[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Rooppur, Matarbari, metros to get highest ADP allocation

The government is set to increase budget allocation for quick completion of the Rooppur nuclear and Matarbari coal-fired power plant projects.

www.thedailystar.net

Rooppur, Matarbari, metros to get highest ADP allocation

The government is set to increase budget allocation for quick completion of the Rooppur nuclear and Matarbari coal-fired power plant projects.

Several metro rail projects are also going to get more funds.

The Tk 2,65,000 crore Annual Development Programme (ADP) will be placed at today's National Economic Council meeting where allocations will be finalised.

Planning ministry officials say the aforesaid projects may get Tk 34,043 crore, which is 12.84 percent of the ADP.

Six projects related to Rooppur Nuclear Power Plant are the top recipients of funds. The projects will get a total Tk 12,544 crore, up from the current fiscal year's Tk 11,621 crore.

The 2,400MW power plant, worth Tk 1,14,225 crore, is the biggest ever development project in Bangladesh. As of December last year Tk 68,248 crore has been spent. In the 2023-24 fiscal year, it got Tk 9,706 crore, while in the 2024-25 fiscal year it will get Tk 10,502 crore.

The government hopes to see it generate power by March 2025 or sooner.

Six transmission lines from the plant are being set up. Four of the lines are almost 90 percent complete, according to Power Grid Company of Bangladesh.

When the lines are set, a unit of the plant will start operation, officials said.

Setting up of lines across the Padma, which saw 40 percent progress, will be done by October, said Delwar Hossain, the project director.

There are five projects -- totaling Tk 88,492 crore -- related to the power plant in Matarbari, Cox's Bazar. In 2024-25, the projects will get Tk 14,962 crore, up from Tk 12,161 crore in 2023-24.

A unit of Matarbari 1200MW Ultra Super Critical Coal Fired Power Plant was formally inaugurated in November last year and it has been generating power without hiccups. The other unit is set to begin operation by July.

An official of the power division said a substation needed for the plant is being built.

Project Director Abul Kalam Azad told The Daily Star that the work related to power transmission will hopefully be complete by June.

"The existing lines are able to supply up to 900MW. When the work is done, it will be able to handle 1,200MW," he said.

As per the proposed ADP, construction of the power plant will get Tk 6,105 crore. The power transmission system costs Tk 1,024 crore, and Tk 656 crore of it has been spent.

Three projects related to Matarbari port are worth Tk 35,614 crore. In the next fiscal year, they will get Tk 8,758 crore, up from Tk 2,666 crore in 2023-24.

Three metro rail projects worth Tk 1,28,687 crore, are going to get Tk 6,537 crore.

The Uttara-Motijheel part of MRT line 6 is complete, and the ADP proposes Tk 1,975 crore to build the part from Motijheel to Kamalapur.

Two other metro rail projects -- MRT Line 1 (Airport-Purbachal-Kamalapur) and MRT Line 5 (Hemayatpur-Bhatara) -- are making progress. The initial activities are done. The main construction work will begin in the upcoming fiscal year.

The MRT-1 would cost Tk 53,977 crore, and MRT-5 Tk 41,238 crore. The proposed ADP allocates Tk 3,594 crore and Tk 968 crore for them respectively.​

 

[Saif]

Next budget will be challenging than previous years: Debapriya

High inflation, rising pressure on external account to slow down economy, the economist said

www.thedailystar.net

Next budget will be challenging than previous years: Debapriya
High inflation, rising pressure on external account to slow down economy, the economist said

Preparing national budget for the next fiscal year will be more challenging than any previous years as the Bangladesh economy is passing through a tough time and the geopolitical developments are influencing the economy, Debapriya Bhattacharya, a distinguished fellow at the Center for Policy Dialogue (CPD), said today.

The economy is reeling from high inflation and rising pressure on the external account, he said, adding that economic activities are slowing down too.

"Under the circumstances, ensuring macroeconomic stability should be the topmost priority. It is like diabetes. If we cannot control it, it affects the rest of the organs of the body."

The economist made the comments at a discussion on the budget for 2024-25 fiscal year.

Private television channel NTV organised the programme at Pan Pacific Sonargaon Dhaka this evening.

Steps to control inflation will get priority in the upcoming national budget, Waseqa Ayesha Khan, state minister for finance, said at the event.

Along with this, there will be a system to ensure social security, she said, adding the fiscal measures will be designed to attain the commitments made in the Awami League's manifesto declared before the election.

She said the upcoming budget will incorporate the measures to reduce unemployment.

Mashiur Rahman, economic affairs adviser to the prime minister, said they will take measures to ensure socio-economic progress.

Moderated by Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry; Saleh Uddin Ahmed, former governor of Bangladesh Bank; Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association, and Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh, also spoke at the occasion.​

 

[Saif]

Bangladesh expands offshore banking in hunt for forex

Offshore banking is increasingly becoming a key window for banks in Bangladesh to facilitate investments and international trade by attracting deposits in foreign currencies.

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Bangladesh expands offshore banking in hunt for forex

Offshore banking is increasingly becoming a key window for banks in Bangladesh to facilitate investments and international trade by attracting deposits in foreign currencies.

Industry people say offshore banking can even play a crucial role in mitigating the persisting foreign currency crisis in the country by extending liquidity support and stabilising the local currency.

"Deposits of offshore banking will be a major source for US dollars," said Mashrur Arefin, managing director and chief executive officer of City Bank, which has stepped up efforts to draw foreign deposits through offshore banking operations (OBOs).

It started its journey in 1985 as the central bank created financing opportunities for factories at the export processing zones – the estates set up to drive the country's export earnings – by providing banking service to importers, exporters, and financial institutions.

The segment received more attention in recent years, particularly after Bangladesh began to feel the pinch following a sharp depletion of foreign currency reserves.

In March this year, parliament passed the Offshore Banking Act 2024 to give a much-needed boost to the country's desperate efforts to improve the US dollar supply, which has squeezed in the past two years owing to higher outflows compared to inflows.

The BB has relaxed rules and policies to allow both Bangladeshis and foreign nationals to avail the service. It has permitted domestic commercial banks' OBOs to offer an interest or profit rate markup over a benchmark rate for term deposits in foreign currencies to eligible customers.

The customers include individuals and entities residing outside the country, non-resident Bangladeshis, persons of Bangladesh origin, foreign nationals, companies registered and operating abroad, and external institutional investors.

The central bank has allowed domestic banking units to receive funds from OBOs up to 40 percent of their regulatory capital to settle payment obligations.

OBOs can be executed in five currencies: the US dollar, the British pound, the euro, the yen, and the yuan.

Currently, about 40 banks have offshore units. At the end of September, the total outstanding loans of OBUs stood at Tk 83,826 crore.

Investors enjoy tax-free profit of up to 8.40 percent on fixed deposits in the USD or the euro for terms ranging from three months to five years. They are also able to transfer funds internationally without any restriction along with profit.

"The offshore banking system has become a new avenue for the dollar supply apart from exports and remittance. Offshore banks' fixed deposits can be used to cover the cost of imports," Arefin said, adding that the dollars obtained through OBOs are sold on the interbank foreign exchange market.

Currently, City Bank has deposits amounting to $23 million under its offshore banking unit. "Our target is to raise it to $1 billion," the noted banker said.

There are two ways to open offshore banking accounts: one is for those residing in Bangladesh and the other is for those who live abroad.

Any representative of expatriates, such as family members and relatives, or partner of a foreign investor residing in Bangladesh can open accounts. Similarly, expatriates and foreign investors can do the same.

"We call it international bank accounts. City Bank mobilised $29 lakh through the accounts opened from abroad," Arefin said.

City Bank is providing the facility to open dollar accounts for offshore deposits at its 175 branches.

Mohammad Ali, managing director and CEO of Pubali Bank, said the offshore banking has a huge potential in Bangladesh.

"Our reserves are small. If we can promote it properly, every bank can mobilise billions of dollars through the offshore banking."

Pubali Bank is developing software and a mobile app so that anyone can open accounts and do banking from abroad.

"We hope to complete all procedures by next two months."

Mohammad Ali said if Bangladeshi expatriates deposit money at OBOs, import obligations can be met with the funds as well as from remittance and export earnings.

"Then, the forex reserves will go up automatically."

Speaking about the prospect of offshore banking, both Arefin and Mohammad Ali gave the example of Mauritius, an Indian ocean island nation with only about 1.3 million population.

"This country has a balance of $800 billion under offshore banking," Arefin said.

"We have a huge economy with 17 crore population. If more people are informed about the advantages of this banking relationship, there is a possibility of bringing $50 billion under OBOs."​

 

[Saif]

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks

Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit. Highlighting the contributions of Bangladesh’s sixty thousand expatriates to the economies of bo

thefinancialexpress.com.bd

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks
Published :
May 17, 2024 23:51
Updated :
May 17, 2024 23:53

Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit.

Highlighting the contributions of Bangladesh's sixty thousand expatriates to the economies of both Bangladesh and Spain, the Foreign Minister suggested that the two countries may consider concluding a bilateral instrument for legal migration of professionals and skilled workers from Bangladesh to Spain.

Hasan also underscored the ample opportunity of emboldening cultural exchange and cooperation between the two friendly countries, according to a UNB report.

The issues were discussed when Ambassador of Spain to Bangladesh Gabriel Sistiaga Ochoa de Chinchetru had his maiden courtesy meeting with the Foreign Minister on Thursday.

Hasan congratulated Gabriel Chinchetru for his appointment as the Ambassador of Spain to Bangladesh and hoped that bilateral relations between our two friendly countries would be further strengthened during his tour of duty in Dhaka.

The Foreign Minister expressed satisfaction over the excellent bilateral relations between Bangladesh and Spain and thanked Spain for being the second largest destination of Bangladesh's merchandise exports as well as the second largest host of Bangladesh Diaspora in the European Union (EU).

The Spanish Ambassador stated that concluding a bilateral instrument on migration and mobility between Bangladesh and Spain in line with the spirit of EU's Pact on Migration and Asylum would be beneficial for both the countries.

He also assured to expand business and investment as well as cultural ties between the two countries, according to the Ministry of Foreign Affairs.

The Ambassador also met Foreign Secretary Masud Bin Momen.

They discussed the potential to broaden cooperation and harness mutual capacities in areas like bilateral commodity trade as well as orderly and skilled migration and mobility from Bangladesh to Spain.​

 

[Saif]

IMF satisfaction: Respite or disquiet for Bangladesh?

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment

en.prothomalo.com

IMF satisfaction: Respite or disquiet for Bangladesh?
Farid Khan
Published: 18 May 2024, 10: 14

The post-Covid global recession and spiralling costs of fuel import triggered by the Russia-Ukraine war, put considerable strain on Bangladesh's foreign currency reserves. Having no other alternative, Bangladesh turned to the International Monetary Fund (IMF), seeking a loan.

In January 2023 IMF pledged to lend Bangladesh USD 4.7 billion on certain conditions, including that subsidy on the energy sector be lifted.

IMF gave Bangladesh directives to increase the foreign currency reserves, to increase the tax-GDP ratio by 0.5 per cent within June 2023, and to move to a formula-based price adjustment mechanism by December 2023 to fix the cost of fuel oil.

Also, in its first review in December 2023, IMF advised Bangladesh to take up a contractionary monetary policy to control the prevailing high inflation rate in the country and to follow a flexible exchange rate policy.

With the January 2024 election ahead, the government refrained from fulfilling those conditions. However, in order to avail the next tranche of the loan, this month it has left the interest rate entirely to the market and so increased the policy interest rate by 50 basis points to 8.5 per cent.

After taking up a flexible exchange rate policy, the exchange rate of the dollar was hiked by Tk 7 to the highest the country has ever seen, at Tk 117, under the crawling peg exchange rate system.

Also, a formula-based energy price adjustment mechanism was implemented for petroleum products. The donor agency IMF is satisfied with these financial reforms carried out by the government.

And the end of the second review this month, the IMF mission chief Chris Papageorgiou apprised the media of its satisfaction, saying there needs to be more reforms in the banking sector and emphasis must be placed on tax and revenue collection. He also stressed the need on curbing subsidies in order for the economy to turn around.

The matter that must be given due consideration is how much respite will this satisfaction of IMF offer the country, and how must relief will these reforms give the people for whom the loan has been taken.

Ever since this loan was taken from the IMF, the country has seen one record after the other. There has been a record in the hike of energy prices, the dollar rate has hit a record high, the reserves have hit a record low. And above all, the people are floundering under the record hike in the prices of essentials. IMF's satisfaction has offered the people no respite. It has simply served to increase their distress further.

On the eve of receiving the loan, in January 2023 Bangladesh's central bank authorities said that fighting against inflation was Bangladesh Bank's top priority and that they aimed to bring down inflation to 6 per cent that year. That aim was not met. The prices of essential continue to increase in leaps and bounds.

Even by taking the path shown by IMF and following their prescription, the projected inflation rate could not be achieved. On the contrary, it has increased. They reason for this increase, the say, is the global contractionary financial policies, high commodity and food prices in the international market, and internal weaknesses.

Inflation is increasing steadily for these reasons and foreign currency reserves are dwindling. This is increasing pressure on the economy and macroeconomic challenges are growing more complex.

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment.

A handful of Latin American countries took up this strategy to determine exchange rates, but many of them later moved away from this system.

On one hand there is the post-pandemic weak economy and the war-hit global market. On the other hand there is forecast of economic recession and fear of an extreme food shortage. Under such circumstances, serious thought must be given to whether the unknown and uncertain path shown by IMF will lead the country's economy to happier climes or pose as a risk.

IMF has greeted this daring decision taken by the government for financial reforms. Liberalising the interest rates and taking up a contractionary monetary policy will help in relieving the pressure of inflation caused by reforming the exchange rate.

It is clear that there are all apprehensions that financial reforms will create new pressures, adding salt to the wound of the people squirming under the pressure inflation. Reforms in the exchange rate have pushed the price of the dollar up by 6 per cent, which in simple math translates directly into a 6 per cent rise in the prices of import-dependent. By the same formula, the import costs of fuel oil will increase proportionately, leading to increased import expenditure.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

The increase in dollar rates means costs on foreign loans will go up. This multidimensional effect of increased dollar rates will put added pressure on foreign exchange reserves, and these reforms will push inflation up further.

Also, in post-war times, the economic depression in western countries can have an effect on Bangladesh's export revenue in the coming days. Meanwhile, the Middle East is in a state of unrest due to the Israeli aggression in Palestine, which may have a negative impact on remittance. These factors may lead to a drastic drop in foreign exchange reserves and the writing is already on the wall.

At a juncture where the country's financial sector is already unstable and fragile, leaving the interest rate to the market may make this sector even more unstable.

If interest rates go up, loan expenditure in the private sector and investment costs will go up. This creates apprehensions that investments may decrease in the market. That may lead to increased capital flight, and many workers may lose their jobs.

There are strong misgivings that these multidimensional contractionary financial policies will ultimately dash to the ground all hopes of a fall in inflation and a durable foreign sector.

There is no doubt that we are bound to a larger extent to follow the IMF recommendations or directives for financial reforms. But there are questions regarding the logic in the timing selected to implement these reforms. This is questioning the capacity and sovereignty of our financial sector.

We are in a flurry to meet the IMF conditions, but are we able to uphold the interests of the people of Bangladesh? Past experience has left a bitter taste in our mouths.

In the past, IMF has never been able to be anyone's real friend or guardian. A study of Oxfam reveals that in countries that have been transformed into high debt-ridden countries due to IMF loans, it becomes impossible to repay the loans at the same as time as investing in the education, health, social welfare and development sectors.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

How can this challenge be tackled? That's a million dollar question. But if domestic revenue is increased, stern austerity measures are put in place, corruption is clamped down upon and good governance is established, it will at least put some wind in the sails.

* Farid Khan is a professor at the department of economics, Rajshahi University.​

 

[Saif]

Bangladesh financial sector in red zone: Oli Ahmed

Liberal Democratic Party (LDP) President Oli Ahmed on Saturday voiced concern over the country’s “deteriorating” economic condition, saying that Bangladesh's financial sector has now entered the red zone. Speaking at a press conference at his party’s Moghbazar office, he al

thefinancialexpress.com.bd

Bangladesh financial sector in red zone: Oli Ahmed
UNB
Published :
May 18, 2024 23:44
Updated :
May 18, 2024 23:46

Liberal Democratic Party (LDP) President Oli Ahmed on Saturday voiced concern over the country's "deteriorating" economic condition, saying that Bangladesh's financial sector has now entered the red zone.

Speaking at a press conference at his party's Moghbazar office, he also warned that if the prevailing economic situation persists, it could deeply harm the country's progress and development and undermine the social and economic stability of the nation.

"The Bangladesh bank reserves are now alarmingly declining amid a visible liquidity crisis of local currency. There is stagnation in business with inflation surpassing 10 per cent. The local currency has depreciated by 38-51 per cent over the last two years, and cash flow within banks has also decreased… Bangladesh's financial sector has entered the red zone, indicating a significant economic risk," Oli observed.

The veteran politician said feared that the country's economy may seriously collapse anytime as it is now going through a unstable situation. "We think if this situation continues for long, the country will suffer further, leading to inevitable chaos. It might even go beyond control."

He also attributed the current state of the country to the government's failure in running the country. "The present government has been ruling the country in the Baksal style for the past 15 years. I will tell them, for the sake of Allah, stop it and give the people a chance to form the government through their votes."

The LDP leader called upon Prime Minister Sheikh Hasina to come out of her misconception that the country will not function without her.

Oli, a former minister, depicted a sorry state of the country by highlighting the issues of the growing unemployment rate, foreign debt, defaulted loans, corruption, irregularities in commodity prices, the spread of drugs, mismanagement of roads, the poor condition of the education system, and oppression of opposition leaders and activists, including implicating them in different cases and jailing them in false cases.

He alleged that the government is whimsically enacting new laws to stay in power illegally by repressing and suppressing its opponents and the common people. "Justice must be ensured in the country. Otherwise, peace will never return to the country, and the uncomfortable situation will never end."

In such a situation, he called upon people from all walks of life, including farmers, workers, youth, and students, to get united with fresh vigour for the establishment of democracy and justice in the country.

Oli said their party, together with BNP, will soon announce fresh programmes to unseat the current government from power. "All unite and prepare to oust this Baksal regime through united efforts."

He slammed the Indian government as he thinks it is directly and indirectly responsible for destroying democracy in Bangladesh and establishing dictatorship in the country.

"We have no negative attitude towards the people of India. It is our hope that the Indian government will focus on establishing friendship between the people of Bangladesh and the people of India, refraining from associating with any particular person or party," Oli said.​

 

[Saif]

NSC sales plunge amid high inflation in Bangladesh

The net sales of national savings certificates plummeted in the July-March period...

www.newagebd.net

NSC sales plunge amid high inflation in Bangladesh
Staff Correspondent 21 May, 2024, 22:08

A file photo shows clients receiving services at a branch of a state-owned bank in the capital Dhaka. The net sales of national savings certificates plummeted in the July-March period. | New Age photo
The net sales of national savings certificates plummeted in the July-March period.

Bankers said that the sales of the instruments plunged, as people were living off their savings amid soaring commodity prices

According to Bangladesh Bank data, the net NSC sales were Tk 12,545 crore negative in the July-March period of the financial year 2023-24, compared with a negative Tk 4,161 crore in the same period in the previous year.

In March alone, the net sales figure plummeted to a negative Tk 3,653 crore, against negative Tk 652 crore recorded in the same month of the previous year.

This negative trend in net sales occurs when the repayment of the principal amount exceeds the sales, leading to a net outflow of funds from the government's exchequer or through loans taken from the banking system.

Bankers said that people were living off their savings due to acute and prolonged inflationary pressures in the country.

They said that many individuals lacked extra funds for savings and investments due to rising living costs.

Bangladesh's overall inflation rate reached 9.74 per cent in April, remaining over 9 per cent since March 2023.

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

 

[Saif]

Per capita income increased to US$2784 in FY 2023-24: BBS

The per capita income of Bangladesh stands at US$2784 in the current fiscal year, slightly higher than the previous fiscal year. Bangladesh Bureau of Statistics (BBS) released the periodic data on Monday. The end of the current fiscal year is just a few days away. The BBS prepared this projection

thefinancialexpress.com.bd

Per capita income increased to US$2784 in FY 2023-24: BBS
UNB
Published :
May 21, 2024 19:52
Updated :
May 21, 2024 21:35

The per capita income of Bangladesh stands at US$2784 in the current fiscal year, slightly higher than the previous fiscal year.

Bangladesh Bureau of Statistics (BBS) released the periodic data on Monday. The end of the current fiscal year is just a few days away. The BBS prepared this projection from an existing trend of the economic situation.

BBS says that by the end of FY 2023-24, the provisional GDP growth will stand at 5.82 per cent, which was 5.78 per cent in the previous FY2022-23.

At present the per capita income in terms of taka is Tk 0.361 million, which in the last financial year was Tk 0.273 million. The amount of per capita income in the local currency increased due to the devaluation of taka.​

 

[Saif]

Why is it taking so long to stabilise the economy?

Bangladesh’s macroeconomic imbalances have emerged from inflationary pressure; the balance of payments pressure; and fiscal pressure

www.thedailystar.net

Why is it taking so long to stabilise the economy?

VISUAL: SHAIKH SULTANA JAHAN BADHON

Bangladesh's economy showed remarkable signs of swift recovery from the adverse effects of Covid-19, but this progress was cut short by the advent of serious macroeconomic imbalances in April 2022. These imbalances are reflected in high inflation, depleting foreign exchange reserves, pressure on the exchange rate, shrinking capital inflows, and pressure on the budget. To address the stabilisation issues, the government entered a four-year programme with the International Monetary Fund (IMF). Implementation of the second year of the programme is currently underway.

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

 

[Saif]

How sharp depreciation of taka affects Bangladesh’s GDP per capita

The rapid depreciation of the taka against the US dollar has had a noticeable impact on the country's economic growth, as evidenced by the recent GDP data published by the Bangladesh Bureau of Statistics (BBS)

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How sharp depreciation of taka affects Bangladesh's GDP per capita

The rapid depreciation of the taka against the US dollar has had a noticeable impact on the country's economic growth, as evidenced by the recent GDP data published by the Bangladesh Bureau of Statistics (BBS).

Per capita GDP in taka terms has shown a steady growth from the fiscal year of 2020-21 to 2023-24, rising from Tk 208,751 to Tk 294,191. It was Tk 262,868, meaning it rose 12 percent in the current financial year.

Per capita GDP in dollar terms, however, has not followed the same trend.

In 2021-22, per capita GDP in dollars rose to $2,687 from $2,462 in FY21. However, it fell to $2,643 in FY23 before slightly recovering to $2,675 in the current financial year, up 1.2 percent year-on-year.

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

 

[Saif]

Forex reserves rise by $180 million in a week

Reserves hit $18.61 billion on May 21, up from $18.43 billion on May 15

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Forex reserves rise by $180 million in a week
Reserves hit $18.61 billion on May 21, up from $18.43 billion on May 15

Bangladesh's foreign currency reserves have risen to $18.61 billion on May 21, an increase of $180 million from a week ago, central bank figures showed.

It was $18.43 billion on May 15, according to a central bank calculation based on the International Monetary Fund's Balance of Payment Manual 6.

The Bangladesh Bank began calculating forex reserves in line with the new method in July last year as per suggestions of the lender, which approved a $4.7 billion loan in January that year.

Tuesday's reserves were far lower than the $41 billion the country reported in August 2021. Since then, import payments have risen faster than remittance earnings and exports, bringing the reserves to the current level.

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

 

[Saif]

Budget For Fy25: 53pc rise in allocation for debt servicing

The government’s allocation to repay foreign debts may reach Tk 57,000 crore in the next budget, a 53 percent rise from the current year, putting further pressure on the country’s dwindling foreign currency reserves.

www.thedailystar.net

Budget For Fy25: 53pc rise in allocation for debt servicing
Spiralling amount will put strain on reserves, say experts

The government's allocation to repay foreign debts may reach Tk 57,000 crore in the next budget, a 53 percent rise from the current year, putting further pressure on the country's dwindling foreign currency reserves.

The interest payments for increasing levels of foreign loans in recent years and the tumbling value of the taka against the US dollar have forced the government to set aside more for debt servicing.

Allocation for foreign debt repayment has been Tk 37,076 crore in the current fiscal year, according to the finance ministry.

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

 

[Saif]

Budget for FY25: Scope likely for legalising black money

The government is thinking about allowing again undisclosed money to be legalised and laundered money to be brought back home through formal channels in the next budget.

www.thedailystar.net

Budget for FY25: Scope likely for legalising black money
Govt also mulling ways to bring laundered money home

Illustration: Collected

The government is thinking about allowing again undisclosed money to be legalised and laundered money to be brought back home through formal channels in the next budget.

A finance ministry official said the National Board of Revenue and Bangladesh Bank are trying to find out ways this could be done.

The official said they were considering to impose a 15 percent tax on legalising black money.

Similar steps had been taken in the past, but the result was not as expected, the official added.

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

 

[Saif]

Most economic indicators on the downtrend

Discover how economic indicators like inflation, dollar crisis, and foreign exchange reserves are worsening, putting pressure on Bangladesh's economy and banking sector.

en.prothomalo.com

Most economic indicators on the downtrend
Shanaullah SakibDhaka
Published: 27 May 2024, 11: 54

Most of the economic indicators--inflation, dollar crisis, foreign exchange reserves have worsened, resulting in mounting pressure on the overall economy.

The cost of doing business has gone up as Bangladesh Bank has increased the interest rate.

The banking sector has become fragile as money is being taken from banks in names, real and false.

Panic has spread due to the initiative for the forceful bank mergers. At least three banks are struggling to return depositors' money, according to the central bank and officials in the sectors concerned.

Although the Covid pandemic hit the economy, the economic indicators were better at the time.

The economic indicators started to worsen mid-2022.

Bangladesh Bank at the time said the crisis would end by December. Later, the crisis intensified. Now the central bank assures businessmen that the crisis will go by December this year.

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

 

[Saif]

Why are IMF policies failing to stabilise our economy?

Why does macroeconomic instability continue to plague Bangladesh even after partnering with the IMF?

www.thedailystar.net

Why are IMF policies failing to stabilise our economy?

During its latest partnership with the International Monetary Fund (IMF), Bangladesh has been experiencing high inflation for the past 22 months, its economic crisis worsening gradually. Financial account deficits have surpassed $9.26 billion. With outstanding payments across various sectors like electricity, aviation, fuel imports, and various digital sectors, the net reserves have plummeted to just $13.8 billion, a situation reminiscent of nine years ago. The continuous dollar crunch and dollar payment crisis have persisted for the past 22 months, further strangling the country's business and employment sectors due to LC's substandard control.

Meanwhile, the government is also suffering from a local currency crisis. Being unable to make due payments in taka, it decided to issue special bonds worth nearly Tk 26,000 crore. Nearly half of the new foreign loans are being used to pay the interest and principal on unscrupulous loans taken in the past. The country has witnessed the highest depreciation in the value of taka during this time. So, the question arises: Why does macroeconomic instability continue to plague Bangladesh even after partnering with the IMF?

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

 

[Saif]

Bangladesh could be a regional trade hub

Bangladesh could become a regional hub for trade and investment in the wake of ongoing geopolitical tensions and growing focus on the Indo-Pacific region, according to Paul J Thoppil, Canada’s trade representative for the Indo-Pacific.

www.thedailystar.net

Bangladesh could be a regional trade hub
Says Canadian trade representative

Paul J Thoppil

Bangladesh could become a regional hub for trade and investment in the wake of ongoing geopolitical tensions and growing focus on the Indo-Pacific region, according to Paul J Thoppil, Canada's trade representative for the Indo-Pacific.

However, the country would need to sign Foreign Investment Protection Agreements (FIPAs) in order to encourage foreign direct investment (FDI) to this end, he said.

A FIPA is an international treaty between two countries that imposes rules on how foreign investors from either side can be treated while doing business with the other, thereby protecting their interests.
Most countries have taken advantage of the huge low-cost labour force in China, Thoppil said.

"But given geopolitical tensions, a lot of foreign multinationals are considering adopting a combined China Plus One policy," he added.

China Plus One refers to a global business strategy where companies avoid investing only in China and opt for a more diverse portfolio featuring a variety of ASEAN countries.

Bangladesh has the opportunity to benefit from this strategy amid the changing global supply chain thanks to its low-cost and educated labour force, Thoppil said.

"I would like Bangladesh to leverage this attribute as demonstrated in the country's garments sector to increase trade and investment with Canada and other parts of the North American market," he added.
Thoppil made these comments in an exclusive interview with The Daily Star on May 21 during a three-day visit to Dhaka, where he held meetings with top government officials to promote bilateral trade and investment.

He said he observed vibrancy in the economy, confidence in the private sector, good infrastructure and a youthful population.

In fact, Bangladesh's economic progress in the past two decades has been so fast that it was not well observed by the outside world, he said.

"I think we should send the Canadian private sector a signal that Bangladesh is a fantastic place for investment as it could be a hub for exports to India, China and neighbouring countries," he said.

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[Saif]

Taxes on basic consumer commodities being halved

Taxes on numerous basic consumer commodities are getting cut to half as the government is set to bank on fiscal measures to combat high food inflation, sources say. Existing tax on procurement of rice, wheat, potatoes, onions, garlic, green peas, gram, lentils, garlic, turmeric, dry chili, p

thefinancialexpress.com.bd

Taxes on basic consumer commodities being halved
Inexorable inflation control dominates new budget's fiscal measures
DOULOT AKTER MALA

Taxes on numerous basic consumer commodities are getting cut to half as the government is set to bank on fiscal measures to combat high food inflation, sources say.

Existing tax on procurement of rice, wheat, potatoes, onions, garlic, green peas, gram, lentils, garlic, turmeric, dry chili, pulses, maize, coarse flour, flour, salt, edible oils, sugar, black pepper, cinnamon, nuts, clove, cassia leave, dates, cardamom, and all types of fruits would be cut to 1.0 per cent from the existing 2.0 per cent in the budget for the next fiscal, to be placed in parliament on June 6.

Also, procurement of jute, cotton, yarn, computer and computer parts would enjoy tax cuts in FY 2024-25.

Official sources have said the tax-cut decision has been made following instructions of the prime minister to combat food inflation through fiscal measure in the upcoming budget.

According to Bangladesh Bureau of Statistics (BBS), cost of food in Bangladesh increased 10.22 percent in April 2024 over the same month in the previous year.

Food inflation in the country averaged 6.83 per cent in 2024 over the past year, reaching an all-time high of 12.56 percent in October 2023, against a record low of 3.77 percent in February 2016.

Currently, banks or financial institutions deduct the tax on those commodities procured through letter of credit (LC) or other modes of financing agreement on paid or loan amount.

Former lead economist at World Bank, Bangladesh, Dr Zahid Hussain, however, finds the effort to tame food inflation through tax cuts not justified.

He rather suggests trying subsidizing food prices through increasing allocations, if the government could control 'market power'.

On tax cut he says, "The government has to address the need for mobilizing domestic revenue for social-safety net, higher allocation to education and health."

Meanwhile, blanket tax holiday for megaprojects and other physical infrastructures may also end in the current fiscal year.

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[Saif]

Dollar crisis deepens economic woes in Bangladesh

The persistent dollar crisis in Bangladesh has exacerbated various economic issues, including inflation, rising business costs, an energy crisis, and mounting government foreign debt payments...

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Dollar crisis deepens economic woes in Bangladesh
Mostafizur Rahman 29 May, 2024, 23:59

A file photo shows a man counting US dollar notes at a currency exchange house in the capital Dhaka. | New Age photo

The persistent dollar crisis in Bangladesh has exacerbated various economic issues, including inflation, rising business costs, an energy crisis, and mounting government foreign debt payments.

Bankers say that commercial banks in the country are having difficulty opening Letters of Credit because their holdings of foreign currency are evaporating rapidly.

In April, foreign currency reserves held by commercial banks fell to a 14-month low of $5,047 million, down from $5,439 million in March and $5,559 million in December 2023. This is the lowest level since January 2023, when reserves were $4,849 million.

Against the backdrop, banks received little support from the central bank, whose own foreign reserves are also dwindling, making it harder for banks to open LCs for importing essential products.

Many import payments have been delayed or renegotiated due to the dollar shortage, leaving banks desperate to acquire the necessary foreign currencies.

The country's foreign currency reserves, according to International Monetary Fund guidelines, dropped to $18.2 billion in May 2024 from $48 billion in August 2021.

To mitigate the depletion, the government has secured a $4.7 billion loan deal from the IMF.

On May 8, the central bank devalued the local currency from Tk 110 to Tk 117 per US dollar.

However, many banks are selling dollars at Tk 120–123 for opening LCs. This devaluation follows a series of declines from Tk 94.7 in July 2022 and Tk 84.8 in July 2021.

Bangladesh, like many other countries, has foreign debt denominated in US dollars. As the taka depreciates, it will take more taka to repay the same amount of foreign debt in dollars.

It can lead to higher debt repayment obligations for the government and businesses, putting further strain on their finances, economists said.

Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said that the persistent dollar crisis has forced banks to decline opening LCs.

As a result, the import of raw materials has been delayed or obstructed, significantly reducing business production.

He added that hampered imports have led to reduced production and increased product prices due to supply constraints.

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[Saif]

Budget deficit to remain high in next fiscal year also

Budget deficit in the next fiscal year is likely to be Tk 2.50 trillion as the government frames a slightly expansionary budget amid ongoing elevated inflationary pressure, officials said, although inflation control remains its high priority. The government is likely to frame a Tk 7.969-tril

thefinancialexpress.com.bd

Budget deficit to remain high in next fiscal year also
Taming inflation, higher expenditure contradictory, say economists
FHM HUMAYAN KABIR

Budget deficit in the next fiscal year is likely to be Tk 2.50 trillion as the government frames a slightly expansionary budget amid ongoing elevated inflationary pressure, officials said, although inflation control remains its high priority.

The government is likely to frame a Tk 7.969-trillion national budget for the fiscal 2024-25 with one-third of the outlay constituting a gap between income and expenditure targets.

Economists find such massive deficit amid the ongoing economic slowdown contradictory to government priority of inflation control in the upcoming fiscal year.

Bangladesh passes through a higher trajectory of inflation for over a year, which is still close to double-digit figure on a point-to-point basis.

In the last month of April, the inflation rate was recorded at 9.74 per cent in the Bangladesh Bureau of Statistics (BBS) data.

Ministry of Finance (MoF) officials say since the country's better economic growth will have to be kept continuing, they opted for a higher-expenditure target than the one in the current FY2024.

"We know that we need borrowing to bankroll the deficit budget, but we have planned to keep the economy growing," a senior official told the FE correspondent.

"At the same time, we are going to lay top priority on controlling inflation in the next national budget," he added.

According to the MoF officials, the government is likely to set a target of pegging inflation within 6.5 per cent in FY2025.

They hope to keep the budget deficit within 5.0 per cent of the targeted GDP or gross domestic product.

Meanwhile, the government kept the budget deficit at Tk 2.61 trillion, or 5.2 per cent of the GDP, in the outgoing budget worth Tk 7.62 trillion.

Noted economist Dr Debapriya Bhattacharya told the FE that the contractionary monetary policy and higher budget deficit do not fit in this moment properly.

"When you will prepare a budget with higher deficit, then you will definitely go for borrowing. You may go to local banks or to the foreign lenders to bankroll the deficit budget. If you go for local borrowing, there will be a crowding-out effect," he says about the budget arithmetic.

And then the credit flow to the investors will be lower and investment will be slower further.

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[Saif]

Time to exploit the potential of local partners and products

It is important to encourage all development players to invest money and energy to maximise their contributions towards the GDP growth.

www.thedailystar.net

Time to exploit the potential of local partners and products

Photo: Prabir Das

A successful political regime is expected to maintain formal and informal arrangements through which the government, private actors and non-government organisations (NGOs) cooperate to formulate and carry out key policy decisions. In a pluralistic society, power is not supposed to be concentrated on a single development actor, but should be spread between these three major actors so that a developmental balance is maintained and each can judge the performance of the others.

All three development actors have their respective circle of influence and are capable of reaching out to the household level through a variety of goods and services. While the Bangladesh government provides electricity, education and basic health directly to the people, NGOs provide micro-credit, income-generating activities and social awareness, and the private sector supplies consumer goods and services. Often the work of these development actors overlaps—e.g. the government funds micro-credit programmes and builds houses for the poor families, and NGOs are involved in education and health services, and have been running banks and industries. The private sector is also involved in social welfare activities and education sector. In fact, thousands of schools and most of the universities and medical colleges in Bangladesh are in the private sector.

Over the last two years, high inflation rates have affected the quality of life of the middle class and lower income groups. Economic inequality has risen in the country over the last two decades. The country built up high foreign exchange reserves as a result of positive balance of payment for several years. The forex reserves averaged $24.91 billion between 2008 and 2024, reaching as high as $48 billion in August 2021. But the situation has deteriorated in recent years and forex reserves slipped to $18.61 billion on May 21, 2024, because of higher import payments caused by the rise in prices in the international market, slow growth of foreign remittance and the taka's depreciation against international currencies. Economists made various recommendations to increase the country's foreign currency reserves: diversify export items; increase competitiveness of Bangladeshi products in the international market; use modern technology; encourage flow of foreign remittance through the official channel; and limit foreign borrowing.

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[Saif]

WB to give $500 million as budget support

After the IMF’s loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

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WB to give $500 million as budget support

After the IMF's loan, the World Bank is now going to provide $500 million in budget support to Bangladesh, double from what it had initially planned, by the end of June, said finance ministry officials.

This will ease pressure on the country's dwindling foreign currency reserves.

The Washington-based multilateral lender's budget support is part of a $1.15 billion loan package, of which $650 million will be spent on building the Bay Terminal in the port city of Chattogram.

The WB in the last fiscal year had planned that it would give $250 million cash-based policy support under the Bangladesh First Recovery and Resilience Development Policy Credit (DPC).

The lender is now going to double the amount following the Bangladesh government's request as it is trying to rebuild the forex reserves.

The development comes at a time when the International Monetary Fund's (IMF) board is set to approve a $1.15 billion loan in the third instalment under its $4.7 billion loan programme in the last week of June.

Once the budget support from the WB and the IMF loan is approved, Bangladesh will receive a total of $1.65 billion.

The country's reserves stood at $18.72 billion on Wednesday from $41 billion in August 2021.

Bangladesh was supposed to receive the WB's budget support in the last fiscal year, but the release of the fund was delayed due to the government's inability to fulfill 12 conditions, including the implementation of the revised Bank Company Act, the development lender had tagged.

After meeting the conditions, the government sent the progress report to the WB requesting it to release the fund earlier this fiscal year, finance ministry officials told The Daily Star.

As the government fulfilled the condition of implementing the revised bank company law, the WB asked for an English draft of it.

The WB reviewed the draft and the implementation status for the other conditions of the reform programme. It also evaluated the measures taken by the Bangladesh Bank to bring reforms to the banking sector.

The central bank and the government took some bold steps, including introduction of a market-based interest rate policy by replacing the fixed interest rate policy, and launching the crawling peg system to determine the exchange rate of foreign currencies.

As the reforms took place, the WB is now set to place the loan proposal before its board.

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[Saif]

‘Booming’ economy, struggling people

When it comes to the simultaneous existence of growth and crisis, Bangladesh has become a model.

www.thedailystar.net

'Booming' economy, struggling people
growth and crisis in Bangladesh

VISUAL: SHAIKH SULTANA JAHAN BADHON

When it comes to the simultaneous existence of growth and crisis, Bangladesh has become a model. There is a growth of per capita income on the one hand, and financial hardship, unemployment, hunger, malnutrition, and financial insecurity suffered by the majority of people on the other. Unprecedented expansion of private banks is happening while the banking sector faces a crisis with rising defaulted loans and big theft of bank money. Over the last decade, we have seen a construction boom on the one hand, and the highest rates of deforestation, air and water pollution, and land- and river-grabbing on the other.

The super active propaganda machine of the government as well as their local and foreign partners consistently try to make us believe that the country is on the highway of development, and they often point to big infrastructure projects—most of which are extremely expensive because of high corruption and inefficiency—as proof. Yes, many megaprojects have been taken up during this government's time. But a good number of these megaprojects will be dangerous and/or big liabilities for Bangladesh in the long term. For example, the Rampal Power Plant, in partnership with the NTPC of India, will harm our precious Sundarbans severely. This plant created the path for many more "red category" projects in the area, which means it will massively damage the environment.

There are more coal-based power plants in the coastal areas in collaboration with China and Japan, requiring big loans, which will make these areas more vulnerable to climate change effects. Another project is a combination of both catastrophic risks and immense loans (nearly $12 billion), which is the Rooppur Nuclear Power Plant, in partnership with Russia. There are also big import projects of LNG with the US and other countries. All these projects have contributed to a huge amount of foreign debt, which is putting pressure on the already depleting foreign exchange reserves. It is not possible to find any rationale behind these projects when there are much better alternatives, for example, for energy and power sectors, that are cheaper and environment-friendly.

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[Saif]

Narrowest budget deficit in a decade as govt to curb expenses

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

www.thedailystar.net

Narrowest budget deficit in a decade as govt to curb expenses

As the government wants to lower expenses, it is likely to contain the budget deficit to 4.6 percent of gross domestic product in the next fiscal year, a level seen a decade ago.

The government usually keeps the budget deficit at around 5 percent.

During the political turmoil of 2013, ahead of the 2014 national election, the government placed the budget of which the deficit was 4.6 percent.

The upcoming budget will be the first one of the current government. The political situation is stable now, but the economy is facing a prolonged crisis.

In the 2019-20 fiscal year, the government was in a difficult place because of the shutdown of the economy due to coronavirus restrictions. The Ukraine-Russia war also made a global impact on economies in 2022.

Economists now believe that the dwindling foreign currency reserves are the biggest crisis.

Finance ministry officials say they are finding it hard to maintain macroeconomic stability due to the low foreign currency reserves.

According to Ahsan H Mansur, executive director of Policy Research Institute, macroeconomic stability should be the first priority in the upcoming budget, which will be placed in parliament on June 6.

"Earlier, the policymakers were in denial, thinking they could overcome the crisis in a matter of months. At least, they have realised now that they have to do something," he said.

The International Monetary Fund also suggested lowering government expenditure and raising revenue collection.

In the current, 2023-24, fiscal year, the budget deficit is Tk 2,61,785 crore. In the coming one, the amount is likely to be Tk 2,57,000 crore.

This is a departure from the norm because the deficit amount usually rises year on year, officials say.

A budget deficit means the gap between the government's revenue income and the expenditure. The government borrows from the domestic and global development partners to meet the deficit.

Most of the time, the budget size increases by 12 to 14 percent compared to the previous year's budget. But this time around, the Tk 7,96,900 crore budget is likely to be just 4 percent bigger than the previous one.

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[Saif]

Govt missteps led to economic deterioration

A series of missteps taken by the government are to blame for the country’s deteriorating economy, Muinul Islam, former professor of economics at Chittagong University, said yesterday.

www.thedailystar.net

Govt missteps led to economic deterioration

Says Prof Muinul

A series of missteps taken by the government are to blame for the country's deteriorating economy, Muinul Islam, former professor of economics at Chittagong University, said yesterday.

Some quarters, who are now oligarchs by dint of blessings from the ruling class, have played major roles to bring on this crisis, he observed while presenting a keynote paper at a discussion programme.
Bangladesh Workers Party organised the event titled "Economic Reality of Bangladesh: Crisis and Ways of Transition" at the National Press Club in Dhaka.

Some kind of authoritarian rule is going on, and various policies were taken at the behest of some oligarchs, Muinul alleged mentioning some names.

Mentioning the name of one, he said it is indecent for the country to have a businessman like him. That businessman has "removed his name from the list of defaulters by depositing 2 percent".

Muinul said, "Money laundering is the biggest problem but no steps have been taken to control hundi."

Rather, he added, various benefits including tax exemptions have been offered to bring back the laundered money, but not a single taka has returned.

About loan money being laundered, he said, "Tk 5 lakh crore out of total Tk 18 lakh crore loans in the banking sector are defaulted. But Bangladesh Bank does not recognise it. Bank loans are being repaid with borrowed money. A loan is being rescheduled seven to eight times."

Speaking about the lingering high inflation, he said, "Other countries could reduce it, but Bangladesh couldn't. To the contrary, the prices have been pushed up further."

Muinul said now the names of the former police and army chiefs are being discussed. "They are being talked about only because the government wants them to be talked about. Where did former home minister Mohiuddin Khan Alamgir get the money to set up Padma Bank? Why is Bachchu (Abdul Hai) of BASIC Bank still missing? Where are the sons of Sikder who ruined the National Bank?"

He said that Russia has set up projects like Rooppur power plant in India at half the cost. "So why are we spending more money there? A lot of unnecessary infrastructure is being built. Money is being looted through it."

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[Saif]

Saarc nations contribute below 1% of remittance to Bangladesh

Of the $21.61 billion remittance Bangladesh received in FY23, only $44.99 million came from Saarc countries

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Saarc nations contribute below 1% of remittance to Bangladesh
Of the $21.61 billion remittance Bangladesh received in FY23, only $44.99 million came from Saarc countries

Below 1 percent of the remittance Bangladesh received in 2022-23 fiscal year came from the countries under the South Asian Association for Regional Cooperation (Saarc), according to a Bangladesh Bank report on trade among Saarc countries.

Remittance inflow to Bangladesh stood at $21.61 billion in FY23, of which only $44.99 million came from Saarc nations, according to the report titled "Export receipts, import payments, and remittances with Saarc countries".

The highest amount of remittance came from the Middle East, the European Union and North America, but the amount from the Saarc region was very negligible compared to other countries, it read.

Among the Saarc nations, the highest amount of remittance -- 64.46 percent -- came from the Maldives while 26.25 percent came from India and 3.31 percent from Sri Lanka. The amount from others were very negligible.

However, Bangladesh's import payments stood at $10.33 billion for the Saarc region in FY23, which was 15.07 percent of the total of $68.6 billion, the report showed.

Bangladesh made the highest import payment among Saarc nations to India, 91.84 percent, and 6.76 percent to Pakistan.

Of Bangladesh's total export earnings of $43.57 billion, only 4.4 percent originated from Saarc countries, the Bangladesh Bank report said.​