[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Both inbound, outbound FDIs drop for Bangladesh

Unctad’s World Investment Report shows

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Both inbound, outbound FDIs drop for Bangladesh
Unctad's World Investment Report shows

ILLUSTRATION: SALMAN SAKIB SHAHRYAR/STAR

Both inbound and outbound foreign direct investment in Bangladesh declined in 2023 as global FDI fell amid an economic slowdown and rising geopolitical tensions.

FDI from Bangladesh dropped 43 percent year-on-year to $30 million last year, data from the UN Trade and Development showed today.

The outbound FDI stood at $53 million a year prior, according to the World Investment Report 2024. The outflow was $23 million in 2018, $28 million in 2019, $12 million in 2020, and $92 million in 2021.

The inflow of FDI to Bangladesh stood at $3 billion last year, down nearly 14 percent year-on-year from $3.48 billion a year ago. Still, last year's receipts were the second-highest in South Asia.

India's FDI plummeted to $28.16 billion against $49.38 billion in 2022. The inflow stood at $712 million for Sri Lanka, down from $884 million a year prior.

The Maldives received $1.42 billion against $1.5 billion in 2022.

Pakistan, Nepal, and Bhutan, however, posted a positive growth. For example, Pakistan wooed FDI worth $1.82 billion, which was $1.46 billion a year earlier. Nepal attracted $74 million in 2023 against $65 million in 2022.

According to the World Investment Report, global FDI fell 2 percent to $1.3 trillion in 2023 amid an economic slowdown and rising geopolitical tensions.

But the report highlights that the decline exceeds 10 percent when excluding the large swings in investment flows in a few European conduit economies.

The downturn in project finance affected sustainable development, with new funding for Sustainable Development Goals (SDGs) sectors dropping over 10 percent, particularly in agrifood and water. This hampers efforts to achieve the 2030 Agenda and calls for urgent policy action to revamp sustainable development finance.

The report emphasises that business facilitation and digital government solutions can address low investment by creating a transparent and streamlined environment.

It highlights significant growth in online services and information portals, saying such tools also support broader digital government development, benefiting developing nations in particular.​

 

[Saif]

Bangladesh forex reserves increases to $19.53b thanks to additional remittances

Bangladesh’s foreign exchange reserves rose by US $318 million in the span of a week to hit $19.53 billion on June 19. Bangladeshi expatriates have sent about $1.65 billion as remittances in 1-14 days of this month, which is a huge inward flow just in two weeks. But it is usual for expatriat

thefinancialexpress.com.bd

Bangladesh forex reserves increases to $19.53b thanks to additional remittances
Published :
Jun 20, 2024 20:51
Updated :
Jun 20, 2024 20:55

Bangladesh's foreign exchange reserves rose by US $318 million in the span of a week to hit $19.53 billion on June 19.

Bangladeshi expatriates have sent about $1.65 billion as remittances in 1-14 days of this month, which is a huge inward flow just in two weeks. But it is usual for expatriates to send additional remittances ahead of Eid-ul-Azha, reports UNB.

According to the latest update of Bangladesh Bank (BB) the foreign exchange reserves were $19.21 billion on June 12. The reserves increased to $19.53 billion on June 19.

The foreign exchange flow will continue to rise in the coming weeks as the country is set to receive $1.65 billion from the International Monetary Fund (IMF) and the World Bank before the end of this June.

The IMF may release $1.15 billion in the third installment of its $4.7 billion loan in the last week of June while the WB is going to provide $500 million in budget support. This may send the reserves above $21 billion.

The latest improvement in the forex reserves situation comes a month after the central bank relinquished its control over the rate-setting mechanism and introduced a more flexible exchange rate regime.​

 

[Saif]

WB, IMF loans to help Bangladesh rebuild reserves

On the back of the credits from the World Bank and the International Monetary Fund, Bangladesh may meet for the first time the condition on net foreign exchange reserves attached to the $4.7 billion loan from the IMF and secure the next instalment.

www.thedailystar.net

WB, IMF loans to help Bangladesh rebuild reserves
WB approves $900m, including $500m budget support

On the back of the credits from the World Bank and the International Monetary Fund, Bangladesh may meet for the first time the condition on net foreign exchange reserves attached to the $4.7 billion loan from the IMF and secure the next instalment.

Yesterday, the board of the WB approved budget support worth $500 million. The fund will be disbursed by this month, said finance ministry officials.

The IMF will discuss releasing $1.15 billion in the third tranche of its multi-year credit to Bangladesh during its board meeting tomorrow.

The budget support and the loan will add $1.65 billion to the forex reserves of the South Asian nation, handing it a much-needed boost as it has been struggling to overcome the US dollar supply crunch for the past two years.

Owing to the sharp fall in the reserves level since its peak in August 2021, Bangladesh could not fulfil the target on net international reserve (NIR) as per the conditions of the IMF since the loan programme started in January last year. Still, the global lender disbursed the first two instalments and is going to do the same this week.

To secure the fourth instalment, Bangladesh would have to maintain an NIR of $14.69 billion by June 30. Since the reserves are not picking up as expected, the IMF has revised down the goal from the $20.11 billion set for the end of the current financial year.

NIR figures are not published regularly. Currently, the central bank releases data on the reserves as per its traditional accounting method as well as in line with the balance of payments and investment position manual (BPM6) of the IMF.

The NIR is defined as reserves assets minus reserve liabilities. Reserves liabilities are all foreign exchange liabilities. As per BPM6, gross forex reserves include gold, cash US dollar, bonds and treasury bills, reserve position in the IMF, and special drawing rights holdings.

Usually, the NIR is $5 billion to $6 billion lower than the amount reported under the manual.

In order to hit the NIR goal, Bangladesh will have to keep gross forex reserves above $20 billion as per the BPM6. The reserves stood at $19.53 billion on Wednesday, central bank data showed.

In Bangladesh, the reserves have been declining sharply since the beginning of the Russia-Ukraine war as the conflict sent the prices of commodities higher, hurting import-dependent nations such as Bangladesh.

Mismanagement in the forex market, frequent policy changes, and the gap between the official and the unofficial exchange rate are also to blame.

The dwindling reserves forced the Bangladesh Bank to make the exchange rate almost market-based on May 8 when it introduced the crawling peg mid-rate, allowing banks to trade US dollars at around Tk 117.

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

 

[Saif]

Bangladesh needs to overcome barriers to private investment

According to Bangladesh Business Climate Index 2024

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Bangladesh needs to overcome barriers to private investment
According to Bangladesh Business Climate Index 2024

Bangladesh needs to overcome barriers to increasing private investment, as year-on-year private sector credit growth fell short of the government target of 11 percent for this month, according to Bangladesh Business Climate Index 2024.

In December 2023, it experienced a slightly lower year-on-year growth of 10.2 percent, compared to its growth rate of 10.9 percent in December 2022, it said.

The index was released by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange, Bangladesh (PEB) in Dhaka recently.

The growth rate was primarily influenced by higher domestic and international commodity prices, coupled with a notable depreciation of the Bangladeshi taka against the US dollar, it said.

Despite that, Bangladesh performed fairly well compared to many other emerging and developing Asian economies, it added.

Bangladesh is acknowledged as a burgeoning investment hub, said the index.

Foreign direct investment (FDI) remains limited and predominantly focused on traditional sectors such as garments and textiles, oil and gas, energy and power, financial services and pharmaceuticals, it said.

The FDI is a powerful tool for developing the Bangladesh economy and can significantly contribute to achieving the country's socioeconomic objectives, including poverty reduction goals, it added.

The inflow of foreign capital strengthens the domestic investment base, stimulates economic activities, creates employment opportunities, and brings along technological advancements and managerial expertise, which can have a transformative effect on local industries, said the index.

The inflow of private investment and FDI is hampered by various factors, which have prevented the country from keeping pace with many of its comparator nations, it said.

The FDI flowing into various sectors of Bangladesh offers valuable perspectives on the nation's economic terrain and highlights the industries drawing notable investments, it said.

In FY2023, the manufacturing sector in Bangladesh received the highest net FDI inflows, amounting to $1208.56 million, which accounted for 37.2 percent of the total FDI, it added.

Bangladesh's business environment deteriorated slightly in 2023 compared with 2022, mainly because of sluggish regulatory reforms, weak infrastructure and difficulty in access to finance, according to the index.

Measured on a scale of 0-100, the homegrown index fell to 58.75 in 2023 from 61.95 the previous year.​

 

[Saif]

ADB to lend $20.8b to Bangladesh in four years

The Asian Development Bank (ADB) is expected to provide $20.8 billion in loans to Bangladesh in the next four years as the country looks to accelerate economic growth and attain the upper-middle-income status in less than a decade.

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ADB to lend $20.8b to Bangladesh in four years

The Asian Development Bank (ADB) is expected to provide $20.8 billion in loans to Bangladesh in the next four years as the country looks to accelerate economic growth and attain the upper-middle-income status in less than a decade.

The amount is 42.3 percent higher than the $12 billion the country received in the previous four years, documents from the Manila-based lender showed.

Of the expected financing, $16.4 billion, or 78.85 percent of the total, will be extended as ordinary capital resources (OCR) loan, since the country's capacity to pay back has gone up.

The interest rate for the OCR portion is near market-based. The rest of the loan will be concessional.

The loans at near-market terms have a repayment period of 25 years and a grace period of five years. The interest rate is SOFR plus 0.75 percent.

The Secured Overnight Financing Rate (SOFR), which is replacing the London Interbank Offer Rate (LIBOR), was 5.32 percent on Thursday, data from the Federal Reserve of Bank of New York showed.

The concessional loans have the same repayment schedule, but the interest rate is fixed at 2 percent.

The ADB has set a loan pipeline for 92 projects in seven sectors from 2024 to 2027, the documents related to its country programme showed.

The projects included Mass Rapid Transit (MRT) Line-5 (Southern Route); SASEC (South Asia Subregional Economic Cooperation) Dhaka-Chattogram Highway Improvement Project; SASEC South Corridor Improvement Project (Faridpur-Barishal Highway); and Dhaka Power System Expansion and Strengthening Project.

The Economic Relations Division will hold a meeting with the ministries and divisions today to finalise the projects under the pipeline.

While there is no specific allocation for regular OCR loans, the ADB expects to commit around $16.4 billion between 2024 and 2027, subject to the readiness of the proposed projects.

It expects to commit around $2.3 billion for 2024, $4.2 billion for 2025, $4.9 billion for 2026, and $5 billion for 2027.

As per its pipeline, the ADB will provide $1.8 billion for 2024-2027 for 12 projects in the agriculture, food, nature and rural development sector; $2.9 billion for 14 projects in the energy sector; and $2.5 billion for 10 projects in the finance sector.

Some $3.1 billion will be given to 15 projects in the human and social development sector, $1.7 billion for five projects in the public sector management and governance sector, $5.9 billion for 18 projects in the transport sector, and $2.9 billion for 18 projects in the water and urban development sector.

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