sectors free from corruption and irregularities, he said.

The administration lacks accountability, and corruption is deeply rooted there, which wastes public funds, said Wahiduddin, also a former professor of economics at Dhaka University.

He said the Bangladesh Financial Intelligence Unit (BFIU) has failed to play its due role in curbing money laundering. "Recently, we have seen that a former government official kept hundreds of crores of taka in banks and then withdrew it too. But nobody was caught."

He said if Tk 10 lakh is transferred via banks, the BFIU notices it and is supposed to detect the source.

"The atmosphere for confidence has not been created. We see unbridled circulation of black money in the economy and capital flight."

Wahiduddin said when the economic indicators were strong, the irregularities, mismanagement, and waste were covered up. "It [the economy] had the capacity to absorb those. At present, it has no capacity to absorb this mismanagement."

The current economic crisis is not temporary, and mid- and long-term strategies are needed, he warned.

Citing mega projects, the economist said those were built with loans. He said some of them could have been built with equity sharing. "Then, it might have eased the pressure of debt repayment."

Wahiduddin said the economy is facing the challenges of stubborn inflation; erosion of foreign exchange reserves; lower revenue collection; lukewarm growth in remittance and export earnings; capital flight; indiscipline in the banking sector; massive corruption; and waste of public funds.

"In this situation, the budget was as usual … which can be termed a sacrificial lamb that has no significant scope to do the many things that are required."

Due to lower revenue earnings, there is no scope for a budget with high expenditure, which the country requires. Considering the high inflation, the government had to contain the deficit too, he said.

In overall macroeconomic management, some basic weaknesses have been exposed.

He said low revenue collection was a big weakness, but the government has not taken any strong corrective measures.

Another weakness is the huge loans taken from internal and external sources. "If the government continues to borrow, the budget may fall into a debt trap."

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

 

[Saif]

Bangladesh economy to grow 5.7% in FY25: WB

The World Bank's prediction is much lower than govt projection of 6.75%

www.thedailystar.net

Bangladesh economy to grow 5.7% in FY25: WB
The World Bank's prediction is much lower than govt projection of 6.75%

Bangladesh's economy is likely to grow 5.7 percent in 2024-25 fiscal year, much lower than the government's projection, supported by increased private consumption for easing inflation and a pick-up in overall investment for implementation of large investment projects, the World Bank said today.

"Shortages of inputs and imported goods are expected to ease gradually. A more flexible exchange rate policy is envisaged to help increase remittance inflows and reduce balance of payments pressures," the multilateral lender said in its Global Economic Prospects released today.

The outlook by the WB comes couple of days after the government, in the budget for FY25, projected a 6.75 percent growth of the gross domestic product -- the final value of goods and services produced in an economy in a certain period -- for FY25.

The WB's forecast is roughly one percentage point lower than the government's target for the year. The Washington-based agency in April predicted 5.7 percent growth for Bangladesh's economy for next fiscal year and it kept the projections unchanged in the latest report.

The agency said overall output would expand 5.6 percent in the FY24 ending this June.

The Bangladesh Bureau of Statistics (BBS) provisionally estimates GDP growth at 5.82 percent for FY24.

The WB said industrial activity was disrupted in Bangladesh partly due to ongoing import restrictions, which have caused shortages of materials and intermediate goods.

"The government consumption and investment have supported activity, while elevated inflation has dampened real wage growth and the purchasing power of households, and weighed on private consumption," it said in its Global Economic Prospects.

"Additionally, higher borrowing costs have weighed on demand. High levels of non-performing loans in the banking sector dampened investor confidence."

The multilateral lender raised its global growth outlook on Tuesday on the back of resilient consumer spending in the United States, but warned that growth remains weak by historical standards, reports Reuters.

In updated forecasts, the Washington-based development lender said it now expects the world economy to grow by 2.6 percent this year in real terms, up 0.2 percentage points from its last update in January.​