[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Higher remittance makes only difference

The higher inflow of remittance on the back of a slim export growth is the major exception amid deterioration of other major economic indicators during the first quarter of the current financial year...

www.newagebd.net

Higher remittance makes only difference
Shakhawat Hossain 09 November, 2024, 00:22

The higher inflow of remittance on the back of a slim export growth is the major exception amid deterioration of other major economic indicators during the first quarter of the current financial year marked by the historic regime change.

Economists observe that the incumbent interim government led by Nobel laureate professor Muhammad Yunus is facing trying times in taming the prolonged high inflation and bringing back economy on track after assuming power at a critical juncture marked by the faltering growth in gross domestic product at 3.91 per cent in the April–June quarter of FY24.

The April–June growth rate was the lowest in the past five quarters due to late contractionary monetary policy adoption following the implementation of flawed and expansionary policies for years by the Sheikh Hasina-led Awami League regime ousted amid a student-led mass uprising on August 5.

With the interim government struggling to stabilise the law and order and the civil administration, the higher flow of remittance registering 38 per cent growth in August, and 80 per cent growth in September on a year-on-year basis brought some relief for the government.

Besides, a 5.04 per cent growth on export earnings in the first quarter—July–September period—of FY25 from 4.34 per cent negative growth in FY24 reduced pressure on forex reserves hovering around $20 billion and also on the current account balance.

But hardly any improvement has been recorded in the sluggish imports of consumer goods, capital machinery and intermediate goods, according to the ‘Weekly selected economic indicators’ released by Bangladesh Bank on October 31.

In the July–September period, the import of consumer goods decreased by 17 per cent compared with the same period of FY24; the import of capital goods saw a decrease by 24 per cent; and intermediate goods by 13.38 per cent. The scenario signals inertia in fresh business investments amid the ongoing political uncertainty and shortage of energy and power, observes former World Bank Dhaka office chief economist Zahid Hussain.

The change is huge, he continues, and has shaken the crucial baking sector following revamping of a dozen of banks’ boards, including the largest private commercial bank, Islami Bank Bangladesh Limited, securing their control from the S Alam Group, one of the most closest cronies of the previous Awami League regime.

Leakages from the banking sector have been checked, but the interim government still faces challenges to bring back the overall economy on track, according to Zahid Hussain.

Echoing Zahid, the Institute for Inclusive Finance and Development executive director Mustafa K Mujeri said that average inflation remained high at around 10 per cent in the past three months.

The interim government has cut import duties on essential goods, including main staple rice, to 25 per cent from previous 62 per cent after flash floods and massive rain in August–September affecting the cultivation of Aman, country’s second largest rice crop.

The supply situation needed improvement by removing others barriers, including extortions, MK Mujeri stressed.

To check the persistent high inflation, the central bank is also tightening the flow of money by raising interest rates, which according to businesses, discouraging for investment and private sector employment.

In October, the general inflation returned to double digit at 10.87 per cent, after it somewhat eased in September, which was 9.92 per cent.

The October food inflation recorded at 12.66 per cent by the Bangladesh Bureau of Statistics was the main factor behind that month’s rise in general inflation.

Inflation that has been prevailing at a decade-high since 2023 had hit 11.27 per cent in July, and was recorded at 10.49 per cent in August when the interim government assumed power after the fall of the Awami regime.

The private sector credit growth in the country already dropped to 9.86 per cent in August from 10.13 per cent in July amid turmoil in the banking sector and business environment.

The ‘Bangladesh Development Update’ released by the World Bank in the past month viewed that factors, including inflation, external pressure, financial sector vulnerabilities, and political uncertainty, would continue to put pressure on the country’s economy in the current FY25.

The finance ministry is mulling to cut the overall national budget of FY25 by around Tk 70,000 crore, mainly from the development allocations to offset possible revenue losses.

The National Board of Revenue’s income in the July–September of FY25 recorded 6 per cent negative compared with the income during the same period of FY24.

M Masrur Reaz, chairman and chief executive officer of think tank Policy Exchange Bangladesh, said that the foreign direct investment, export and small and medium entrepreneurs should get equal priority from the interim government.

Confidence of foreign investors needed worked upon since the foreign direct investment hit 8.80 per cent negative in FY24 from that in FY23, he said.

Besides, efforts were urgent to check factory unrest to increase the export growth, while support should be given to the small and medium entrepreneurs accounting for at least one fourth of the country’s GDP.​

 

[Saif]

Prioritising Economic Zones

The immediate past regime planned to launch 100 Economic Zones (EZs) across the country mostly on personal, political and other considerations. To that end, the Bangladesh Economic Zone Authority (BEZA), an agency to operate under the Prime Minister's Office (PMO), was created in 2010 to manage the

thefinancialexpress.com.bd

Prioritising Economic Zones
FE
Published :
Nov 12, 2024 21:39
Updated :
Nov 12, 2024 21:39

The immediate past regime planned to launch 100 Economic Zones (EZs) across the country mostly on personal, political and other considerations. To that end, the Bangladesh Economic Zone Authority (BEZA), an agency to operate under the Prime Minister's Office (PMO), was created in 2010 to manage the Economic Zones (EZs). In 2015, BEZA rolled out this highly ambitious plan of setting up so many industrial enclaves with the target of operationalising them by 2030 and gave approval to as many as 97 EZs, of which 68 were government-owned and the rest 29 were to be run privately. But given the bureaucratic sloth, the history of time overruns regarding initiation and implementation of development projects, and not to mention the complexities involved in land acquisition, activating such a large number of EZs by the set deadline of (2030) proved impractical. Also, the EZs in most cases failed to draw investors due to inappropriate site selection, among other reasons. Only a few including the Bangabandhu Shilpa Nagar in Mirsarai of Chattogram, the Japanese Economic Zone at Araihazar in Narayanganj and the Srihatta Economic Zone in Moulvibazar, for instance, could make any visible progress. In all, only 10 EZs, about 10 per cent of the total envisaged economic zones, could finally get off the ground before the previous government's ouster.

However, the interim government, according to a recent FE report, is going to take a selective approach to EZs on the basis of viability. It is going to select a smaller number of government-owned EZs and fast-track their development with clearly defined timelines in keeping with the requirements of the investors. Out of the EZs identified by the past regime, the ones that might find themselves in the priority list as prepared by the interim government include the National Special Economic Zones in Mirsarai, Sitakunda and Feni, Jamalpur, Srihatta, Moheshkhali and Sabrang Tourism Park.

Given the experience gathered on this score in the past, especially during the previous government, the investors are better given the opportunity to choose the industrial enclaves they want to invest in. In this connection, some experts are of the view that before actually prioritising the EZ plots, the BEZA might well carry out a survey to assess the investors' point of view in this regard. To have a better understanding of what particularly discouraged the potential investors in majority of the EZs opened up for them by the previous government, the new executive chairman of BEZA appointed by the interim government should have exchange of views with them. At the same time, he should listen to the complaints and grievances of the entrepreneurs who did finally invest in the EZ sites awarded to them by the deposed previous government and take early measures to address their problems.

In fact, the emphasis of the interim government should be on not to repeat the mistakes the previous government committed in this regard. Notably, many investors in the EZs are learnt to have complained that the previous government failed to provide the promised facilities including utility connections. Even some were not duly informed of the VAT they had ultimately to pay against the land allotted to them to set up their ventures. So, the main focus of the interim government should be on building trust with potential entrepreneurs who might feel confident to put their money in selected EZs.​

 

[Saif]

BEZA gets the priority right

It is good to see that the current government is sticking to its promise of moving away from multiple mega projects involving billions of dollars in foreign loans. The previous government had the grand plan of setting up nearly 100 Special Economic Zones (SEZs). Indeed, the industrial zoning scheme

thefinancialexpress.com.bd

BEZA gets the priority right
Syed Mansur Hashim
Published :
Nov 12, 2024 21:35
Updated :
Nov 12, 2024 21:35

It is good to see that the current government is sticking to its promise of moving away from multiple mega projects involving billions of dollars in foreign loans. The previous government had the grand plan of setting up nearly 100 Special Economic Zones (SEZs). Indeed, the industrial zoning scheme that had been envisaged has effectively been shelved and according to a report published in this newspaper, "developing prioritized zones on fast track with clearly defined timelines" appears to be the plan now.

Even when the grand vision of setting up 100 SEZs had been formulated, economists had raised questions about such an ambitious target. As this plan was not based on reality since foreign direct investment (FDI) has shown dismal growth year-on-year over the last 15 years. So what possessed the previous regime to come up with this fantastic number? As pointed out by a former chief economist of the World Bank, it had everything to do with political preferences, business interests becoming the overriding factor over and above SEZ selection and overlooking investors' desire on whether or not to actually invest in Bangladesh.

Hence the current shift in thinking at policy level concurs with what is actually feasible for the economy and likely FDI commitments that may be made and then developing select zones "on a fast track with clearly defined timelines." Had the previous idea been implemented, it would undoubtedly have landed the country in even greater debt as billions in foreign exchange would have had to be borrowed, much of it from foreign lenders leading to an even greater debt trap.

The new executive chairman of the Bangladesh Economic Zones Authority (BEZA) has gone on record saying that a smaller number of zones would be developed. "We will set specific timelines to address investors' needs in a realistic and achievable way," he adds. "What investors are looking for is a stable fiscal policy, not just tax cuts." The zones expected to receive priority include the National SEZ (Mirsarai, Sitakunda and Feni), Jamalpur, Srihatta, Maheshkhali, and Sabrang Tourism Park.

Indeed, it is not merely a matter of setting up a SEZ. Undoubtedly, investors are interested in state-of-the-art infrastructure, but they will also be looking specifically at the cost of doing business in the country. For years, Bangladesh has scored low on the international indices in this regard and those nagging issues need to be worked out by the BEZA. If need be, the government should think of bringing the exercise of issuing permits and licences under one roof at the BEZA, so that a prospective investor doesn't need to run around all over the place to get required permissions. If policymakers are genuinely serious in attracting greater FDI to the country, these changes must be made.

Again, simply putting up a SEZ with requisite infrastructure and even having a "one stop service" will not be enough. When BEZA authorities talk about conducting a survey amongst investors, it ought to have another survey done because foreign company / industry workers will not simply be working all day and browsing the internet during leisure time. The quality of life for them and their families in the areas where these SEZs will be located needs to be complemented with quality education and entertainment sites. There must be good communication between SEZs and major metropolitan cities so that foreign and local officers and employees can visit their loved ones easily and safely on weekends. These are all doable and if done rightly, there is every reason why SEZs will flourish.​

 

[Saif]

Can Bangladesh reduce income inequality by 2030?

In Bangladesh, challenges hindering the achievement of economic equality are: low public expenditure on education, training, health, rural development and social protection.

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Can Bangladesh reduce income inequality by 2030?

Inequality is the overwhelming centralisation of the decision-making process. PHOTO : REUTERS

The first target under Sustainable Development Goal (SDG) #10 reads, "By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average." This calls upon all nations to bolster the income of the bottom 40 percent of the population by promoting economic, social and political inclusion of all people, irrespective of their sex, age, physical conditions such as disability, religion, race, class, ethnicity, etc. The achievement of this global target requires creating appropriate and equal opportunities, empowerment of women, and reduction of poverty and inequality. The ongoing work of the interim government's public administration and constitutional reform commissions needs a focus on these aspects so that the future elected government may work to fulfil SDG 10, as Bangladesh has only six years in hand to establish substantial improvements on this global goal.

There are data challenges with regard to having a proper understanding of the income inequality situation in Bangladesh. According to UNDP data, the income share of the bottom 40 percent of the country's population is 11 percent. In sharp contrast, for the top 10 percent, the income share is 43 percent. Based on Household Income and Expenditure Survey (HIES), 2022, the income of the bottom 40 percent population grows at 7.7 percent per annum, while the annual growth rate of income of the total population is 9.1 percent. The HIES 2022 shows that the top 10 percent of households increased their share of wealth to 40.91 percent, around 2.83 percent rise since 2016. The bottom 50 percent of the households had 19.05 percent of the total income in 2022, which came down from 20.23 percent in 2016.

Even though the country achieved progress in poverty reduction, the income Gini coefficient has been on the rise. It increased from 0.458 in 2010 to 0.499 in 2022. During the same period, consumption Gini coefficient increased from 0.321 in 2010 to 0.334 in 2022. The data from surveys over the last two decades clearly shows that income and wealth inequality is growing in Bangladesh. Whether we consider the well-known measure, the Gini coefficient, or an alternative measure like the Palma ratio, and compare the income share of the top 10 percent with the income share of the bottom 40 percent, we get the same result, which demonstrates that inequality is consistently rising in our society.

The constitutional commitment of ensuring social and economic equality among the citizens of the country can sustain without resulting in major social and political unrest. However, there is no reason to assume that income and wealth inequality will come down automatically. The common strategic options that are available to reduce inequality are participatory planning and inclusive development, pro-poor budget formulation and implementation, skills development, progressive taxation of income, adoption of appropriate legislation, scrapping of discriminatory laws, realistic minimum wage fixation, improved governance, effective measures against corruption, containment of inflation, promotion of social protection measures, investment in small and medium enterprises, and greater investment in the social sector.

In Bangladesh, the major challenges hindering the achievement of economic and social equality are: low public expenditure on education, training, health, rural development and social protection; poor direct tax collection and a culture of tax evasion; high level of selection error in social protection schemes; and high percentage (12.6 percent) of female-headed households with limited assets and means of production. The benefits of economic growth in the country have gone to the upper-income groups while the poor remain marginalised. The "pro-poor growth" concept is not being applied properly. Programmes and projects that benefit the poor need to be taken up in a greater number. Micro-credit and SME loans should be increased to help accumulate assets of small entrepreneurs and create additional employment in the formal sector. The high inclusion and exclusion errors in the social protection programmes must be corrected through a bold and one-time correction of the beneficiary list. Irregularities in the banking sector, money laundering, and tax evasion must be curbed with a strong hand. Health and nutritional services must be freed from corruption and mismanagement, so that the vulnerable population gain access to the benefits of these public services.

A vital issue that exacerbates inequality is the overwhelming centralisation of the decision-making process. The politician-bureaucracy nexus is strong, and this keeps people out from participating in the governance process. Unless the attitude of the politicians, bureaucrats and policymakers change towards a more people-centric approach in planning and development as well as local governance, the level of inequality is unlikely to come down in the near future. Additionally, the political parties should be committed to the greater good of the general people instead of continuing the culture of benefiting a select few, and adopt social-democratic norms for economic development with strong emphasis on securing socioeconomic equality in the country.

Dr Nawshad Ahmed, a retired UN official, is an economist and urban planner.​

 

[Saif]

Removing hurdles to investment in SEZs

An economic zone, by definition, is a special designated area within a country's national borders. It is created with its own set of applicable laws to encourage and enhance business and trade investment, and job creation. The primary reason behind setting up such a zone is the desire to attract fo

thefinancialexpress.com.bd

Removing hurdles to investment in SEZs
Atiqul Kabir Tuhin
Published :
Nov 13, 2024 21:29
Updated :
Nov 13, 2024 21:29

An economic zone, by definition, is a special designated area within a country's national borders. It is created with its own set of applicable laws to encourage and enhance business and trade investment, and job creation. The primary reason behind setting up such a zone is the desire to attract foreign direct investment. Free zones have been popular and used for centuries to guarantee free storage and exchange along trade routes.

Modern economic zones, however, developed only in the late 1950s, initially in industrialised nations. Notable early examples include the SEZ at Shannon Airport in Clare, Ireland, and, in the 1970s, zones in Latin America and East Asia focused on labour-intensive manufacturing. China's first SEZ, the Shenzhen Special Economic Zone, was established in 1979 under Deng Xiaoping, attracting multinational investment and accelerating industrialisation in the region. These zones attracted investment from multinational corporations.

Inspired by the economic promise of SEZs, the former Awami League government launched an ambitious plan to establish 100 economic zones on 75,000 acres of land across the country by 2030. The government envisioned these zones would create 10 million jobs and generate USD 40 billion in goods and services. The vision was overly optimistic. To make matters worse, the plan was driven by political interests and corruption rather than economic viability and benefit to the people.

Consequently, despite much talk about establishing 100 economic zones, the deposed government, over a span of 15 years, made visible progress in only a few projects-such as Bangabandhu Shilpanagar in Chittagong, the Japanese Economic Zone in Narayanganj, and the Srihatta Economic Zone in Moulvibazar-while work on the vast majority remains stalled or never began.

One notable example of a misguided and whimsical approval of economic zone can be found in the Netrakona SEZ. Sajjadul Hasan, who served as the private secretary (PS) to Prime Minister Sheikh Hasina from 2015 to 2018, allegedly used his influence to secure government approval for an economic zone in his home district, Netrakona. In 2018, during a visit to Mymensingh, Prime Minister Hasina laid the foundation stone for the Netrakona SEZ, a 1.5 billion taka project. Nine years on, there has been little progress, with officials from the Bangladesh Economic Zones Authority (BEZA) now expressing doubts about its financial viability, citing political pressure as the reason for its initial approval. This is just one example among many. Reports indicate that former ministers, secretaries, and politicians have pushed through around 30 economically unviable economic zones, which has now become an albatross around the government's neck.

Speaking to the media, Ashik Chowdhury, Executive Chairman of the Bangladesh Economic Zones Authority (BEZA), recently stated that the authority will concentrate on a smaller number of government zones to better meet investors' demands. This recalibrated strategy, supported by the new leadership of two investment-promotion agencies-BEZA and the Bangladesh Investment Development Authority (BIDA)-will focus on developing a set of prioritised zones on a fast track with clearly defined timelines. Concentrating on fewer, high-potential zones offers a more sustainable approach to developing SEZs.

Apart from planned development of SEZs, Bangladesh has still a long way to go in increasing ease of doing business to attract a healthy flow of foreign investment. Vietnam's success in attracting foreign direct investment (FDI) stands in stark contrast to Bangladesh's performance. In the first eight months of this year, Vietnam secured $14 billion in FDI, while Bangladesh could not attract even a billion dollars. In Bangladesh, investors face a series of obstacles; chief among them is bureaucratic red tape. For example, in Vietnam, a new company can be up and running in just seven days; but in Bangladesh, the same process could drag on for seven months. The bureaucratic hurdles that plague businesses in Bangladesh must be addressed to create a more investor-friendly environment.

The launch of the One Stop Service (OSS) by BEZA and BIDA to support both local and foreign investors had raised high expectations about Bangladesh's investment climate. However, progress towards achieving these goals has fallen far short of expectations. While some advancements in enhancing its systems and processes has been made, OSS remains far from functioning as a true "one-stop service" for investors. Currently, investors require access to as many as 155 services across 44 institutions for tasks such as company registration, land acquisition, and utility services. Yet BIDA and BEZA can only expedite around 60 services from 23 institutions. For the remaining services, investors must still navigate cumbersome bureaucratic processes in various government offices, as the two regulatory bodies have yet to establish agreements with all service-providing agencies.

Regrettably, in many government offices, bribery remains the only way to move files from one desk to the next. For foreign investors, bribery and corruption presents an even more complex challenge, as they risk accountability in their home countries if found to have engaged in corrupt practices to establish a business abroad. Not only do they face dismissal but aso jail time. Addressing these issues with meaningful reform is critical if Bangladesh is to cultivate a truly welcoming and efficient investment environment.

Another major challenge for foreign investors is the frequency of policy changes in Bangladesh, which disrupt business operations. While policy adjustments can be necessary, in Bangladesh investors often allege that government resorts to policy flip-flop without even holding dialogue with private sector partners, leading to uncertainty and reducing profitability for investors.

According to a survey by the World Bank and Business Initiative Leading Development (BUILD), 83 per cent of businesses felt that new regulations released without prior consultation are a major barrier, while 67 per cent expressed frustration at rarely receiving feedback on whether their input has been considered in policy-making. Intergovernmental agencies also struggle to coordinate effectively, creating inconsistencies and uncertainty that harm investment competitiveness.

It is worth mentioning that foreign investors have long been demanding a consistent tax policy in Bangladesh. However, tax policy in Bangladesh changes almost every fiscal year, further complicating investors' decision-making and affecting business confidence.

So, while the interim government is planning to streamline SEZ projects, it must also address the underlying issues hindering foreign investment in Bangladesh. By implementing regulatory reforms, improving infrastructure, and ensuring political stability, the government can create a more attractive investment climate. Simply inviting foreign investors without addressing these fundamental issues is unlikely to yield any positive results.​

 

[Saif]

Hastening pace of economic recovery

A sense of uncertainty centring Bangladesh's economic situation has been persisting for months. Policymakers and economists alike are now burning midnight oil to craft suitable measures to stabilise and revive a faltering economy. After assuming power, the interim government has initiated several

thefinancialexpress.com.bd

Hastening pace of economic recovery
Mir Mostafizur Rahaman
Published :
Nov 13, 2024 21:26
Updated :
Nov 13, 2024 21:26

A sense of uncertainty centring Bangladesh's economic situation has been persisting for months. Policymakers and economists alike are now burning midnight oil to craft suitable measures to stabilise and revive a faltering economy.

After assuming power, the interim government has initiated several measures, but a significant boost appears to be elusive, and a few underlying issues are still hampering progress. The roots of the crisis lie undoubtedly in the immediate past style of governance, as a decade of cronyism, rampant money laundering, and large-scale bank embezzlement under the previous regime led to a systemic weakening of financial foundations.

Now, Bangladesh faces the urgent challenge of recovery, but achieving it will require more than reactive policy adjustments -- it will require a bold, coordinated strategy.

Economic experts believe it is high time to address fundamental challenges to growth and devise a pathway to sustainable recovery. However, one obstacle remains evident: much of the governmental machinery is caught up in distractions, focusing on trivial concerns rather than making decisive, strategic efforts to address the economy's most pressing needs. Rather than shuffling chairs on the deck, it's time to focus entirely on turning around the ship.

The current economic landscape presents a grim prospect for many in Bangladesh. Inflation has been steadily climbing, with the cost of essential goods rising month by month. This escalation hits the poor and middle class hardest, igniting fears about the future, as shrinking incomes and depleting savings erode their financial security. The plight of these households, whose purchasing power dwindles daily, reflects the larger contraction gripping the national economy. Without a clear, forceful response to inflation, the crisis may continue to deepen, and the gap between the affluent and the vulnerable will only widen.

The pro-people government, as it calls itself, could seize this opportunity to reduce colonial-style bureaucratic practices and allow people, having grass-root experiences to devise policies.

The Bangladesh Bank has attempted to counter inflation by raising policy interest rates. Yet, rather than easing inflation, this measure has stifled investment, which in turn has stymied business activity and eroded employment opportunities. The resulting atmosphere of economic contraction has deterred entrepreneurs and caused businesses to reduce hiring. Without a vibrant investment climate, Bangladesh risks a prolonged period of stagnation, unable to create the jobs needed for a young and growing workforce. Inflation management, though crucial, should not inadvertently crush the aspirations of small and medium enterprises, which are the backbone of the Bangladesh economy.

On a broader scale, the Annual Development Program (ADP) remains a key tool for economic stimulus, yet it has been mired in inefficiencies. The government has rightly trimmed the ADP to exclude politically motivated, non-essential projects inherited from the previous regime. While this streamlining will reduce the long-term debt burden, the pace of implementation has been slow, potentially derailing immediate recovery efforts. Trimming wasteful spending is sensible, but a delay in executing critical infrastructure projects could exacerbate the economy's sluggishness.

Bangladesh cannot afford complacency. The government should embrace a more holistic strategy that balances macroeconomic stability with micro-level interventions. Traditional bureaucratic approaches to combating inflation are simply insufficient; they do not address the root causes, including market syndicates and extortion practices that continue to disrupt fair competition. A more effective strategy might involve a bottom-up approach, engaging local businesses and communities to tackle price hikes through localised, demand-driven solutions.

At this critical juncture, a transformation in governance practices is also warranted. A more transparent, results-driven public sector approach, rather than top-down control, will better align policy with public need and increase accountability in executing development programs. Reconfiguring leadership structures within the government to promote merit over administrative hierarchy can empower those with the necessary expertise and local knowledge to lead recovery efforts.

Bangladesh stands at a crossroads. With inflation persisting and business activity waning, time is running out to implement the far-reaching changes needed to steer the country out of its economic malaise. Deploying the full force of government resources, both financial and human, toward a resilient recovery is not only prudent but essential.​

 

[Saif]

Govt moves to cut budget size

The interim government is going to curtail its expenditure focusing on the budget for 2024-25 in order to keep fiscal pressure within its control, contain inflation and prevent foreign currency reserves from falling further.

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Govt moves to cut budget size

The interim government is going to curtail its expenditure focusing on the budget for 2024-25 in order to keep fiscal pressure within its control, contain inflation and prevent foreign currency reserves from falling further.

Through a circular, the finance ministry has put a stop to all types of spending for vehicle purchases, land acquisitions, and foreign tours.

Considering necessity, participation in programmes abroad can be allowed. But in that case, concerned officials would have to take permission from the Ministry of Finance.

The government has already initiated a process to prepare a revised budget, for which the circular was issued yesterday. By next January, the size of the revised budget will be finalised.

All budgetary allocations will be cancelled for new buildings except for those in the education, health and agriculture sectors, the circular said.

If over 70 percent of the construction of a building has been completed, the allocation can stay in effect.

The Ministry of Finance told all ministries that the revised budget must be limited to the proposed budget and demand for extra allocation would not be met.

It also ordered an end to fund allocations for unnecessary projects.

However, in case of foreign aid-funded projects, the government ordered to keep the same amount in domestic funds, wherever applicable, so that these projects do not face any problem in implementation.

The circular said electricity, fuel and lubricant allocations would be trimmed to around 80 percent of the existing budget.

Officials from the ministry said the World Bank and International Monetary Fund (IMF) had informed that rising inflation and erosion of foreign currency reserves cannot be tackled solely by a contractionary monetary policy.

Thomas Helbling, deputy director for the Asia Pacific Department of the IMF, earlier this month said fiscal policy should support monetary policy by tightening overall expenses.

"At the same time, they need to rebalance fiscal policy to maintain space to support the poor and support development," he added.

Inflation rose to 10.87 percent in October amid soaring food prices, especially of staples like rice and vegetables.

The foreign exchange reserves of Bangladesh dropped to $18.44 billion on November 13, according to Bangladesh Bank data.

Already, the high-ups of the interim government directed that all politically biased and prestige projects will have to be dropped.

The Ministry of Planning and line ministries are already working in tune with this.

The finance ministry will set the size of the revised budget by January on the basis of support received from development partners.

The national budget for FY25 was proposed to be Tk 797,000 crore.

However, implementation of the development budget has already slowed.

In the first three months of the current fiscal year, development budget expenditure amounted to Tk 13,215 crore, which was Tk 20,609 crore in the same period of the previous year.​

 

[Saif]

Country not in financial crisis, but faces challenges: finance adviser

Finance Adviser Prof Dr Salehuddin Ahmed has said that the country is not in a financial crisis, but there are some political and economic challenges due to the internal and external factors

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Country not in financial crisis, but faces challenges: finance adviser

Finance Adviser Prof Dr Salehuddin Ahmed has said that the country is not in a financial crisis, but there are some political and economic challenges due to the internal and external factors.

He made the remarks while addressing a policy dialogue on "Financial and Economic Reforms in Bangladesh 2024" at Brac University in the capital today.

Brac Business School of the Brac University organised the seminar on its campus in Merul Badda in the city.

The event was addressed by Centre for Policy Dialogue (CPD) distinguished fellow Dr Debapriya Bhattacharya, Commissioner of Bangladesh Securities Exchange Commission (BSEC) Farzana Lalarukh, and Brac Bank CEO and Chairman of Association of Bankers Bangladesh (ABB) Selim RF Hussain.

Dr Salehuddin Ahmed said most of the institutions, specially, the state-owned companies, have been on the brink of collapse. There was no governance and accountability there.

"We're trying to bring good governance which is a big challenge," he said, adding, "But I'm not that much disappointed with the situation as Bangladeshis are very efficient and creative".

He said the government has been working to bring down inflation and create market stability by taking different measures like waving import duties.

"But there are so many factors -- from production to supply chain. The traders have to pay extortions at 16-17 points which push up the prices," he said.

He said due to the middlemen and extortions, for instance, the price of per kg of brinjal goes up to Tk 60 at kitchen market from Tk 10 at the production level due to such middle-interest groups and extortions. All the groups run the extortions in a mutual understanding.

"To stop this extortions and end the middle-interest groups' business, a political solution is needed," he said.

Criticising the previous regime's GDP calculations through wrong data and misinformation, the finance adviser said there was no accountability of the institutions.

He observed that there were many projects for which no feasibility study was conducted. Now it was found that the Indian Adani Group did not pay their taxes in implementing the project.

"We inherited all these and now we're repairing and reforming these with the support of people," he said.

He said this government may not be able to complete all the reforms, but leave a footprint so that the next government can follow and implement it.

Conveying special thanks and appreciation to the Brac University students and teachers for their role in the July-August mass uprising, Dr Debapriya Bhattacharya said that the previous regime has destroyed all the institutions which put the country in the challenges.

"The central bank which was supposed to oversee the banking sector actually helped the looters to loot the banks," he added.

He said the previous government had depicted a growth narrative where all the miss information and disinformation were used. The growth figure was a false figure.

He alleged that the previous Awami League regime politicised the data and information. There was no private investment, but there was GDP growth. The Tax-GDP ratio was not increased. They spent money to show the visible development

He said the previous government intentionally picked up two sectors -- financial sector and the energy sector to loot wealth.

He said an anti-reform and corrupt alliance was created among the corrupt politicians, corrupt businessmen and corrupt bureaucrats to loot the state-wealth.

BSEC Chairman Farzana Lalarukh said that the government has been working to implement reforms in the capital market.

"The first step in this regard is to rebuild the confidence of the investors. We're trying to do that," he added.

He said the BSEC will implement reforms to ensure accountability and transparency through a digital platform.​