[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

GDP growth target may be revised down to 5.25%

The GDP growth target may be brought down to 5.25 percent in the revised budget for the current fiscal year due to the damage caused by multiple floods and the interim government’s contractionary monetary policy to contain high inflation.

www.thedailystar.net

GDP growth target may be revised down to 5.25%

The GDP growth target may be brought down to 5.25 percent in the revised budget for the current fiscal year due to the damage caused by multiple floods and the interim government's contractionary monetary policy to contain high inflation.

The previous government had set the growth target at 6.75 percent in the original budget.

A discussion on the revised budget for the current fiscal year was held among top officials from the finance, commerce, and planning ministries, as well as Bangladesh Bank, at the Chief Adviser's Office on Tuesday, with Chief Adviser Professor Muhammad Yunus in the chair.

Finance ministry officials said they presented the current macroeconomic indicators and the revised budget during the meeting.

"The growth of the agriculture sector will decrease due to repeated floods at the beginning of the current fiscal year," said a finance ministry official.

Additionally, Bangladesh Bank introduced a tight monetary policy and raised the policy rate, reducing overall GDP growth, he added.

This comes as the World Bank, International Monetary Fund (IMF), and Asian Development Bank (ADB) have also lowered their GDP growth projections for Bangladesh for the current fiscal year.

The ADB has revised its growth forecast for Bangladesh to 5.1 percent from 6.6 percent, citing supply chain disruptions caused by political unrest in July and August.

The World Bank has slashed its growth forecast for the Bangladesh economy by 1.7 percentage points to 4 percent for the fiscal year 2024-25 due to "significant uncertainties following recent political turmoil" and "data unavailability."

The IMF has also revised the growth forecast for Bangladesh for this year, saying political uncertainty, industrial unrest, and floods continue to weigh heavily on economic activities.

In its flagship World Economic Outlook, the IMF lowered Bangladesh's growth projection by 2.1 percentage points to 4.5 percent, the lowest since fiscal 2019-20, when the global coronavirus pandemic struck.

In a visit last December, an IMF delegation revised the growth to 3.8 percent.

The inflation target may rise to 8 percent, up from 6.5 percent in the original budget.

Although the latest data showed that inflation in Bangladesh eased for the second consecutive month in January to 9.94 percent, it remains high.

On Tuesday, Finance Adviser Salehuddin Ahmed said the government was working on reducing inflation to 7 percent by June.​

 

[Saif]

Govt revises down forex reserve target

The interim government has revised its aim for foreign exchange reserves, saying it expects to have $28.6 billion by June this year, capitalising on strong growth in inward remittances, exports, and budgetary support from development partners.

www.thedailystar.net

Govt revises down forex reserve target

The interim government has revised its aim for foreign exchange reserves, saying it expects to have $28.6 billion by June this year, capitalising on strong growth in inward remittances, exports, and budgetary support from development partners.

The budget initially set a target of $31.6 billion, based on the central bank's gross calculation.

As of January 29, the gross forex reserve stood at $25.32 billion, down from $26.20 billion in June last year, according to Bangladesh Bank (BB).

Bangladesh Bank now publishes two types of forex reserve figures—one of which is based on a calculation method advised by the International Monetary Fund, known as BPM6. Based on this, reserves stood at $19.97 billion as of January 29.

On Wednesday, the finance ministry presented the revised forex reserve and other macroeconomic indicators at a meeting at the Chief Adviser's Office, chaired by Chief Adviser Prof Muhammad Yunus.

To meet the revised target, forex reserves need to increase by $3.28 billion by June.

According to the finance ministry, substantial growth in remittances and exports will help increase the forex reserve.

There is also a high possibility of receiving $2.5 billion in budgetary support from three major development partners, including the International Monetary Fund, the Asian Development Bank, and the World Bank, by June.

Other bilateral and multilateral budgetary support is expected to contribute an additional $500 million to the forex reserve.

These prospects have made the finance ministry optimistic about increasing the reserve.

However, Zahid Hussain, former lead economist at the World Bank Dhaka Office, expressed scepticism about reaching the target.

"It's true that exports and remittances are growing and that there is a high possibility of receiving budget support from development partners, but Bangladesh must pay various outstanding bills, including those for power, energy, and fertiliser imports," he said.

"The government will have to import fuel and LNG (liquefied natural gas) to ensure uninterrupted electricity in the upcoming summer. Additionally, payments must be made for imports from India, including Adani Power," he said.

He noted that a significant quantity of fertiliser must be imported for the Boro season, meaning much of the budget support would be used to meet these expenses.

"So, it will be difficult to raise the reserve by more than $3 billion from current levels," said Hussain.

The government has also revised its export growth target to 10 percent, up from 8 percent in the original budget.

Meanwhile, remittance growth has been revised to 15 percent, doubling from the initial target of 7 percent.

Hussain described this as a modest and achievable target.

"The export sector has also witnessed satisfactory growth in the first six months despite labour protests, factory closures in the RMG sector, and violence," he said.

According to the central bank's balance of payments statistics, exports grew by 11 percent in the first six months of the current fiscal year.

Meanwhile, remittances increased by 27.56 percent during the same period.

However, the revised budget has lowered the import growth target to 8 percent from the original 10 percent.

Although imports have remained sluggish, they have shown signs of acceleration in recent weeks.

In the first six months, imports grew by 3.5 percent, recovering slightly after a 10.61 percent decline in the previous fiscal year.

The private sector credit growth target has been slightly increased to 9.8 percent in the revised budget, up from 9 percent in the original projection.

However, as of November, private sector credit grew by only 7.66 percent, falling short of the target.​

 

[Saif]

Can downward inflation curve be sustained?

Rising prices of food, energy and commodity coupled with depreciation of Bangladesh Taka (BDT) against US Dollar (USD) contributed to higher inflation throughout last year (2024) with the rate reaching a 12-year high in July at 11.7 per cent. The major driver of this high inflation was food inflati

thefinancialexpress.com.bd

Can downward inflation curve be sustained?
Published :
Feb 07, 2025 23:35
Updated :
Feb 07, 2025 23:35

Rising prices of food, energy and commodity coupled with depreciation of Bangladesh Taka (BDT) against US Dollar (USD) contributed to higher inflation throughout last year (2024) with the rate reaching a 12-year high in July at 11.7 per cent. The major driver of this high inflation was food inflation which in July surged to 14.1 per cent, a 13-year high. Later, the headline inflation gradually moderated and went down to 9.92 per cent in September (2024). But it again went up and continued to remain at two-digit level throughout the year.

Against this rather depressing backdrop, the Bangladesh Bureau of Statistics (BBS) last Tuesday (February 4) came up with the reassuring report that last month the inflation did come down to a single digit, 9.94 per cent, which is one percentage point lower than what it was by the end of last year (December) at 10.89 per cent. However, the credit for this encouraging development has been given to abundant supply of winter vegetables in the market which drove down the overall inflation rate to the reported record low level.

While appreciating the fall in last month's inflation, worries still remain in the general consumers' mind since they saw a similar fall in September last year, but it could not be sustained in the long run. Add to that the strong possibility that the vegetables supply would dwindle and their prices might again rise in the coming months to offset the gains achieved in January. At the same time, one cannot lose sight of the fact that the food inflation has still remained high above 10 per cent in the urban as well as rural contexts, especially due to the unpredictability of the staple market. Also, one needs to take into account the steady rise in the non-food inflation in both urban and rural areas. On this score, the central bank is learnt to have blamed the higher prices of staples and edible oils at the retail level as the factors that are pushing up the inflation rate thereby dampening the efforts at curbing it using various measures including tightening of money supply.

Naturally, the concern still remains in public mind about the sustainability of January's relatively low inflation rate, despite the finance adviser's reassuring words that measures including the tight monetary policy now in force would be able to maintain consumer price at this comfortable level and that by June, it would go down further to between 6.0 and 7.0 per cent. In this connection to dispel any misgivings expressed by some who often draw the instance of Sri Lanka, the finance boss would like to console them referring to the smaller size of that island nation's economy as well as the differences in the realties of Bangladesh and Sri Lanka. But whatever the differences in the details of the factors that led the economic downturn and high inflation rate in either country, the fact remains that the monetary tool used to bring down inflation level in Siri Lanka worked far more effectively than it did in Bangladesh. In that case consider that Sri Lanka's annual inflation rate surged astronomically to over 70 per cent in August 2022, while the food price rose by 84.6 per cent compared to what it was during the year before. But thanks to the prudent monetary policy pursued by that country's central bank, the inflation gradually declined and in November last year, it dropped to as low as 2.1 per cent which was the lowest ever in that country since 1961. But in Bangladesh around that time, the inflation rate was as high as 11.38 per cent. So, the public can't be blamed if they take any assurances from the government in this regard with a pinch of salt. Hopefully, the interim government will succeed in arresting inflation at the promised level to meet the public's expectation.​

 

[Saif]

World Bank VP for South Asia in Dhaka

Martin Raiser, vice president of the World Bank (WB) for South Asia, arrived in Dhaka on a four-day visit yesterday, which the global financial institution stated was aimed at reinforcing its longstanding partnership with Bangladesh..Raiser is scheduled to meet high-ups of the government,

www.thedailystar.net

World Bank VP for South Asia in Dhaka

Martin Raiser, vice president of the World Bank (WB) for South Asia, arrived in Dhaka on a four-day visit today, which the global financial institution stated was aimed at reinforcing its longstanding partnership with Bangladesh.

Raiser is scheduled to meet high-ups of the government, including the chief adviser of the interim government, finance adviser, energy adviser, the governor of Bangladesh Bank, and other senior government officials, according to a press release.

His visit aims to strengthen the country's partnership with the global institution and advance discussions on key development initiatives.

His meetings will focus on Bangladesh's ongoing development priorities and future collaborations with the WB.

Raiser will be accompanied by Pablo Saavedra, the WB's vice president for prosperity, who leads the institution's work on economic policy, poverty reduction, finance, institutional development, competition, and investment.

The WB has been a key partner in Bangladesh's development journey since the country gained independence, said the statement.

Over the years, the WB has committed approximately $44 billion to Bangladesh, predominantly in grants and concessional credits.

This makes Bangladesh the recipient of the largest ongoing programme supported by the WB's International Development Association (IDA).

Raiser's visit highlights the continued focus on strengthening the WB's engagement in Bangladesh, particularly in areas like economic growth, poverty alleviation, and social development, said the statement.

It underscores the importance of sustaining and deepening this vital partnership for Bangladesh's future.

This visit comes at a time when Bangladesh is grappling with various economic challenges, and it is expected that discussions will revolve around supporting the country's development ambitions, including energy sector reforms, financial stability, and inclusive growth strategies.​

 

[Saif]

Why so many problems with FDI?

Bangladesh has mostly failed to achieve its targeted level of foreign direct investments (FDIs), with investment inflow amounting to only 0.75 percent of GDP in 2023, according to UNCTAD.

www.thedailystar.net

Why so many problems with FDI?

Bangladesh has mostly failed to achieve its targeted level of foreign direct investments (FDIs), with investment inflow amounting to only 0.75 percent of GDP in 2023, according to UNCTAD. Efforts to attract foreign investors by developing economic zones and adopting one-stop services have not yielded much results, raising the question: what's the country doing wrong? A recent report by the US administration has identified precisely what's holding the country back -- corruption, bureaucracy, an anti-competitive procurement system, violation of intellectual property rights, unreliable logistics, and lack of skilled labour, among others.

The United States Trade Representative (USTR) in its 2024 National Trade Estimate Report on Foreign Trade Barriers showed corruption to be deeply ingrained in Bangladesh's commercial environment. This is partly laxity in enforcement of relevant legislative measures. US investors have voiced concerns over the undue delays and bureaucratic hurdles they face.

Efforts to undermine the independence of the Anti-Corruption Commission (ACC) through legislation such as the Sarkari Chakori Ain Bill—which limits its ability to investigate corruption allegations against government officials effectively—only accentuate the problem. Adding to that is the backlog of unresolved corruption cases and systematic attempts to dilute anti-government safeguards in procurement processes. The Daily Star reported a backlog of 3,300 cases in 2024 alone. Adding to the burden, the conviction rate hit a record low of 47% in the same year.

Despite building the central procurement and technical unit (CPTU) and then the Public Procurement Company, the US report also highlights the lack of transparency and fairness in public procurement. It also points out deficiencies in our legislative and rulemaking processes, particularly concerning patent law, copyright amendments, and the enactment of the Industrial Design Act. Meanwhile, the proposed Personal Data Protection Act and regulations for digital, social media, and the top platforms pose potential threats to privacy and freedom of expression, raising apprehensions among the international investment community.

Another significant hurdle is the country's infrastructure deficit and logistical inefficiencies. While the country has made strides in power generation and connectivity, gaps in transport networks, port congestion, and inconsistent energy supply remain persistent challenges. The World Bank's Ease of Doing Business Index previously highlighted delays in land acquisition, customs clearance, and business registration as major obstacles. Foreign investors often cite the high logistics cost and unreliable utility services as deterrents. Without improving these fundamentals, the country will struggle to compete with regional peers like Vietnam and India in attracting high-value foreign investments.

Beyond infrastructure, Bangladesh must focus on building a skilled workforce to attract knowledge-intensive FDI. While the country enjoys a large, young labour pool, gaps in technical expertise and vocational training hinder its competitiveness in IT, manufacturing, and R&D. According to the World Economic Forum, automation and AI are reshaping global industries, making skill development more critical than ever. To stay ahead, Bangladesh must invest in STEM education, industry-driven training programmes, and stronger university-industry collaboration.

These challenges need to be taken seriously by our policymakers, as cosmetic incentives to foreign investors can only work for a limited time. For Bangladesh to unlock its full economic potential and foster a conducive environment for foreign investment and sustainable growth, it must address the longstanding problems discouraging investors. This will require a concerted effort from the government, but first, there must be the political will to tackle entrenched corruption and bureaucratic inefficiencies. Meanwhile, the government needs to make serious improvements to the country's Intellectual Property (IP) regime, ensuring better coordination among enforcement authorities and government institutions and moving away from repressive regulatory frameworks for data protection and online content regulation.

The author is the chairman of Financial Excellence Limited.​

 

[Saif]

Financial sector crisis, labour unrest flagged as key risks

Weakness in the financial sector and labour unrest might be the major sources of risk for the interim government in the short term, said a finance ministry report yesterday on Bangladesh’s recent economic challenges and the way forward.

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Financial sector crisis, labour unrest flagged as key risks

Weakness in the financial sector and labour unrest might be the major sources of risk for the interim government in the short term, said a finance ministry report yesterday on Bangladesh's recent economic challenges and the way forward.

In view of this, the government should give the highest priority to bringing back discipline in the financial sector and mitigating labour unrest before it flares up, said the paper, presented by Finance Secretary Md Khairuzzaman Mozumder to Chief Adviser (CA) Muhammad Yunus.

Finance Adviser Salehuddin Ahmed, Bangladesh Bank Governor Ahsan H Mansur, and other senior finance ministry officials were present, according to the press wing of the CA.

The paper said factories near the Beximco Group's industrial enclaves are prone to the risk of labour unrest

The paper said factories near the Beximco Group's industrial enclaves are prone to the risk of labour unrest because of the layoff of 40,000 workers across the textile and garment units of Beximco.

Incidents of labour unrest have been taking place in factories whose owners are absconding on allegations of either corruption or money laundering.

The paper said a section of vested groups instigates the workers and students. This often deteriorates law and order and creates public suffering in industrial zones, it added.

The financial sector is also at risk because of the massive buildup of default loans.

Some 10 banks are at high risk due to mismanagement by the previous government, said the finance ministry paper, adding that authorities have appointed international firms to review the asset quality of banks.

At a press briefing after the meeting, Shafiqul Alam, press secretary to the CA, said the chief adviser asked the BB governor to ensure the autonomy of the central bank as soon as possible.

The BB has stopped all kinds of fresh recruitment until now, he added.

Alam said the government has been trying not to take on any unnecessary and less important projects anymore.

Citing the finance ministry paper, he said that major economic indicators are showing positive signs.

For instance, exports grew by 10 percent year-on-year, imports were increasing, jobs were being created, and inflation had come down to single digits.

Inflation decreased because of the hike in the interest rate, and it is expected that inflation will come down to 7.5 percent by July of this year, said Alam.

Furthermore, the government has taken some measures, such as a contractionary monetary policy and a conducive revenue policy, to arrest high inflationary pressure, he added.​

 

[Saif]

Supply chain disruptions thwart inflation fight

Bangladesh has adopted measures to curb inflation, including tighter spending controls and higher interest rates, but deep-rooted supply chain bottlenecks continue to drive up prices for essential goods, according to a report from the Finance Division.

www.thedailystar.net

Supply chain disruptions thwart inflation fight
Says govt report, recommends special mobile courts to fix bottlenecks

Bangladesh has adopted measures to curb inflation, including tighter spending controls and higher interest rates, but deep-rooted supply chain bottlenecks continue to drive up prices for essential goods, according to a report from the Finance Division.

The report shared by the chief adviser's press wing to the media yesterday recommended that these structural issues will require long-term solutions, even as inflation shows signs of easing.

Inflation, which surpassed 11 percent in July 2024, declined to 9.94 percent in January 2025. Food prices -- a major driver of inflation -- followed a similar trend, dropping from 12.92 percent in December 2024 to 10.72 percent in January this year.

Despite this progress, the report identifies supply chain inefficiencies as a key factor behind elevated costs, particularly for staples like rice, onions and potatoes.

To stabilise prices, the government should focus on improving storage and distribution networks for key commodities, the report suggested.

The report also recommends plans to conduct special mobile court drives at the district level to monitor and prevent price manipulation. It also calls for enhanced cold storage facilities and stricter oversight of food stockpiles.

Besides, the Bangladesh Competition Commission must be strengthened to prevent unfair market practices, with potential expansions to district-level operations under consideration.

"Although political shifts in 2024 brought some degree of economic uncertainty, the adoption of carefully planned monetary and fiscal policies by the interim government has resulted in positive developments in the economy," the Finance Division said in the report.

SHORT-TERM RELIEF EFFORTS

The government has rolled out several immediate measures to ease the price pressure on consumers. According to the report, subsidised sales of essential goods, including rice and cooking oil, are being conducted through Open Market Sales (OMS) in major urban areas.

As many as 1 crore families now benefit from subsidised food distributed through "family cards".

The government has also reduced import duties and taxes on key items like onions, potatoes, and edible oil to soften the impact of global price fluctuations.

Besides, public spending on non-essential projects has been trimmed to prioritise relief measures and ensure the availability of essential items.

Alongside supply-side efforts, the government has adopted contractionary monetary policies to temper inflation.

The central bank raised the repurchase agreement rate incrementally from 8 percent in July 2024 to 10 percent in December last year in an effort to curb excessive demand.

However, inflation remains elevated, signalling ongoing challenges, according to the report.

PATH AHEAD

While the recent decline in inflation offers some relief, the Finance Division report underscores that sustained progress will require addressing supply chain inefficiencies. Inflation is expected to drop to about 8 percent by June.

"Additionally, the external sector is showing signs of stability, which is a promising development," the report said. "If supply chain inefficiencies are effectively addressed, inflation control measures could restore economic momentum."

STRAIN ON FOOD STOCK

Bangladesh is facing significant challenges in maintaining food security due to the devastating impact of floods during the current fiscal year (FY) 2024-25.

The production of Aus and Aman rice has fallen short of targets by 9.55 lakh tonnes and 3.58 lakh tonnes, respectively.

This shortfall has led to a decline in government food stock, which currently stands at around 13 lakh tonnes -- 23.6 percent lower than in the same period last fiscal year.

While the government's effective storage capacity is 21.34 lakh tonnes, this gap highlights the urgency of stabilising food supply systems.

Plans are underway to import an additional 9 lakh tonnes of food grains this fiscal year. Buffer stock capacity for urea fertiliser has also been raised to 8 lakh tonnes, which will remain accessible through March.

Additionally, fertiliser subsidies have been continued, with Tk 28,000 crore allocated in the revised budget to stabilise fertiliser prices.

The government had made a separate allocation of Tk 8,059 crore to keep up food subsidies through programmes, including Open Market Sales and other year-round food assistance efforts.​

 

[Saif]

Economy improves, inflation, bank sector, worker unrest pose risks

The overall economy has been improving for the past six months, but worker unrests, inflation and fragile banking sector still pose risks, according to a Finance Division report released on Sunday...

www.newagebd.net

Economy improves, inflation, bank sector, worker unrest pose risks
Staff Correspondent 09 February, 2025, 23:56

The overall economy has been improving for the past six months, but worker unrests, inflation and fragile banking sector still pose risks, according to a Finance Division report released on Sunday.

The interim government led by Muhammad Yunus assumed power on August 8, 2024, three days after the ouster of Sheikh Hasina-led government amid a mass uprising against her 15 years of authoritarian rule.

Risks of the deterioration in the overall economic situation in the wake of regime change have been checked because of prudent monetary and revenue policies over the past six months, said the report submitted at a meeting presided over by the chief adviser at his Tejgaon office in the capital Dhaka.

Yunus instructed that individuals involved in bank robberies and those facing specific allegations against them must be brought to justice as soon as possible, said the chief adviser’s press secretary, Shafiqul Alam, at a post-meeting briefing at the Foreign Service Academy in the capital.

The meeting took stock of the country’s economy over the past six months.

The economy is recovering due to various measures taken by the interim government, said the press secretary adding that exports had increased by 10 per cent over the past five months.

The Finance Division report said that signs of improvement in the overall economy were visible as the inflation rate was falling from 10 per cent and was expected to come down to 8 per cent in June.

Noting that the external side is also signalling improvements, the report recommended overcoming flaws in the supply chain management to revive the economic activities across the board.

The report titled ‘Bangladesh economy: recent development and tasks ahead’ feared that worker unrests in the industrial sector and the scam-hit financial sector still posed risks.

It recommended clearing the payment of workers by selling the closed factories of BEXIMCO and the joint monitoring by police and intelligence agencies to check spill-over of the worker unrests.

The report also laid importance on bringing back discipline in the financial sector, especially the banking sector facing risks because of mismanagement by the past Awami League regime and ballooning non-performing loans.

Ten banks are at serious risks, said the report without naming the banks.

The report recommended providing liquidity supports to problem banks to enhance the confidence of depositors.

It also recommended making law department of banks powerful so that looted money of the banks could be recovered.

Recommending bolstering international efforts for bringing back the money stolen during the AL regime, the report suggested the continuation of monitoring of the trade-based letters of credit.

The report also focused on the country’s food and energy sectors, highlighting the steps taken in the past six months.

To ensure food security, the decision on importing additional nine million tonnes of grain has been made in the wake of 13 million tonnes less production of aus and aman than the estimate due to two rounds of flood.

For maintenance of the country’s energy security, the report said that the budgetary subsidy in the current budget had been increased to Tk 62,000 crore from Tk 40,000 crore to clear the arrears on power and gas.

The report recommended the automation of incomes and value-added-tax to generate more revenue to pull up the falling tax-GDP ratio to 8 per cent.​

 

[Saif]

Economy rebounding notably, policymakers tell CA

The top echelon of Bangladesh's present financial policymakers has noted that the economy, which endured stresses for long following mismanagement by the previous regime, now bounced back significantly. They made their observations at a summit-level meeting Sunday on 'economic challenges and next

thefinancialexpress.com.bd

Economy rebounding notably, policymakers tell CA
Inflation to ease to 7-8pc by June
FE REPORT
Published :
Feb 10, 2025 00:43
Updated :
Feb 10, 2025 00:43

The top echelon of Bangladesh's present financial policymakers has noted that the economy, which endured stresses for long following mismanagement by the previous regime, now bounced back significantly.

They made their observations at a summit-level meeting Sunday on 'economic challenges and next steps', chaired by Chief Adviser Dr Muhammad Yunus.

After the stocktaking meeting was over, Shafiqul Alam, Press Secretary to the CA, apprised journalists in a media briefing about the discussions and decisions that also covered government actions for coming to grips with post-uprising law-and-order situation across the country.

Presentations on a string of economic and fiscal issues like inflation, export, import, foreign trade, and food and energy security were made in the meeting after which the chief adviser expressed his satisfaction over the performances on the economy with an observation: "We need to do better."

On the crucial issue of inflation, the meeting was told that during July last year, the average inflation rose above 11 per cent on a point-to-point basis, but it slid to 9.94 per cent in January this year.

"The government is expecting that due to the steps taken by it the inflation can be reduced to 7.0 to 8.0 per cent by June this year," Mr Shafiq told the media.

The CA was told in the meeting that gross domestic product (GDP) growth in the last fiscal was 4.22 per cent against the provisional estimate of 5.8 per cent.

The GDP size of the country in the last fiscal was 450 billion US dollars though it was estimated at $459 billion.

Similarly, the per-capita Gross National Income was finalised at 2738 dollars against the estimated $2784.

In the meeting the head of interim government directed the authorities concerned to ensure full autonomy of the central bank as soon as possible, and in response, the Bangladesh Bank Governor, Dr Ahsan H Mansur, told him that steps were underway in this regard.

The governor also mentioned that all kinds of hiring and recruitment in the central bank stayed suspended for the time being.

The meeting was told that due to the "plundering by oligarchs" during the past regime, 10 banks were in vulnerable condition but through constant monitoring by the central bank two of them showed signs of recovery.

The default loan in the banking sector stood at Tk2.84 trillion (284,977 crore) in September 2024.

The meeting also discussed the issue of bringing back the laundered money and it was told that the government is in discussion with several countries to repatriate the money through standard procedure.

Dr Yunus told the meeting those who were involved in laundering money must be brought to book, and in response, he was informed that 12 business groups were identified as the main perpetrators.

Already, all the assets of S Alam Group, one of the main oligarchs of the ousted regime, were expropriated, the BB informed the meeting.

Finance Adviser Dr Saleh Uddin Ahmed noted that the country gets back the macroeconomic stability and the situation is expected to improve further, the press secretary said.

The meeting was also told that with rising exports and employment, easing inflation, and improved balance-of-payments situation the economy will perform better in coming days.

"The government step to introduce tighter and contractionary monetary policy and enhance the rates on policy instruments coupled with supply of necessary commodities to poor people through safety-net programmes resulted in the easing of inflation," the meeting noted.

However, responding to a question on the CPD remark that the interim government had failed to take any significant step to revive the economy, the press secretary said easing of inflation and rise in exports resulted from the steps of the government.

The press secretary informed that the long standing issue of land mutation of the Korean EPZ in Chittagong was resolved by this government as the government handed over the mutation documents to the KEPZ authorities on Thursday.

"Many global giants like Samsung could not invest in this EPZ in a bigger way due to the mutation problem, which was not resolved by the previous regime," he said, adding that the oligarchs of the previous regime had "an ill intention to grab this land" and that is why the KEPZ problem was not resolved.

The meeting also dwelled on the latest law-and-order situation, in the wake of some troubles, and a coordinated crime-control action under a recently proposed command centre of forces. The government has just launched a countrywide drive codenamed 'Operation Devil Hunt'.

"The Command Centre under home ministry will roll out today where representatives of all the security agencies attached to the home ministry will be included. Even representatives of the armed forces will be there," Mr Shafiq said, adding that this centre will keep constant monitoring of the activities of the law enforcers in a bid to improve the law-and-order situation.​

 

[Saif]

Key economic sectors expand faster

Bangladesh's key economic sectors expanded faster month- on-month in January, as reflected in the Bangladesh Purchasing Managers' Index (PMI) that recorded a reading of 65.7, up 4.0 points from December's. The PMI provides a snapshot of economic activity, with a reading above 50 indicating expan

thefinancialexpress.com.bd

Key economic sectors expand faster
January expansion index reading 65.7pt
FE REPORT
Published :
Feb 10, 2025 00:44
Updated :
Feb 10, 2025 00:44

Bangladesh's key economic sectors expanded faster month- on-month in January, as reflected in the Bangladesh Purchasing Managers' Index (PMI) that recorded a reading of 65.7, up 4.0 points from December's.

The PMI provides a snapshot of economic activity, with a reading above 50 indicating expansion, below 50 signalling contraction, and 50 representing stagnation.

The latest reading was driven by stronger expansion in agriculture, construction, and services, while the manufacturing sector experienced a slower expansion.

However, the PMI report predicts that future economic momentum will depend on political stability, particularly regarding the timeline and roadmap for a transition to an elected government.

The agriculture sector recorded its fourth consecutive month of expansion, with a faster expansion in business activity. Both new business-and order-backlog indices returned onto expansion territory.

However, the employment index fell into contraction, while input costs expanded at a slower rate.

As for manufacturing, the sector posted its fifth consecutive month of expansion, but at a slower pace. Indicators for new orders, new exports, factory output, input purchases, imports, input prices, and supplier deliveries showed slower expansion.

The finished-goods index accelerated, while the employment index returned to expansion, and order backlogs contracted at a slower rate.

Construction sector recorded its second month of expansion at a faster pace, with stronger growth in new business, construction activity, and input costs.

However, the employment index moved into contraction, and the order-backlog index showed a faster contraction.

Services sector expanded for the fourth consecutive month, with a faster expansion in new business, business activity, employment, and order backlogs. The input- cost index also rebounded.

"The latest PMI readings indicate that the economy remains on an expansion track for the fourth consecutive month, likely driven by growing exports, seasonal consumption trends, and improvements in the agro-supply chain," says a press release on the PMI.

However, new business investments and expansion confidence remain weak, particularly among firms catering to the domestic market.

"This is attributed to sluggish demand, rising business costs, and energy-supply disruptions."

The Bangladesh PMI was launched in 2024 by the Metropolitan Chamber of Commerce and Industry (MCCI) and Policy Exchange Bangladesh, in collaboration with the Singapore Institute of Purchasing & Materials Management (SIPMM) and supported by UK International Development.

The index covers key economic sectors and is based on monthly surveys of over 500 private-sector enterprises. The survey measures changes in business activity compared to the previous month using the diffusion-index methodology, aggregating responses across various economic indicators. The methodology was developed by SIPMM, with technical support from Policy Exchange.​

 

[Saif]

BB keeps policy stance tight to tame inflation

The Bangladesh Bank (BB) has maintained its tight monetary policy stance for the second half of the current fiscal year (FY) 2024-25 to tame the stubbornly high inflation.

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BB keeps policy stance tight to tame inflation

The Bangladesh Bank (BB) has maintained its tight monetary policy stance for the second half of the current fiscal year (FY) 2024-25 to tame the stubbornly high inflation.

To this end, the policy interest rate, a key tool of monetary policy, has been kept unchanged at 10 percent for the January-June period of FY25.

Besides, the standing deposit facility (SDF) and standing lending facility (SLF) rates -- at which commercial banks deposit with and borrow from the BB -- will remain at 8.5 percent and 11.5 percent, respectively.

During the announcement of the Monetary Policy Statement (MPS) at the BB headquarters in Dhaka yesterday, central bank Governor Ahsan H Mansur said that contractionary measures would continue until the desired level of inflation is achieved.

The governor said that the central bank kept the policy rate unchanged as inflation has begun to decline slightly. Price pressures, which crossed 11 percent in July 2024, fell to 9.94 percent in January 2025.

"We are now seeing the result of the tight monetary stance," said Mansur, adding that such results usually take six months to one year to become visible in other countries. "Therefore, it would take 12 to 18 months for us to achieve the target."

Inflation declined in December and further in January this year. We expect it would drop consistently in upcoming months.— Ahsan H Mansur Governor of Bangladesh Bank.

Inflation declined in December and further in January this year. The BB governor hoped that it would continue to decline consistently in the coming months.

"Our expectation is to bring down inflation to 7-8 percent by the end of June this year and we still stand by our expectation," he said.

The central bank has been raising the policy rate for nearly two and a half years since May 2022 in its battle against spiralling prices, which have eroded people's purchasing power and affected domestic demand.

Mansur, who assumed the role of central bank governor in August last year after the political changeover, has raised the policy rate, or repo rate, three times.

In December last year, the International Monetary Fund (IMF) said that near-term policy tightening is crucial to address the emerging external financing gap and persistently high inflation.

The BB expects the country's gross domestic product (GDP) growth in the current fiscal year to decelerate to 4-5 percent, due mainly to natural and industrial disruptions.

While replying to a query, the BB governor said the current situation is not for growth, as the government is now focusing its efforts on containing high inflation.

He also said that exchange rate stability is a must for economic stability, as the inflation target cannot be achieved without it. "As a result, the central bank is now also emphasising its attention on stabilising the exchange rate."

According to the governor, the banking regulator has already been able to stabilise the exchange rate, as the balance of payments is now in a stable position.

The difference between supply and demand would not widen ahead of Ramadan, he mentioned, saying that a huge number of letters of credit (LCs) have already been opened for importing goods and essential commodities for the month of fasting.

"The seasonal demand has already slowed this month," said the BB governor.

For the second half of FY25, the target for private sector credit growth has been increased to 9.8 percent. As of December last year, private sector credit growth stood at 7.3 percent.

Credit to the public sector decreased to 17.5 percent from an actual 18.1 percent as of December last year, according to the MPS.

While highlighting good governance in the banking sector, the MPS outlined the initiative for an asset quality assessment review programme to evaluate the scope and scale of banks' tangible assets, providing essential data for future policy adjustments.

Addressing this issue, the BB governor said both banks and the regulator share the responsibility of ensuring good governance in the banking sector.

"If there is poor governance within banks, external oversight alone cannot keep them in check. If a bank deliberately mismanages itself, no regulatory body can force it to perform well. Yes, we can shut it down or take legal action, but by that time, the damage will already be done."

CONTRACTIONARY POLICY WORRIES BUSINESSES

In its immediate reaction, the Dhaka Chamber of Commerce & Industry (DCCI) expressed concern over the decision to maintain a contractionary monetary policy.

"While aimed at curbing inflation, this rigid stance hampers private sector credit growth and economic expansion. The private sector relies heavily on banks for investment and high interest rates raise production costs and fuel inflation," said the DCCI.

Ashraf Ahmed, a former president of the DCCI, said the latest MPS maintains a high interest rate and tight liquidity regime, while public borrowing is crowding out the private sector.

"Private sector credit growth is already lower than inflation. A combination of high interest rates and constrained working capital supply could possibly lead to higher non-performing loans (NPLs), economic growth of less than 4 percent and job losses."

Zahid Hussain, former lead economist at the World Bank Dhaka office, said maintaining a tight monetary policy is indeed justified, though the business community prefers a more lenient approach.

"The BB cannot afford such a risk with inflation rates remaining unacceptably high. Non-food prices have risen every month for the past three months, mirroring the trend from the previous year, indicating that inflation has become endemic."

However, he cautioned that maintaining a 10 percent policy rate for an extended period cannot be the sole strategy to blunt inflation. "Effective inflation management necessitates coordination with other economic policies, such as fiscal policy and market management."

Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, said further tightening of the monetary framework is unnecessary.

He said the government needs to be cautious, as ongoing political instability could lead to supply chain disruptions, which might complicate the price pressure management.

[Md Asaduz Zaman and Jagaran Chakma contributed to the report.]​

 

[Saif]

Too many weak firms get through IPO net

More than two-thirds of companies that got listed on the stock market in the last 14 years were subsequently downgraded to lower categories, with many turning into junk stocks soon after listing.

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Too many weak firms get through IPO net

More than two-thirds of companies that got listed on the stock market in the last 14 years were subsequently downgraded to lower categories, with many turning into junk stocks soon after listing.

This has led market analysts to question their motivation for listing: were these decisions sound, or did they go public when they were already on the brink of financial meltdown?

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For a better understanding, consider the case of Sikder Insurance -- the non-life insurer that holds the record for being downgraded to junk status within just one year of its market listing.

The Dhaka Stock Exchange (DSE) expressed reservations about the listing of Sikder Insurance.

The objection was well-founded, given factors such as the insurer's heavy investment in the loss-making National Bank -- a company owned by its sponsors, and its lower-than-required investment in government T-bonds.

Both actions violate respective laws.

In 2022, Sikder Insurance invested Tk 132 crore, or 73 percent of its total assets, in National Bank, which was already classified as junk stock.

However, Insurance Development and Regulatory Authority (Idra) rules prohibit non-life insurance companies from investing more than 5 percent of their assets in a single stock.

In the same year of 2022, National Bank reported a record loss of Tk 3,260 crore, with 25 percent of its total loans classified as non-performing.

In contrast to National Bank, Sikder Insurance invested only Tk 2.5 crore, or 1.37 percent of its assets, in government treasury bonds -- far below the required minimum of 7.5 percent.

The DSE flagged in its report to the Bangladesh Securities and Exchange Commission (BSEC) that it was not convinced about the listing.

But the company was approved to go public in 2023.

After its listing in 2024, Sikder Insurance announced a 3 percent cash dividend in June, but failed to disburse it. As a result, its stock was downgraded to Z-category.

Even if the company manages to distribute the dividend, it will only be upgraded to B-category, as a minimum 10 percent cash dividend is required for A-category status.

An analysis of the insurer's 2023 financial report showed that its problematic investment in National Bank remains unchanged.

Since National Bank has not paid dividends for four years, Sikder Insurance's earnings from its primary investment source remain zero.

Besides, the company has not increased its investment in treasury bonds, continuing to flout regulatory requirements.

The Sikder case is not an isolated incident. Many other companies show similar IPO-related issues, raising questions about the stock regulator's due diligence in approving listings.

For instance, Apollo Ispat, whose flagship product "Rani Marka Dheu Tin", had already lost market relevance before its listing on the DSE.

Despite this, BSEC approved its IPO at a premium of Tk 12 per share, only for the company to decline into junk status within a few years.

On Thursday, the stock of Apollo Ispat traded at Tk 3.80.

'ROTTEN STOCKS'

Former BSEC chairman Faruq Ahmad Siddiqi said that these companies should never have been approved for listing, as their financials clearly indicated their businesses were in trouble.

According to DSE data, BSEC has approved 132 companies for listing, transitioning them from private to public entities over the last 14 years. However, nearly one-fourth of these companies have since become junk stocks.

Of the 132 companies approved, only 50 remain in A-category, while 43 have been downgraded to B-category and 38 have fallen to Z-category. One company was merged with another listed company.

Siddiqi said that the BSEC should be held accountable for approving so many questionable IPOs over the past decade.

"This is the right time to do it," he said.

He suggested that regulators should conduct case-by-case inquiries to assess whether struggling companies are failing due to genuine business challenges or mismanagement and poor financial decisions.

Companies with no recovery potential should be liquidated, he added.

Saiful Islam, president of the DSE Brokers Association, said that "the impact of these types of rotten stocks is long-term."

Even if some of these IPOs were approved under political pressure, now is the time to delist underperforming companies, he commented.

According to Islam, flawed listing regulations make delisting a lengthy and complicated process.

He called for easier listing and delisting procedures to prevent poorly performing companies from dragging down the market for years.

He added that although delisting such companies may cause losses for some investors, there is no benefit in holding stocks where major assets are at risk.

WILL THE REGULATOR TAKE NOTE?

The value of Sikder Insurance's investment in National Bank has already dropped by 50 percent since 2022.

Md Jakir Hossain, a stock investor, admitted that he did not analyse the company's financials before investing in its IPO.

He assumed that a company wouldn't become junk overnight and that it should take at least a few years to be downgraded.

Contacted, BSEC spokesperson Rejaul Karim said that insurance companies are required by law to be listed and that Sikder Insurance met the public issue rules at the time of approval.

"In IPO approval, the regulator sees whether the company followed the public issue rules properly," he said.

However, he admitted that BSEC is now more cautious to prevent poor-performing companies from receiving IPO approvals.

In 2021, BSEC intervened by restructuring the boards of several underperforming companies, but none of them have fully recovered.

Karim said if the stock market taskforce formed by the interim government makes recommendations regarding these struggling companies, the regulator will analyse the cases and take action.

Abdur Razzak, company secretary of Sikder Insurance, said the insurer has already paid most of its announced dividend and expects to be upgraded to B-category soon.

He admitted that the company -- whose stock traded at Tk 21.90 on Thursday -- has not received any dividends from its major investment in National Bank but defended the decision not to sell its shares, citing the current low market price.

He also said that their buying price was around Tk 10 per share, while National Bank shares are now trading below Tk 5.​