[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Augmenting export earnings

Before apportioning blame to others, the businesspeople in the sector should pay a greater attention to bring its own house in order A 10.53 per cent rise in the country's export earnings to $32.94 billion in the first eight months of the current fiscal year on the back of an augmented rem

thefinancialexpress.com.bd

Augmenting export earnings
FE
Published :
Mar 05, 2025 23:17
Updated :
Mar 05, 2025 23:17

Before apportioning blame to others, the businesspeople in the sector should pay a greater attention to bring its own house in order

A 10.53 per cent rise in the country's export earnings to $32.94 billion in the first eight months of the current fiscal year on the back of an augmented remittance received during the same period provides a sense of relief at the time the economy is wobbling. Even the export earnings for this February recorded a 2.27 per cent year-on-year increase to US$3.97 billion compared with US$3.86 billion in the same month the previous year. Not surprisingly, the number one export commodity of the country, readymade garment (RMG) led the way by recording a 10.64 per cent growth. Taking into account the single month's export growth for February, the knitwear sub-sector registered a growth of 1.66 per cent to $3.24 billion compared to the same month the previous year. However, the woven garment articles experienced a slightly negative growth at 0.44 per cent.

The overall export growth during the first eight months of the fiscal year 2024-25, according to the sector's businesspeople, is a proof of the country's 'resilience and competitiveness on the global export market'. It is so because, the sector has defied the labour unrest, scarcity of gas and a lack of cooperation from banks. So far as labour unrest is concerned, it is the dark horses in the sector which have actually perpetuated the problem. With the highest number of leadership in energy and environmental design (LEED)-certified RMG green factories at 235 in the world by January 25, 2025, the country should have been in the forefront of receiving orders and other supports from the international buying platforms like the Alliance and Accord. Both of them played a pivotal role in transforming the safety standard of garment factories here and also transitioning into the green status. But unfortunately, the same impetus is lacking in matters of placing orders, offering higher prices commensurate with the improved status in workplace safety and helping market commodities produced in these factories.

Garment units must take the blame for not streamlining recruitment policies and procedures and solving the endemic labour unrest. Had these fundamental issues been addressed on a priority basis, even the last year's political unrest would not have left an adverse impact so telling. Vietnam has made tremendous gains from the Western world's China-bashing policy and even India has grabbed a good slice of the global garment business. So, before apportioning blame to others, the businesspeople in the sector should pay a greater attention to bring its own house in order. Together with upscaling products, the systemic improvement can help fetch far higher amounts of forex.

Finally, the reliance on RMG for foreign exchange earnings is overwhelming. Export diversity focusing on leather, pharmaceuticals, frozen fish, processed foods, plastic products---all of which have high potential---is the name of the game for raising income from export in a competitive world. Apart from the unskilled, semi-skilled and skilled workers the country is used to sending abroad, it is time to push for placement of professionals in the high-end job market. In this context, the graduates and masters in technology-based subjects such as computer science, IT, physics, applied physics should be targeted for their employment abroad. Countries like Germany and Japan with aging populations need such professionals on an emergency basis. Bangladesh must seize the opportunity to boost its hard currency earning.​

 

[Saif]

Inflation eases but remains above 9% for 24th month

Inflation eased in February but remained above the 9 percent mark for the 24th straight month as the rising prices of goods and services continue to erode consumers’ purchasing power.

www.thedailystar.net

Inflation eases but remains above 9% for 24th month

Inflation eased in February but remained above the 9 percent mark for the 24th straight month as the rising prices of goods and services continue to erode consumers' purchasing power.

Last month, the Consumer Price Index (CPI), which measures changes over time in the prices paid by consumers, dropped to 9.32 percent from January's 9.94 percent, according to data released yesterday by the Bangladesh Bureau of Statistics (BBS).

Inflation has persisted above 9 percent since March 2023.

Last July, consumer prices witnessed the sharpest jump in 14 years, hitting 11.66 percent, data from the statistical agency showed.

The latest drop was mainly driven by a reduction in food inflation, which stood at 9.24 percent in February, down from 10.72 percent the previous month.

However, non-food inflation showed an upward trend, increasing to 9.38 percent in February from 9.32 percent in January, indicating that services continue to put pressure on household budgets.

"The easing of inflation reflects the increased supply of commodities in the kitchen market," said Prof Selim Raihan, executive director at the South Asian Network on Economic Modeling, a think tank.

The availability of winter vegetables and certain spices has played a positive role in the commodity market, contributing to reductions in food inflation, he said.

"This situation clearly shows what we have been saying for a long time—that supply-side issues are a major driver of our inflation," Raihan said, adding that such problems could not be addressed solely through monetary policy.

However, he remained unsure about the trend, saying inflation above 9 percent is still very high.

"I am still not confident that inflation has declined due to policy measures. The seasonal effect will fade, and prices may rise again," he said.

"Once the seasonal supply diminishes, market prices will increase unless we address the fundamental causes of inflation and ensure proper coordination between monetary policy, fiscal policy, and market supply," he warned.

According to Raihan, the decline in inflation has been marginal.

"If you look at major commodities such as rice, lentils, oil, chicken, beef, and fish, prices have not decreased. In some cases, they have even increased," he said.

"From this perspective, I am not confident that we are taking enough steps to combat inflation."

However, Ashikur Rahman, principal economist of the Policy Research Institute of Bangladesh, believes that the government's contractionary monetary policy has played a role in this reduction.

"The contractionary monetary policy, along with a significant jump in imports, has played a role in easing inflation," he said.

There was a significant increase in imports during December and January, he said, adding that the relaxation of import policies over the past three months has shown good results, reducing supply chain disruptions.

"Now, Bangladesh Bank may not have strong justification to further raise policy rates. If this trend continues, we might see a slight reduction in the policy rate by June," he said.

Currently, the policy rate stands at 10 percent. In the last monetary policy statement, the central bank refrained from any further hikes after witnessing a declining trend in inflation since December.

However, Rahman warned that electricity supply remains a major challenge ahead.

"If the electricity supply remains stable and agricultural output performs well, keeping inflation below double digits would be a positive outcome."

So, the government needs to effectively manage supply chain disruptions and ensure stability in the power sector to improve the overall situation, he said.​

 

[Saif]

US top remittance source in February

Bangladeshi expatriates in the United States (US) sent home the highest remittance amounting to US$491.26 million in February, according to Bangladesh Bank (BB) data. Following the political changeover in August, remittance inflows from the US have seen a significant rise, enabling the US to surpa

thefinancialexpress.com.bd

US top remittance source in February
BSS
Published :
Mar 06, 2025 19:42
Updated :
Mar 06, 2025 19:42

Bangladeshi expatriates in the United States (US) sent home the highest remittance amounting to US$491.26 million in February, according to Bangladesh Bank (BB) data.

Following the political changeover in August, remittance inflows from the US have seen a significant rise, enabling the US to surpass the United Arab Emirates (UAE), which had long been the leading source of expatriate income.

The UAE was in the second position with a total of $334.94 million in remittances sent to Bangladesh in the previous month.

The expatriates in the Kingdom of Saudi Arabia (KSA), the country which hosts most of the Bangladeshi migrant workers, sent around $328.84 million in remittances, putting the country in third place.

Bangladesh received $305.52 million in remittances from the expatriates in United Kingdom, making it the fourth-highest remittance sender in the month, while Malaysia was in the fifth position as expatriate from Malaysia sent $183.87 million remittances in February.

The other top 10 countries for sending remittances to Bangladesh are Kuwait, Oman, Italy, Qatar, and Singapore in that order.

According to the latest BB data, Expatriate Bangladeshis sent US$2,528 million remittances in February, which was around 25 per cent higher than the corresponding month of the previous year.

The wage earners sent $2,022 million remittance to the country in February of 2024.

With the latest addition, the year-on-year growth in receiving remittances increased at 23.8 per cent for the first eight months, July to February, of the ongoing fiscal year (FY25) as the country received $18,490 million in total during the period. Last year, it was $14,935 million.

BB said in its monthly report on remittance inflows that in the current political and economic landscape, marked by inflationary pressures, exchange rate fluctuations, and rising import costs, remittances have provided much-needed relief.

The foreign currencies bolstered foreign currency reserves and supported millions of households across the country, it said.

“The steady flow of remittances has been a stabilising factor, contributing to poverty reduction, improved living standards, and regional development,” said the report.

“In the context of the ongoing economic recovery post-pandemic, coupled with political transitions, remittances are even more critical in sustaining economic growth, ensuring liquidity in the banking sector, and reducing reliance on external borrowing,” it added.

The United Arab Emirates (UAE) was the largest source of remittance during this period, followed by the US.

The report said inward remittances from Bangladeshi expatriates are very significant for the nation... Expatriates’ remittances are one of the largest sources of foreign currency.

The BB suggested targeted strategies to support the migrant workforce, enhance the economic benefits of remittances, improve the financial inclusion of recipients, and address the needs of migrant workers abroad.

Talking to BSS, Deputy Managing Director (DMD) of the Premier Bank PLC Abdul Quaium Chowdhury said the flow of remittances into the country shows upward trend as the government has taken measures to streamline the legal channel for encouraging non-resident Bangladeshis (NRBs) to send money to the country.​

 

[Saif]

Inflation eases but remains above 9% for 24th month

Inflation eased in February but remained above the 9 percent mark for the 24th straight month as the rising prices of goods and services continue to erode consumers’ purchasing power.

www.thedailystar.net

Inflation eases but remains above 9% for 24th month

Inflation eased in February but remained above the 9 percent mark for the 24th straight month as the rising prices of goods and services continue to erode consumers' purchasing power.

Last month, the Consumer Price Index (CPI), which measures changes over time in the prices paid by consumers, dropped to 9.32 percent from January's 9.94 percent, according to data released yesterday by the Bangladesh Bureau of Statistics (BBS).

Inflation has persisted above 9 percent since March 2023.

Last July, consumer prices witnessed the sharpest jump in 14 years, hitting 11.66 percent, data from the statistical agency showed.

The latest drop was mainly driven by a reduction in food inflation, which stood at 9.24 percent in February, down from 10.72 percent the previous month.

However, non-food inflation showed an upward trend, increasing to 9.38 percent in February from 9.32 percent in January, indicating that services continue to put pressure on household budgets.

"The easing of inflation reflects the increased supply of commodities in the kitchen market," said Prof Selim Raihan, executive director at the South Asian Network on Economic Modeling, a think tank.

The availability of winter vegetables and certain spices has played a positive role in the commodity market, contributing to reductions in food inflation, he said.

"This situation clearly shows what we have been saying for a long time—that supply-side issues are a major driver of our inflation," Raihan said, adding that such problems could not be addressed solely through monetary policy.

However, he remained unsure about the trend, saying inflation above 9 percent is still very high.

"I am still not confident that inflation has declined due to policy measures. The seasonal effect will fade, and prices may rise again," he said.

"Once the seasonal supply diminishes, market prices will increase unless we address the fundamental causes of inflation and ensure proper coordination between monetary policy, fiscal policy, and market supply," he warned.

According to Raihan, the decline in inflation has been marginal.

"If you look at major commodities such as rice, lentils, oil, chicken, beef, and fish, prices have not decreased. In some cases, they have even increased," he said.

"From this perspective, I am not confident that we are taking enough steps to combat inflation."

However, Ashikur Rahman, principal economist of the Policy Research Institute of Bangladesh, believes that the government's contractionary monetary policy has played a role in this reduction.

"The contractionary monetary policy, along with a significant jump in imports, has played a role in easing inflation," he said.

There was a significant increase in imports during December and January, he said, adding that the relaxation of import policies over the past three months has shown good results, reducing supply chain disruptions.

"Now, Bangladesh Bank may not have strong justification to further raise policy rates. If this trend continues, we might see a slight reduction in the policy rate by June," he said.

Currently, the policy rate stands at 10 percent. In the last monetary policy statement, the central bank refrained from any further hikes after witnessing a declining trend in inflation since December.

However, Rahman warned that electricity supply remains a major challenge ahead.

"If the electricity supply remains stable and agricultural output performs well, keeping inflation below double digits would be a positive outcome."

So, the government needs to effectively manage supply chain disruptions and ensure stability in the power sector to improve the overall situation, he said.​

 

[Saif]

How Bangladesh can meet its revenue targets

The income tax law in Bangladesh is strict, some might even say, excessively so. It makes provisions for aggressive measures such as disconnecting gas, electricity and water services for taxpayers who fail to pay their dues. If taxpayers miss the deadline for filing returns, even their non-taxable

thefinancialexpress.com.bd

How Bangladesh can meet its revenue targets
SYED MUHAMMED SHOWAIB
Published :
Mar 07, 2025 21:36
Updated :
Mar 07, 2025 21:36

The income tax law in Bangladesh is strict, some might even say, excessively so. It makes provisions for aggressive measures such as disconnecting gas, electricity and water services for taxpayers who fail to pay their dues. If taxpayers miss the deadline for filing returns, even their non-taxable income shall be treated as taxable. The law is rigid but despite its rigidity, revenue collection remains stubbornly below target.

The numbers speak for themselves. According to a report carried in the FE, in the first six months of the current fiscal year, the target for income tax collection was Tk 766.7 billion (Tk 76,670 crore). However, only Tk 521.62 billion (Tk 52,162 crore) was collected which is just 68 per cent of the target. This shortfall underscores the widening gap between ambition and reality. In a nation with an expansionary budget and mounting debt obligations, the government's reliance on income tax revenue is vital. Failing to meet targets creates a significant fiscal strain.

The problem, however, is not a lack of intent. The National Board of Revenue (NBR) has tried to widen the tax net by linking return submissions to essential services. Proof of Submission of Return (PSR) is now mandatory for accessing 43 essential services, including bank loans exceeding Tk 20 lakh and trade licence renewals in city corporations and municipal areas. But the results of this requirement have been underwhelming. This year, only 3,973,757 returns were filed. The fact that the country's 12 million Tax Identification Number (TIN) holders are mandatorily required to submit returns, but two-thirds of them do not do so points to a systemic problem.

A significant portion of the non-filingTIN holders earn well above the tax-free threshold. However, the NBR's efforts to identify such taxpayers have historically been fragmented. Several years ago, in an attempt to address this, NBR initiated a data-sharing programme with other government organisations. This initiative aimed to cross-reference existing databases to obtain relevant financial and asset-related information. Consequently, they secured access to the Bangladesh Road Transport Authority (BRTA) database and the Dhaka Power Distribution Company (DPDC) database. Through BRTA's database, the NBR is able to retrieve records of individuals who own or had previously owned motor vehicles, thereby gaining insights into their financial capacity. Similarly, access to the DPDC's database allows them to collect data on a portion of electricity consumers residing within the jurisdiction of the Dhaka City Corporation. This yielded partial information on approximately 1.02 million individuals with electricity connections and 1.5 million individuals who own or have owned motor vehicles. However, this is merely scratching the surface. Despite the success of this initiative, the NBR has yet to extend its access to other crucial government databases that could significantly enhance its ability to expand the tax base.

Apart from DPDC, five other power distribution companies in the country --DESCO, NESCO, WZPDCL, REB, and PDB -- along with six major gas distribution companies -- TITAS, KGDCL, Jalalabad Gas, Bakhrabad Gas, PGCL, and SGCL --hold valuable records of millions of consumers. These databases could provide crucial insights into consumer spending patterns, revealing not only who is utilising electricity and gas connections, but also the annual expenditure on these essential services. Such information could serve as a strong indicator for potential taxable income and would allow for targeted enforcement.

This is particularly relevant in city corporation areas, where tens or even hundreds of thousands of property owners collect rental income. Many of them are TIN holders who fail to submit returns, while others operate without a TIN altogether. It follows that analysing these datasets would enable the tax authorities to identify those underreporting income or evading taxes.

As it stands, salaried individuals are less likely to evade taxes on their salary income compared to those whose income does not come in the form of a paycheque. This is because employers maintain databases containing salary information and are legally obligated to withhold a portion of their employees' earnings as income tax. Accessing utility service databases could create a similar level of transparency for many other taxpayers. For example, using these databases tax officials can gather crucial usage information during investigation or assessment stages. Multiple gas and electricity connections for a single taxpayer may indicate property ownership, suggesting one or more buildings or multiple units, potentially generating rental income. Conversely, a single connection may imply apartment ownership. Furthermore, for businesses where gas or electricity is essential to operations, inconsistencies between utility usage and reported earnings would provide strong evidence of potential income concealment.

At some point the NBR can utilise advanced analytics to process data from these databases. While manual audits offer certain advantages in discrepancy detection, automation would complement these efforts, minimising resource strain and the risk of oversights.

With accurate data in hand, the NBR can then enforce the law's stringent measures more effectively. The threat of utility disconnection becomes a credible deterrent when backed by solid evidence of non-compliance. This closes loopholes that allow tax dodgers to slip through the cracks. For the system to gain public credibility, however, penalties must be applied consistently -- prioritising habitual offenders who defy tax responsibilities despite clear capacity to pay.

Bangladesh's income tax law is relatively new. It replaced the decades-old 1984 ordinance in 2023 with the promise of higher revenue and a more effective system. Strengthening data-driven enforcement would be a positive step towards making that promise a reality. But demanding compliance alone is not enough, ensuring the availability of appropriate data to identify non-compliance is just as vital. Without this, even the strictest laws will remain ineffective, and revenue targets will continue to elude attainment.​

 

[Saif]

Macroeconomic policies amid interim incumbency

Navigating the labyrinth of macroeconomic management is particularly challenging during periods of interim leadership. The fine equilibrium between fiscal, monetary, and structural policies takes on heightened significance.

www.thedailystar.net

Macroeconomic policies amid interim incumbency

Navigating the labyrinth of macroeconomic management is particularly challenging during periods of interim leadership. The fine equilibrium between fiscal, monetary, and structural policies takes on heightened significance.

This delicate balance of tightening and loosening measures, coupled with the alleviation of binding structural constraints, is pivotal in shaping the economic path. It impacts everything from inflation trends to public sentiment and confidence.

Encouraging but not reassuring

The February inflation data, while somewhat promising, does not convincingly indicate a shift towards a disinflationary trend.

The overall inflation rate fell due to a decline in food prices for the second consecutive month since December 2024. However, non-food inflation rose, with increases in categories such as clothing, footwear, health, recreation, and miscellaneous items.

As a result, the overall state of inflation remains concerning, with no clear evidence from the data suggesting a need for a monetary policy shift.

The deflation in food prices, particularly during peak supply seasons, is likely temporary, along with the diminishing effects of recent floods.

Lower tax rates on some essential food items, import liberalization, and exchange rate stability also contribute to the reduction in inflation.

The rise in non-food inflation likely reflects the recent VAT rate increases and heightened demand driven by booming remittances.

Given the evolving nature of these factors, it is evident that the current inflationary pressures require maintaining a tight monetary policy.

The persistence of non-food inflation underscores the complexity of the inflation landscape, where selective price reductions are insufficient to mitigate overall inflationary trends.

The jury is out on policies

Recently, the Bangladesh Bank reduced the cash reserve ratio to 3 percent on a daily basis while maintaining a bi-weekly average of 4 percent.

The policy rate has remained unchanged at 10 percent, with a 300-basis-point corridor since October 2024. Positive real terms for the nominal policy rate were observed only in January and February, at 0.06 percent and 0.68 percent, respectively.

The yield curve for government bonds experienced a downward shift, exhibiting fluctuations as government borrowing from banks decreased and there was a heightened aversion to private credit risk exposure.

Students of macroeconomic principles should retain their faith in the power of tight monetary policies to mitigate inflation.

The inescapable inference is that the real policy rate has not been sufficiently high nor maintained positive long enough to evaluate its success.

Its outcomes could either lead to a high societal cost or achieve the desired effect with minimal collateral damage.

Policymakers must rely on prevailing economic wisdom, remaining flexible and open-minded in their approach.

There is significant room for improvement in monetary-fiscal coordination to combat inflation. The upcoming FY26 budget must tackle this challenge directly.

If our primary aim is stabilisation, there is little room for risky policy moves such as broad subsidy expansion or major tax cuts, especially when the key factors that influence incentivisation, redistribution, or inflation reduction remain unchanged.

The agenda for action

Without structural policy reforms that eventually lead to productivity enhancements in the foreseeable future, or ideally right away, there is minimal scope for increasing overall spending beyond Tk 7-7.25 lakh crore in FY26.

This presumes that the budget deficit cannot exceed Tk 2-2.25 lakh crore and that revenues surpassing Tk 5 lakh crore are unattainable. Financing even this level of deficit will exert pressure on the flow of credit to the private sector unless deposit growth significantly exceeds the Tk 1.23 lakh crore observed over the twelve months ending December 2024 and/or net foreign financing accelerates beyond its usual pace.

The FY26 budget will serve not only as a litmus test for the interim government's fiscal prudence but also reflect its dedication to enacting the economic reforms proposed in the White Paper and the Task Force Report.

The core issue is not the novelty of the recommendations but their relevance and feasibility. Relevance encompasses understanding the appropriate timing for each high-level recommendation, while feasibility involves translating the recommendations into practical steps.

Disregarding the recommendations on the grounds of their perceived lack of novelty amounts to disengagement from reform. This is not the case in areas such as banking, energy, taxation, and public expenditure, where progress, though slow, is indeed occurring.

However, they remain inconspicuous because their results are not immediately apparent.

What is their incentive?

Structural reforms necessarily involve short-term hardships for long-term gains. Given that the interim government will bear the brunt of these hardships, what incentive does it have to expedite the completion of these reforms, knowing it will not be in power post-election?

An interim government not elected by the populace, freed from the pressures of seeking re-election, is unencumbered by the populist motivations that often pivot reigning incumbents against reforms.

This temporary administration is uniquely positioned to take decisive action, as its most significant risk is the cessation of its governance, which is inevitable anyway.

However, it may still find it difficult to avoid populist measures, either due to a genuine, albeit potentially misguided, belief in their ability to enhance social welfare through such measures or because such decisions serve certain interests best. The path of least resistance could be tempting if it exists. These are the so-called "low-hanging fruits." The risks and rewards associated with all these options are, if anything, uncertain.

One legacy the interim government would fervently wish to avoid is bequeathing a macroeconomic landscape as dismal as the one it inherited.

Should this eventuality transpire, the populace's inevitable inquiry will resonate: "What did you accomplish, Sirs?" Thus, there exists no refuge from risk. We harbour the hope that the interim government's economic management team will align themselves with the right side of history regarding economic policy and institutional reforms.​

 

[Saif]

BANGLADESH INVESTMENT SUMMIT: IMS likely to be hired on direct purchase method

The government is likely to appoint the Integrated Marketing Service Ltd for management of the upcoming ‘Bangladesh Investment Summit 2025’ to be held in the capital in Aril 7-10, said officials.

www.newagebd.net

BANGLADESH INVESTMENT SUMMIT: IMS likely to be hired on direct purchase method
Staff Correspondent 08 March, 2025, 23:10

The government is likely to appoint the Integrated Marketing Service Ltd for management of the upcoming ‘Bangladesh Investment Summit 2025’ to be held in the capital in Aril 7-10, said officials.

Last week, the Bangladesh Investment Development Authority received consent from the advisory council on economic affairs for appointing a firm with the direct purchase method with an estimated contract price of Tk 2.12 crore.

BIDA’s previous bid to select a firm through open tendering in January failed to bring any desired outcome.

Officials said that the Integrated Marketing Service Ltd along with 10 other firms competed in the tender but failed to meet all criteria of the tender.

Because of shortage of time, BIDA is going seek the advisory council of the government purchase soon to appoint the Integrated Marketing Service Ltd on the direct purchase method.

IMS executive director Nazmus Sakib Rahman on Saturday said that they were not aware about the development regarding the appointment of their company in the upcoming event management.

Admitting that they have competed in the bid, he said that he could only explain the nature of management once his company signed a contract with the BIDA.

Chief adviser Muhammad Yunus is expected to inaugurate the event.

BIDA expects that they will redefine the future of investment in Bangladesh, one of the world’s most dynamic markets, by the event to be participated by investors at home and abroad.

The event is going to be arranged against the backdrop that the foreign direct investment flow to the country in FY23–24 dropped to a decade low amid negative credit rating, dollar shortage, political uncertainty, inefficient bureaucracy, and corruption.

The FDI, however, in FY23–24 fell by 8.80 per cent to $1.47 billion from $1.6 billion in FY22–23 and $3.44 billion in FY21–22, according to Bangladesh Bank.

The FDI flow in FY23–24 has been the lowest in the past decade.

In FY13–14, the country received $1.48 billion, according to the central bank.

The last BIDA summit-- the International Investment Summit—was held in November 2021. In 2023, the Bangladesh Securities and Exchange Commission and the BIDA held a roadshow in Japan to reach out to non-resident Bangladeshi investors and attract foreign investment.​

 

[Saif]

Economy may have expanded in Feb, but at a slower pace: PMI

Bangladesh’s economy might have expanded in February, but at a slower pace due to sluggish growth in the construction and services sectors.

www.thedailystar.net

Economy may have expanded in Feb, but at a slower pace: PMI

PHOTO: Rajib Raihan

Bangladesh's economy might have expanded in February, but at a slower pace due to sluggish growth in the construction and services sectors.

February marked the fifth consecutive month of expansion, driven by consistent growth in the agriculture and manufacturing sectors, according to the Bangladesh Purchasing Managers' Index (PMI) released yesterday.

The agriculture sector posted its fifth month of expansion, while the manufacturing sector recorded its sixth month of expansion.

Both sectors grew at a faster pace, according to the PMI, a monthly index prepared by the Metropolitan Chamber of Commerce and Industry (MCCI) and the Policy Exchange Bangladesh (PEB).

"Business confidence remains weak due to sluggish demand, energy disruptions, and continued protests. Sustained recovery depends on improved law and order, political consensus on the election roadmap, and expedited implementation of priority reforms."

The PMI is a forward-looking economic indicator designed to help understand the direction in which the economy is heading.

The PMI reading for the agriculture sector rose by 7.8 points to 66.4 in February, up from 58.6 in the previous month.

The manufacturing index increased to 72.6 last month from 68.5 in January, recording an expansion.

The PMI recorded faster expansion in new orders, factory output, input purchases, and supplier deliveries in the manufacturing sector.

However, there was slow growth in new exports, finished goods, imports, and employment.

Similarly, the construction sector posted its third month of expansion, albeit at a slower rate.

At the same time, the services sector recorded its fifth month of expansion.

However, the pace of growth slowed, the MCCI and the PEB said in a press statement.

PEB Chairman and CEO M Masrur Reaz said Bangladesh's PMI readings indicate sustained expansion for the fifth month, driven by continued growth in exports and a seasonal uptick in agriculture, while construction and services recorded slower expansion.

"Business confidence remains weak due to sluggish demand, energy disruptions, and continued protests. Sustained recovery depends on improved law and order, political consensus on the election roadmap, and expedited implementation of priority reforms," he said.

The MCCI and the PEB launched the Bangladesh PMI in February 2024, covering key economic sectors based on survey data compiled from monthly surveys of over 500 private sector enterprises.

Survey responses reflect changes in business activity, if any, in the current month compared to the previous month.​

 

[Saif]

Private sector credit growth hits decade-low

Credit appetite of the local private firms continues to fizzle out as the ongoing battle against inflation makes bank borrowing more expensive amid a volatile political climate after the August political changeover.

www.thedailystar.net

The cost of a tight monetary policy?
Private sector credit growth hits decade-low

Credit appetite of the local private firms continues to fizzle out as the ongoing battle against inflation makes bank borrowing more expensive amid a volatile political climate after the August political changeover.

In January this year, credit flow to private firms grew by only 7.15 percent, the lowest since at least 2015, according to data from the Bangladesh Bank.

January's growth was 2.65 percentage points lower than the target of 9.80 percent that the central bank has set for the second half of fiscal year 2024-25.

In December last year, loans to private firms grew only by 7.28 percent, according to central bank data.

Economists and bankers said this was a consequence of the central bank's tight monetary stance.

For over two years, the central bank has been hiking the policy rate to combat skyrocketing inflation, which has contributed to the rise in lending rates at banks.

The banking regulator kept the policy rate unchanged at 10 percent for the January-June period of FY25.

However, experts opined that uncertainty in investment climate, banks' go-slow strategy after the political changeover, and lackluster loan recovery also weighed on credit growth alongside the tight-fisted monetary stance.

"The policy rate has to remain high due to the contractionary monetary policy, which impacts the lending rates. This is why the demand for credit has reduced," said Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD).

"We are now seeing a wait-and-watch approach regarding private sector investment due to ongoing uncertainty and the impending general elections," the economist added.

He added that the trends of letter of credit (LC) opening for capital machinery imports reflect this investment reluctance.

During July to January of the current fiscal year, LC opening for capital machinery fell by 33.68 percent to $1 billion, while LC settlements for capital machinery declined by 27.33 percent to $1.24 billion, according to the central bank data.

Rahman also noted that disruptions at the borrower level contributed to the slowdown as some large borrowers have defaulted and are unable to secure new loans, impacting the overall private sector credit.

"On the other hand, new entrepreneurs have adopted a go-slow strategy in taking loans," he said.

He believes private sector credit demand will remain subdued until the elections.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told The Daily Star that he had never seen such slow credit growth during his over three-decade career.

The senior banker attributed the slowdown to heightened lending rates and a worsening law and order situation following the recent political changeover.

"Panic has gripped investors in recent months due to the weak law and order situation," he said, adding that some garment companies have shut down recently.

Rahman, also a former chairman of the Association of Bankers, Bangladesh, said that around 10 banks have seen their lending capacity erode due to massive irregularities and scams, further impacting private sector credit growth.

Echoing those sentiments, a senior official of a private bank said that investors are unwilling to invest with an interim government in power due to political uncertainty.

"New investment in the private sector as well as industry expansion remain stagnant and everyone is now waiting for the national election," he pointed out.

As of January this year, outstanding credit to the private sector stood at Tk 1,680,110 crore, according to central bank data.​

 

[Saif]

Reserves drop to $19.7b after ACU payment

Bangladesh’s foreign exchange reserves fell from $21.39 billion to $19.7 billion yesterday after the country paid $1.75 billion in regional import bills through the Asian Clearing Union (ACU).

www.thedailystar.net

Reserves drop to $19.7b after ACU payment

Bangladesh's foreign exchange reserves fell from $21.39 billion to $19.7 billion yesterday after the country paid $1.75 billion in regional import bills through the Asian Clearing Union (ACU).

The ACU, a Tehran-based organisation, facilitates payment settlements among nine member countries: India, Bangladesh, Bhutan, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka.

Under the ACU mechanism, Bangladesh clears its import bills every two months, leading to a temporary decline in reserves after each payment.

As of March 6, the country's forex reserves stood at $21.39 billion, calculated in accordance with the International Monetary Fund's (IMF) BPM6 manual.

Due to a growing trend in remittance inflows in recent months, the central bank has been able to mitigate the sharp decline in forex reserves, particularly since the end of the Awami League-led government's regime on August 5 in the face of mass uprising.

Last month, remittance inflows to Bangladesh rose 25 percent year-on-year to $2.52 billion as migrant Bangladeshi workers sent larger-than-expected amounts to their families back home for Ramadan-related purchases and Eid shopping.​

 

[Saif]

Govt releases Tk 10b incentives for exporters

The government has released Tk 10 billion as cash incentive for the country's exporters, according to sources. It offers such incentive and cash subsidy against export earnings. Finance Division issued an order to this end on March 05. It is the third instalment of the export incentive allocated

thefinancialexpress.com.bd

Govt releases Tk 10b incentives for exporters
FE Report
Published :
Mar 10, 2025 08:58
Updated :
Mar 10, 2025 08:58

The government has released Tk 10 billion as cash incentive for the country's exporters, according to sources.

It offers such incentive and cash subsidy against export earnings.

Finance Division issued an order to this end on March 05.

It is the third instalment of the export incentive allocated in the current financial year, 2004-25, for export sectors.

Finance Division has set certain conditions, including providing the amount to different banks and export sectors, for receiving such assistance.

Besides, the banks concerned cannot use the fund for other purposes.

The parties concerned (banks, incentive receivers) should follow the existing policy strictly, otherwise legal action would be taken for non-compliance.

The Office of the Controller General of Accounts will announce the debit authority regarding the issue soon.

The Bangladesh Bank (BB) will provide the incentive as per the demand by the respective banks for making payments to the exporters concerned.

Export-oriented sectors like ready-made garment, frozen shrimp and other fish, leather items, jute and jute products enjoy such incentives, according to an official order of the Finance Division issued recently.

Meanwhile, a special 1.0-per cent cash incentive support fund for the apparel industry has also been included in the instalment.

The government reduced rates of cash incentives against exports for all 43 categories up to 50 per cent for fiscal year 2024-25.​

 

[Saif]

BB relaxes loan exit policy for troubled businesses

Bangladesh Bank (BB) today relaxed the down payment requirements for exit facilities on defaulted loans of closed or loss-incurring companies.

www.thedailystar.net

BB relaxes loan exit policy for troubled businesses

The Bangladesh Bank headquarters in Dhaka. Photo: Star/File

Bangladesh Bank (BB) today relaxed the down payment requirements for exit facilities on defaulted loans of closed or loss-incurring companies.

The central bank issued a notice in this regard.

From now on, such applications can be made with only 5 percent down payment on the existing loan balance, which was previously at 10 percent.

The notice said the management authority can now approve exit facilities for loans up to Tk 20 lakh whereas previously it was Tk 10 lakh.

Loans exceeding this amount will need approval from the board.

Bangladesh Bank on July 08 last year introduced an exit policy for businesses, industries, or projects that were established on loans but have shut down or are incurring losses due to uncontrollable factors.

The policy aimed to recover such loans within a maximum of three years through measures including interest waivers and other facilities.

Loans availing the exit facility will continue to be classified as defaulted until fully recovered.

Some modifications have been brought about in the policy, further relaxing the conditions. The revised policy states that loans availing the exit facility cannot be rescheduled or restructured.​