[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Export gains as taka appears 'highly competitive'

Bangladesh's currency now appears "highly competitive" as the real effective exchange rate (REER) of the taka against a 15-currency basket of global trading partners dropped below 100, particularly spurring export. Measured by the central bank of Bangladesh against the currency basket, the R

thefinancialexpress.com.bd

Export gains as taka appears 'highly competitive'
BD currency's real effective exchange rate against 15-currency basket drops below 100
JASIM UDDIN HAROON
Published :
Jun 15, 2024 23:30
Updated :
Jun 15, 2024 23:30

Bangladesh's currency now appears "highly competitive" as the real effective exchange rate (REER) of the taka against a 15-currency basket of global trading partners dropped below 100, particularly spurring export.

Measured by the central bank of Bangladesh against the currency basket, the REER stood at 99.79 in May. The exchange rate was 104.89 in April 2024.

This change is due to higher depreciation of the local currency recently against the US dollar with the relaxation of exchange-rate controls. "Such deep depreciation of the taka in one go has not been seen in many years before," says an analyst.

This gauge can be used to assess the equilibrium value of a currency. A decrease from 100 is an indication that its exports are getting competitive and its imports expensive.

The end result: its trade-competitiveness is on the rise. It is an indicator of the international competitiveness of a nation in comparison with its trade partners.

Among Bangladesh's top trading partners are mainly China, the European Union, and India. The REER considers the currencies and inflation readings of the top 15 trading partners.

Both India and the EU had 2.6-percent inflation in May last while in China it was much lower as the world's second-biggest economy was experiencing deflation.

Such valued BDT in terms of the REER will help enhance the competitiveness of Bangladeshi-made goods on the international market, bankers and economists believe.

Central bankers told the FE that such value of the BDT is due to sharp depreciation of the local currency against the greenback. The latest taka-dollar adjustment took place on May 08 under a reform drive when the taka weakened by shedding it's value by Tk 7.0 to Tk 117.

"Yes, it is impacting the export receipts as May export expanded to over $4.0 billion. It was less than $4.0 billion in April," one senior central banker told the FE.

Economists say this effective-exchange position will enhance the country's competitiveness in external trade.

"Definitely, this will enhance the competitiveness," says Dr M. Masrur Reaz, chairman of local think-tank Policy Exchange of Bangladesh.

He notes that the country's export receipt has been on the rise and it will accelerate further if the REER becomes supportive.

Dr Zahid Hussain, a former lead economist of the World Bank, feels that the "REER picture is now appears to be near-true."

He also told the FE correspondent that the inflation measurement raises many questions as to whether or not it is calculated genuinely.

He questions the representative CPI and its inflation measurement. "The REER will be more truly reflected once the inflation data of Bangladesh become more reliable," Dr Hussain says.​

 

[Saif]

Macro challenges paramount, budget measures half-hearted

Economists on Thursday criticised the proposed national budget for FY25, arguing it does not have adequate focus on restoring macroeconomic stability. Speaking at a post-budget discussion hosted by the Economic Reporters' Forum (ERF), they said the budget flagged major challenges such as rising in

thefinancialexpress.com.bd

Macro challenges paramount, budget measures half-hearted
Say economists at ERF discussion
Published :
Jun 14, 2024 09:30
Updated :
Jun 14, 2024 09:30

Economists on Thursday criticised the proposed national budget for FY25, arguing it does not have adequate focus on restoring macroeconomic stability.

Speaking at a post-budget discussion hosted by the Economic Reporters' Forum (ERF), they said the budget flagged major challenges such as rising inflation, revenue generation, foreign-currency reserves, growth and job creation. But the proposed measures were incomplete and insufficient to tackle these issues effectively.

In a keynote presentation, Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said persistent high inflation remains a major concern for the economy, which continues hurting the livelihoods of common people.

While the central bank adopts contractionary measures to control inflation, she said, the proposed fiscal policy is expansionary -- which is "contradictory".

"Under such circumstances, bringing down inflation will be difficult," she noted.

Dr Fahmida Khatun questioned the projected GDP growth of 6.75 per cent for FY25, considering the current macroeconomic context. Achieving this ambitious target in a private sector-driven economy would require increased investment.

However, she said that the private investment-to-GDP ratio has remained stagnant at around 23-24 per cent for several years.

"It is unclear how the government plans to raise it to 27.34 per cent in the next fiscal year," the CPD executive director said during the discussion chaired by ERF President Refayet Ullah Mirdha.

The economist also talked about the consistently high revenue targets set for the National Board of Revenue (NBR) despite their history of falling short.

She said the bank borrowing target has been proposed at Tk 1.37 trillion, which is 2.50 per cent of the GDP. The gradual high dependency of the government on the bank borrowing would create a crowding-out effect that would hurt the private sector.

Former Bangladesh Bank (BB) governor Dr Salehuddin Ahmed said the budget has almost nothing that would bring smiles to the lower-income groups and businesses as the debt burden keeps rising, while the scope of employment continues squeezing. He criticised the apparent contradiction between the budget's "Smart Bangladesh" slogan and the proposed increase in mobile and internet taxes. "Such slogans should not mislead the public."

He argued that the budget should have prioritised three key issues: inflation, foreign currency reserves and energy. But the budget lacked concrete measures to address these pressing challenges. Dr Monzur Hossain, research director at the Bangladesh Institute of Development Studies (BIDS), advocated for a stronger focus on restoring macroeconomic stability, even if it meant compromising somewhat on projected growth figures.

"If the macroeconomic problems are not addressed properly, achieving the desired long-term growth trajectory will be difficult," he said.

He questioned the government's approach of reducing subsidies by simply raising energy prices. "Is this the most effective way to manage subsidies? Shouldn't alternative options, such as improving institutional capacity, be explored?"

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

 

[Saif]

GDP output may rise 40% if women’s participation in economy widens

Bangladesh can increase its economic output by nearly 40 percent by closing the gender gap and increasing women’s participation in the economy, according to the International Monetary Fund (IMF).

www.thedailystar.net

GDP output may rise 40% if women's participation in economy widens
Two IMF economists say on Bangladesh

As women played an integral role in the development of the garment industry of Bangladesh and the country's growth success in recent decades, they should be empowered to play an active role in green transition, say economists. Photo: Star

Bangladesh can increase its economic output by nearly 40 percent by closing the gender gap and increasing women's participation in the economy, according to the International Monetary Fund (IMF).

"Sizable gaps in women's economic empowerment undermine growth and exacerbate climate vulnerability in Bangladesh," said the multilateral agency in an article last week.

Per capita incomes in Bangladesh have risen seven-fold in the past three decades while poverty has been reduced to a fraction of former levels.

"Such progress has been driven in part by greater labour force participation by women, most notably in the garment industry, and has been accompanied by other meaningful improvements in women's empowerment," said the article jointly written by Jayendu De and Genet Zinabou.

"Our recent analysis, however, shows there is still large gaps between women and men. Notably, women's labour force participation is only half the rate of men."

Jayendu De is the IMF resident representative in Bangladesh while Genet Zinabou is an economist in the fiscal affairs department.

The writeup, citing an IMF's previous research, said closing the gap could increase Bangladesh's economic output by nearly 40 percent.

"Women also remain less likely than men to obtain tertiary education, and they face greater barriers in accessing financial services. Remedying both factors could raise the entire economy's productivity."

The article said Bangladesh's extreme vulnerability to climate change and natural disasters makes the efforts to close gender gaps challenging.

"Climate shocks generally affect the already poor and vulnerable the most. This means that Bangladeshi women, who on average have fewer resources than men, are likely to be disproportionately impacted."

It highlights several factors that render women uniquely exposed to the effects of climate change and natural disasters.

Women's employment is highly concentrated in agriculture and informal work and climate change directly affects agricultural production. Informal workers are often particularly vulnerable to climate shocks as they lack access to social insurance programmes.

The article said both international and internal migration are important climate adaptation strategies. But these are availed mostly by men: men are 16 times more likely to be employed overseas than women, who tend to be primary caregivers for children and the elderly, leaving them less mobile and more likely to remain living in areas highly exposed to climate change.

Women carry the primary responsibility for collecting drinking water and cooking fuel. As warming temperatures, rising sea levels, deforestation and more frequent cyclones and droughts render these tasks more time-consuming, women's time poverty is expected to be exacerbated, the IMF warned.

Bangladesh has already recognised the need to integrate gender perspectives in its 2009 Climate Change Strategy. Following this, the government adopted the first Climate Change and Gender Action Plan 2013, which it updated in March 2024.

"Renewed efforts will be needed to ensure successful implementation of the plan and achieve simultaneous progress on climate action and gender equality," it added.

"To this end, policymakers should capitalise as much as possible on the synergies between women's empowerment, economic growth, and increased resilience to climate change."

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

 

[Saif]

State enterprises’ loan rising, so is govt guarantee

The government needs to provide guarantees against an increasing amount of loans of state-owned enterprises every fiscal year, especially for power generation, fertiliser and fuel imports, and aircraft purchases.

www.thedailystar.net

State enterprises' loan rising, so is govt guarantee
Govt guarantee against loans of state enterprises

The government needs to provide guarantees against an increasing amount of loans of state-owned enterprises every fiscal year, especially for power generation, fertiliser and fuel imports, and aircraft purchases.

The government provides these "sovereign guarantees" against loans negotiated by various state-owned financial and non-financial enterprises, states the finance ministry's Medium-term Macroeconomic Policy Statement for 2024-25 to 2026-27.

Meant to aid the implementation of public policies and programmes, the sovereign guarantees are mostly issued to entities operating in commercial aviation, power and public commodity sectors, and fertiliser plants, according to the statement.

If the entities fail to repay their loans on time, the guarantees could be invoked and the liabilities would be passed on to the government, which inevitably would have future fiscal implications, it added.

As of the current fiscal year of 2023-24, sovereign guarantees were backing Tk 117,094 crore in loans, according to budget documents of the finance ministry.

In the last fiscal year of 2022-23, it was Tk 98,591 crore whereas it was Tk 92,601 crore in fiscal year 2021-22.

The amount has been increasing by around 19 percent on average every year.

State-owned power agencies now have the highest amount of loans -- Tk 53,596.26 crore.

Bangladesh Agricultural Development Corporation accounted for Tk 18,985.48 crore, all availed for importing fertilisers.

Besides, the loan against Ghorashal-Palash Urea Fertiliser Factory, which was inaugurated in Narsingdi in November last year, stands at Tk 10,113 crore.

Biman Bangladesh Airlines had loans to the tune of Tk 8,543.45 crore, the energy sector Tk 7,660.18 crore and the Trading Corporation of Bangladesh Tk 2,432.11 crore.

One of the ways in which state-owned enterprises were correlated with the government's fiscal position, as per a partial analysis, was that their loans exposed the state to potential financial loss, said the finance ministry statement.

Moreover, the government has had to inject additional capital to keep many of the enterprises afloat, it said.

Economists suggest privatising loss-making entities instead of running them by spending taxpayer money.

As of February, 30 state-owned enterprises had Tk 65,089.48 crore in debt with state-owned commercial banks, read the Bangladesh Economic Review 2024.

Of the amount, Tk 183.62 crore has been classified.

Up until now there has been no default of loans backed by sovereign guarantees, said the finance ministry statement.

However, the government plans to amend the existing guidelines to streamline the process and further strengthen the debt repayment capacity of the state-owned enterprises, it said.

Loan default of state-owned enterprises is a serious issue in terms of preserving the confidence and image of the country as it generally does not happen anywhere in the world, said M Masrur Reaz, chairman of Policy Exchange of Bangladesh.

When state-owned enterprises default on loans, the impact falls on the private sector and raises questions about the capability of the government, he said.

Most public enterprises are incurring losses, but the government does not shut those down on political grounds, said Ahsan H Mansur, executive director of the Policy Research Institute.

Instead, the government continues to run these enterprises by providing subsidies and repaying their loans by spending taxpayer money, he said.

According to him, the ultimate solution is to privatise the state-owned enterprises to avoid the liabilities of debt for years on end.​

 

[Saif]

undefined | The Financial Express

thefinancialexpress.com.bd

Forex reserves increase to $24.52 billion before Eid
Published :
Jun 18, 2024 15:40
Updated :
Jun 18, 2024 17:03

Foreign exchange reserves with Bangladesh Bank increased before Eid-ul-Azha as expatriate Bangladeshis sent more money home than at other times to facilitate their families celebrating the festival.

According to the central bank data, the reserves rose to 24.52 billion US dollars on June 12 from 24.21 billion dollars at the beginning of this month, representing a rise of 310 million in 12 days.

However, according to the International Monetary Fund's Balance of Payments and International Investment Position Manual (BPM6), the reserves increased by 487.3 million dollars.

According to BPM6, the reserves were 18.72 billion dollars at the beginning of this month and it increased to 19.2 billion dollars on June 12.​