[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

FROM CRISIS TO CONFIDENCE: Navigating liquidity challenges

LIQUIDITY management has become a hot topic in the financial sector as institutions struggle to manage funding amid market pressures. Liquidity shortages have recently made the headlines, signalling trouble for banks and...

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FROM CRISIS TO CONFIDENCE: Navigating liquidity challenges
by Nurul Karim Patwery 16 February, 2025, 00:07

LIQUIDITY management has become a hot topic in the financial sector as institutions struggle to manage funding amid market pressures. Liquidity shortages have recently made the headlines, signalling trouble for banks and non-bank financial institutions. Rising interest rates, economic uncertainty and structural issues within the financial system have shifted the liquidity landscape, demanding a fresh look into how institutions manage their liquidity needs. In the current financial landscape, treasurers grapple with the complexities introduced by persistent high interest rates, which require a renewed focus on liquidity management, particularly intra-day liquidity, as the cost of maintaining sufficient levels becomes increasingly significant.

At the heart of liquidity management lies the ability to ensure enough money available to meet the demands of depositors and borrowers, without having too much cash sitting idle. To address the liquidity pressure, institutions must hold adequate high-quality liquid assets and maintain access to borrowing facilities. This balancing act has become increasingly difficult, especially with the changing dynamics in the economy and monetary policy.

Liquidity risk can be divided into two types: funding liquidity risk, which is the inability to obtain necessary funding at a reasonable cost, and asset liquidity risk, which is the inability to liquidate assets at an acceptable price. Institutions must understand their liquidity flows to manage funding needs effectively. A key aspect of liquidity management is distinguishing between operational and non-operational funds, enabling the optimisation of cash availability without holding excess funds that could be used for lending.

Roots of liquidity crisis

CONTROLLABLE and internal liquidity risks encompass several factors within an institution’s management. Bucket-wise asset-liability mismatches occur when there are timing differences between cash inflows and outflows, potentially causing funding gaps. Deposit concentration risk arises from reliance on a small number of large depositors, increasing vulnerability to withdrawals. Hence, an undiversified funding basket limits flexibility in raising funds, heightening liquidity risk. Additionally, rising non-performing loans because of inadequate credit risk management practices can strain liquidity as the flow of expected repayments diminishes.

Liquidity in the banking sector in Bangladesh is exposed to various exogenous and uncontrollable risks that significantly affect financial stability and operational effectiveness. For more than two years, the banking sector has faced a liquidity crunch, particularly impacting some Islamic banks. The contributing factors include panic withdrawal, high dollar values, inflation, a poor debt repayment culture, frequent loan concessions and increased government borrowing at high interest rates.

A significant cause of the shortage is the central bank’s efforts to control inflation by reducing the money supply, leading to multiple policy rate increases, with the repo rate recently reaching 9.5 per cent. Many banks have turned to the central bank and the call money market, borrowing at rising rates, which has forced them to offer high-interest deposits, further increasing the operational cost.

The liquidity crunch has also been exacerbated by the central bank’s sale of foreign exchange reserves to stabilise the taka against the dollar, draining liquidity from the system. A lack of public confidence in the banking sector has led people to hold onto cash, with about Tk 2,92,000 crore circulating outside the banking system as of August 2024. This negative sentiment has caused bank deposits to decline, reaching an 18-month low growth rate of 7.02 per cent.

Additionally, business loans are often not repaid on time, with borrowers having received various benefits like moratorium because of the Covid outbreak and the Ukraine-Russia war. Loan scams and money illicit capital flows have further stopped some banks from maintaining the required cash-to-reserve ratio. Regulatory risks arise from frequent changes in banking regulations that affect operational practices and capital requirements, complicating liquidity management. The interest rate cap of 6 per cent for deposits and 9 per cent for loans was limiting banks’ responses to inflation. After the withdrawal of cap, there is room for more flexible lending rates, which can help banks to manage liquidity and to enhance financial stability amid rising global interest rates.

Effective liquidity management

TO STRENGTHEN liquidity management, institutions should implement risk-based treasury management by identifying specific financial and reputational risks and taking necessary measures to mitigate them. It is essential to ensure the availability of at least three months of rolling cash flow forecasts while identifying bucket-wise asset-liability mismatches to minimize gaps.

Maintaining a robust liquidity buffer requires effective treasury management and the capability to meet debt obligations within a rolling 30-day period. Assets should be securely held in banks or government securities to provide for safety and accessibility. The aim should be to achieve a liquidity ratio well above the regulatory requirement. Managing non-performing loans is crucial, with a target of keeping the non-performing loan ratio as minimum as possible. Institutions should proactively manage asset liability risks by monitoring key ratios and their trigger points, emphasising core values of ‘timeliness’, ‘accuracy’ and ‘efficiency’.

To diversify funding sources, institutions should continue embracing digital deposit services, aiming at connecting depositors through a digital platform. Active management of four core areas is necessary to mitigate liquidity risks. Monitoring key macroeconomic indicators such as the current account balance, financial account balance, the opening of letters of credit versus settlement ratio, advance-deposit ratio, yield on government securities, foreign currency position, policy rate movement, inflation and market interest rates — will guide the understanding of market directions.

Addressing funding liquidity risk involves estimating cash flow from assets and liabilities to identify potential vulnerabilities. Effective mitigation strategies should be developed by understanding the sources of liquidity pressures, such as rising borrowing costs and non-performing loans. Enhancing cash flow forecasting capabilities will help predict funding needs, while diversifying funding sources will minimize deposit concentration.

For liquidity stress testing, financial institutions should assess their ability to meet obligations during challenging periods. Insights from these assessments will inform contingency planning, strategic development, and the definition of its risk appetite.

A key challenge in liquidity management is ensuring sufficient cash for daily operation, especially with potential tightening on the money market. Implementing advanced treasury management systems will enhance the efficiency and accuracy of operations, allowing for real-time monitoring of cash flows, investments and risk exposures. Regulatory compliance, particularly regarding key ratios, must be prioritised to avoid penalties and maintain operational integrity.

Strengthening governance within treasury functions by defining roles and accountability will support sound decision making. A robust maker-checker process is essential for ensuring transaction accuracy. Additionally, financial institutions should focus on enhancing stricter loan approvals, and improved loan recovery efforts to ensure adequate liquidity against future shocks.

In response to higher interest rates, achieving ‘intra-day control’ — real-time monitoring of liquidity positions — is vital. This enables quick adjustments to discrepancies. Financial institutions should leverage software solutions for comprehensive intra-day insights.

Lastly, restoring public confidence will require efforts from both regulators and banks to improve transparency and address governance issues, rebuilding trust in the financial system.

Nurul Karim Patwery is head of treasury, IDLC Finance Plc.​

 

[Saif]

65% of registered taxpayers didn't file return

Over 65 percent of registered taxpayers, including individuals and companies, failed to file tax returns by the deadline, according to the National Board of Revenue (NBR).

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65% of registered taxpayers didn't file return

Over 65 percent of registered taxpayers, including individuals and companies, failed to file tax returns by the deadline, according to the National Board of Revenue (NBR).

Currently, the number of registered Taxpayer Identification Number (TIN) holders stands at approximately 1.14 crore.

As of February 16, a total of 39.86 lakh registered taxpayers, including 13,066 companies, have filed their returns, according to NBR data. During the same period last year, the number of returns submitted was 38.29 lakh.

However, the submission of e-returns has increased by 175 percent this fiscal year, reaching 14.31 lakh.

The return filing process began on July 1, with an initial deadline of November 30. However, the deadline was extended three times, finally closing in February.​

 

[Saif]

IMF loan’s 4th tranche deferred to June

Finance adviser Salehuddin Ahmed on Monday said that the disbursement of the fourth tranche under a $4.7-billion International Monetary Fund loan programme had been deferred to June.

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IMF loan’s 4th tranche deferred to June
Staff Correspondent 17 February, 2025, 12:38

Finance adviser Salehuddin Ahmed. | File Photo

Finance adviser Salehuddin Ahmed on Monday said that the disbursement of the fourth tranche under a $4.7-billion International Monetary Fund loan programme had been deferred to June.

‘We are now expecting to get two tranches in June,’ he told reporters after attending a session of the ongoing deputy commissioner conference in the capital Dhaka.

He attributed some pending conditions under the loan deal to the deferment of the fourth tranche which was due in this month.

The finance adviser, however, did not disclose the conditions.

The conditions reportedly include strengthening revenue collection to manage external pressures, tightening monetary policy to curb inflation and making the foreign exchange rate more market-oriented.

Noting that the IMF loans carry conditions, he said that the conditions would be met after safeguarding the country’s interests.

Salehuddin, however, said that the deferment was made on the basis of a consensus with the IMF.

He said that they were not desperate for the IMF loan since the balance of payment crisis had eased with the improvement in economic situation.

The IMF loan programme began on 30 January, 2023 with the disbursement of the opening tranche of $476.3 million on February 2, 2023.

The second tranche amounting to $681 million was released in December 2023 and the third tranche worth $1.15 billion released on June 2024.​

 

[Saif]

Erosion of savings

The drop in both domestic savings and national savings, as the Bangladesh Bureau of Statistics (BBS) estimates, is certainly a cause for concern but hardly surprising. Fixed-income people---salaried and wage earners---have in most cases found their income where it was before or if increased at all,

thefinancialexpress.com.bd

Erosion of savings
Published :
Feb 17, 2025 23:50
Updated :
Feb 17, 2025 23:50

The drop in both domestic savings and national savings, as the Bangladesh Bureau of Statistics (BBS) estimates, is certainly a cause for concern but hardly surprising. Fixed-income people---salaried and wage earners---have in most cases found their income where it was before or if increased at all, failed to match the raging inflation. A report carried in the FE on Sunday on the basis of the BBS findings released last week refers to increased spending by people in general. Well, people are not doing so voluntarily, they are forced to. Money has become cheaper so much so that even after squeezing their consumption, the majority of the people cannot maintain their living standard, let alone save. Within a tight or curtailed family budget, the low-income and lower-middle-income and even middle-income people are forced to forego not just some of their favourite consumer goods but also a few essential items deemed necessary for maintaining a sound body.

Thus the drop of gross domestic savings by 1.8 percentage points to 23.96 per cent of the gross domestic product (GDP) in the 2023-24 fiscal year from its previous year's 25.76 is not at all surprising. Even there is a clear explanation for the 1.53 percentage point decline in the gross national savings from 29.95 to 28.42 per cent. A turbulent year in terms of social, economic and industrial unrests at home coupled with dented global commerce due to wars in Ukraine, Palestine, Sudan and Syria, particularly the Houthi attacks on merchant ships in the Red Sea suffered the fallouts of all such negative developments. Recession in Europe and America was also responsible for marginal growth of RMG export to those two main destinations. Similarly, setbacks suffered by workers in migrating to some of the popular destinations did not help the cause. Thus the year's savings lost ground.

In this context, let it be recorded that the BBS has started coming up with more or less accurate data instead of the manufactured ones it did during the past regime. That is also a reason for the downward national income curve and its consequent impact on savings. Yet a most significant factor is missing from the calculation. It is the money the big sharks, cronies and beneficiaries of the past regime possessed or amassed but now left idle or stashed away. It should be a huge amount that is no more in circulation nor deposited to savings accounts. One of the reasons why economy suffers liquidity crisis is this idle or black money.

Notably, big businesses are still mostly controlled by the beneficiaries of the past regime. They are not cooperating with the government to bring down inflation. Instead, they follow their old ways of fleecing the consumers and depriving the growers or farmers at home of the reward the latter deserve for the sweat of their brow. It is a vicious ploy that an import-dependent market allows the big players to take recourse to for advancing their unethical advantages. Businesses do not run out of excuses to raise prices even when food grains or other items become cheaper worldwide. An unrelentingly surging inflation leaves no option for saving for the majority of people although they know instinctively the virtue of doing so bit by bit for the rainy season. So, the number one task for this government ought to be taking the inflationary bull by the horn.​

 

[Saif]

Expanding trade horizon should be the focus

Bangladesh needs to adopt a foreign policy that prioritises national interest while actively seeking new economic opportunities, said speakers at a national dialogue yesterday.

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Expanding trade horizon should be the focus
Say speakers at nat’l dialogue on foreign policy

Bangladesh needs to adopt a foreign policy that prioritises national interest while actively seeking new economic opportunities, said speakers at a national dialogue yesterday.

The daylong dialogue styled "Post July Revolution Foreign Policy of Bangladesh: Navigating New Horizons" was organised by the Jatiya Nagorik Committee at the Bangladesh Institute of International and Strategic Studies auditorium in the capital.

In the first session, Dilara Chowdhury, a political scientist, stressed the importance of maintaining a strong relationship with neighbouring India as it surrounds Bangladesh on almost all sides and a deteriorating relationship with the neighbour could lead to unrest.

India will be keen on keeping Bangladesh under its influence as it is tied to their security concerns, she said. However, blaming only India would not be beneficial either as every country prioritises its own interests, she said.

Both India and China will be very influential in this region in future and Bangladesh needs to handle its foreign policy efficiently to navigate these dynamics successfully.

Besides, Bangladesh needs to be proactive in strengthening its relationship with the SAARC and other Southeast Asian countries to ensure economic growth, she added.

Maintaining a balanced relationship with both India and China is essential, said ASM Ali Ashraf, chairman of the International Relations department at Dhaka University.

Highlighting the importance of economic considerations in foreign policy, he said: "We need to identify our major trading partners. As changes in the trade relationship are not possible overnight, we should focus on expanding our market while maintaining existing relationships with these partners."

For its own interest, Bangladesh needs to maintain a relationship with the influential countries, he added.

Bangladesh is a bridge between ASEAN and SAARC countries, said Mohammad Abdur Rob, vice-chancellor of Manarat International University, in another session.

"The distance between Bangladesh and China, a market of around 150 crore, is only 64 miles. It means the country's location is much too significant for around half of the world's population, not only for trade and commerce but also as a strategic and security hub."

Criticising the previous Awami League regime's claim of the "victory of the sea", he said it was a big loss for Bangladesh as the country lost South Talpatti Island to India and territory sea to Myanmar.

The Talpatti island has huge hydrocarbon potential, he said.

An autonomous foreign policy that may increase friendship with ASEAN countries including Indonesia, Brunei Darussalam and Thailand is recommended.

"We need a strong bond with China," he added.

Bangladesh should fix its foreign policy based on fixing the enemy states and trade interests, said Asaduzzaman Fuaad, general secretary of AB Party.

Bangladesh should have learned from Pakistan on how it balances its relationship with the US and China, said Bobby Hajjaj, chairman of Nationalist Democratic Movement.

"We need a political consensus on the foreign policy too," he said.

Worldwide, foreign policy depends on economic interests, said BNP's Organising Secretary Shama Obaid.

"We also want our economic growth and the interconnectivity of youths across the globe. The ministry of foreign affairs is the same as what was it during the Hasina regime. It failed to respond to the propaganda of Indian media after August 5, which it needed to do."

She demanded the revival of SAARC.

Following the July uprising, Bangladesh's foreign policy must be redefined with a priority on national interests, said Sarjis Alam, chief organiser of the Jatiya Nagorik Committee, in the third session.

"We had been following a foreign policy of self-preservation, but now we need to take a bold and decisive stance."

The country's focus will no longer be limited to just India, China and the US. It will extend to Russia, Japan, the Middle East and from the Strait of Gibraltar to both sides of the Panama Canal.

"If anyone wants to exert influence over us, let it be clear -- our approach towards them will be the same as theirs towards us. We are not dependent on anyone -- we are mutually interdependent," he added.

The July uprising has major implications for the Bay of Bengal, primarily strategic autonomy, said Shahab Enam Khan, a professor of international relations at Jahangirnagar University.

"We must maintain our strategic autonomy because we own the resources, the waters -- everything belongs to us."

Calling for a national consensus on the Myanmar issue, Khan urged policymakers to take action.

Abul Kalam Mohammad Humayun Kabir, a retired army general and a former ambassador, underscored the Bay of Bengal's importance from a critical security standpoint.

"External forces should think carefully before exerting control over us," he added.

Without a new economic settlement, a new political settlement would not emerge, said Akram Hossain, the joint principal organiser of the Jatiya Nagorik Committee.

"For the past 15 years, the Bay of Bengal was controlled by a handful of individuals. This must change. In this new era of restructuring, discussions on youth and women's participation are crucial," he added.

SM Suja Uddin, a member of the Jatiya Nagorik Committee, highlighted the economic potential of the Bay of Bengal region.

If policies are formulated involving local stakeholders, the region's economy could significantly contribute to the GDP, he added.

In the fourth session, Jahangirnagar University VC Kamrul Ahsan, noted photographer and activist Shahidul Alam, Jatiya Nagorik Committee's Joint Convener Tasnim Jara and Joint Member Secretary Mahbub Alam, among others, spoke.​

 

[Saif]

Economic stress erodes profits for most listed firms

Most listed companies saw their profits erode in the October-December period last year compared to the corresponding quarter of the previous year, due mainly to higher borrowing costs, persistently high inflation and other macroeconomic stresses.

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Economic stress erodes profits for most listed firms
54% of companies saw profits decline in Oct-Dec last year

Most listed companies saw their profits erode in the October-December period last year compared to the corresponding quarter of the previous year, due mainly to higher borrowing costs, persistently high inflation and other macroeconomic stresses.

So far, 213 listed firms have published their financial disclosures for the last quarter of 2024.

Of them, 97 companies reported higher profits compared to the same period the previous year, while 116 firms, or 54 percent of the total, saw their profits decline.

Among the 97 profit-making companies, 18 returned to positive territory after previously being in the red. On the other hand, of the 116 firms, 32 incurred fresh losses compared to the October-December period in 2023.

Although the companies recorded an average year-on-year profit growth of 16 percent in October-December, their combined profit was 7 percent lower than in the January-March period last year, according to a compilation by Sandhani Asset Management Company.

However, their combined profits grew by more than 21 percent compared to the politically volatile July-September quarter of 2024.

"Profits of the listed companies fell as the gross domestic product (GDP) growth rate dropped, people's consumption shrunk and inflation remained high," said Rupali Haque Chowdhury, president of the Bangladesh Association of Publicly Listed Companies.

In the July-September quarter last year, Chowdhury said public spending on development works slumped. Besides, the circulation of black money in the economy also declined.

That quarter, the country's GDP grew by only 1.81 percent -- the lowest since the second quarter of the fiscal year (FY) 2020-21 when the Covid-19 pandemic hit the globe, according to the Bangladesh Bureau of Statistics (BBS).

At the same time, industrial output expanded by only 2.13, a sharp decline from 8.22 percent growth recorded a year earlier.

The implementation of the Annual Development Programme (ADP) in the first six months of FY 2024-25 was down 19 percent year-on-year, according to the planning ministry.

"Overall, the business of listed firms mirrored the struggling economy," said the president of the association for listed firms.

Azam J Chowdhury, a former president of the BAPLC, said many industries are not getting adequate energy supply, which has an impact on their business.

On the other hand, there are political uncertainties, leaving entrepreneurs to adopt a wait and see approach for business expansion. It affects job creation. At the same time, consumers are squeezing their consumption.

Meanwhile, Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, said business profits were under pressure mainly due to higher operating costs and lower aggregate demand.

As interest rates in the banking sector rose, so did the finance costs for firms. Wages also increased at many companies. However, they were unable to adjust prices amid high inflation, according to Rahman.

The weighted average interest rate in the banking sector was 6.60 percent on October 1, 2023, which rose by 55 percent to 10.23 percent by the end of December 2024, according to the Bangladesh Bank (BB).

On the other hand, aggregate demand, including public investment-induced demand, took a hit due to high inflation and a volatile political landscape, Rahman said.

"So, all of these factors impacted the bottom line of businesses," he added.

Referring to the latest Purchasing Managers' Index (PMI) by the Metropolitan Chamber of Commerce and Industry (MCCI), he said the economy has been expanding and healing but has not yet reached its previous level.

TOUGH TIME FOR SMALL FIRMS

An analysis of company profits found that large companies were comparatively in a better position, while smaller firms faced tougher conditions.

The combined profits of listed firms grew mainly because some large state-run companies returned to profitability.

These companies returned to profit after incurring huge losses earlier due to taka devaluation, which has since reduced in recent quarters amid a stable foreign exchange rate.

For instance, Power Grid Bangladesh PLC incurred a loss of Tk 114 crore in the October-December period of 2023.

The company had losses ranging from Tk 50 crore to Tk 287 crore in each quarter before logging a profit of Tk 398 crore in the October-December quarter of 2024.

A similar trend was seen for the Dhaka Electric Supply Company Ltd (DESCO).

Azam J Chowdhury said medium-sized businesses suffered the most with limited product diversity.

Large corporates are comparatively in a better position for their diverse portfolio and huge market base, said Chowdhury, who is also managing director of MJL Bangladesh Ltd.

"The law-and-order situation was not up to standard after the regime change, with random movements on roads and labour unrest at many firms causing disruptions in supply chains and logistics management," said Rizwan Rahman, managing director of ETBL Securities & Exchange Ltd.

As a result, profits were impacted, he said.

"The country remains in a high-inflation environment, which has affected consumer consumption, especially for fast-moving consumer goods producers," Rahman added.

The country's inflation fell to 9.94 percent in January from 10.89 percent in December, according to the Bangladesh Bureau of Statistics (BBS), but has remained above 9 percent since March 2023.

BUSINESS CLIMATE MAY REMAIN DULL

Regarding the current business scenario, Rahman, a former president of the Dhaka Chamber of Commerce and Industry, said business activity in the current quarter may remain sluggish.

"Until a democratically elected government comes to power, businesspeople are operating very cautiously," he added.

On the other hand, the government recently raised value-added tax (VAT), which may further impact people's purchasing power. At the same time, businesspeople do not have adequate confidence in the law-and-order situation, which could affect business in the second half of the current fiscal year, he added.

An analysis of business trends found that the past two years have been a rollercoaster ride for businesses, with some companies soaring to new heights while others faced staggering declines. The most significant struggles were seen in the mutual fund sector, followed by the construction sector.

THE COMEBACK KINGS

Power Grid Bangladesh PLC emerged as the biggest turnaround story, moving from a deep loss of Tk 50 crore in the January-March period of 2023 to an astounding profit of Tk 398 crore in the October-December period of 2024.

Square Pharmaceuticals, already a market leader, saw consistent growth, climbing from a profit of Tk 428 crore in the January-March period of 2023 to Tk 660 crore in the October-December period of 2024. Strong product demand and expansion into global markets contributed to this success.

DESCO also made a strong recovery, moving from a loss of Tk 145 crore in the third quarter of FY24 to a profit of Tk 26 crore in the second quarter of FY25, showing a well-executed cost-cutting strategy.

Beximco Pharmaceuticals saw steady growth, from Tk 95 crore to Tk 182 crore, fueled by increasing demand for its pharmaceutical products.

Malek Spinning, which started in the red with a loss of Tk 35 crore, turned things around to close at a profit of Tk 50 crore, likely benefiting from favourable market conditions.

FALLEN FROM GRACE

Titas Gas experienced a massive downturn, dropping from a profit of Tk 39 crore in the third quarter of FY24 to a loss of Tk 522 crore by the same quarter of FY25. Unfavorable policies and operational inefficiencies contributed to this decline.

Beximco Ltd, once a strong performer, fell from a profit of Tk 73 crore in the third quarter of FY24 to a loss of Tk 243 crore in the third quarter of FY25, indicating significant financial setbacks.​

 

[Saif]

Tax collection conundrum

Apparently, the lower collection of government revenue in 2024-25 fiscal year notwithstanding the increase in the number of tax payers by 150,000, compared to the previous year looks contradictory. But to go by the observation of an official of the National Board of Revenue (NBR), two factors were

thefinancialexpress.com.bd

Tax collection conundrum
FE
Published :
Feb 19, 2025 22:12
Updated :
Feb 19, 2025 22:12

Apparently, the lower collection of government revenue in 2024-25 fiscal year notwithstanding the increase in the number of tax payers by 150,000, compared to the previous year looks contradictory. But to go by the observation of an official of the National Board of Revenue (NBR), two factors were responsible for this seemingly irreconcilable development. Those are: a) a large number of moneyed people are on the run for political reasons and b) an overwhelming majority of the individual tax returnees took advantage of submitting tax returns showing zero income. About 60-70 per cent of the taxpayers submit such zero-income returns each year. This year more undeserving candidates may have done so, courtesy of the online-submission facility. But it is gratifying to know that the base of tax returnees has expanded substantially, indicating at least a growing interest among the population for payment of tax.

Against this positive development, though, what exposes the inadequacy of the NBR initiative is the wide gap between the government demand for tax collection and the organisation's delivery. Until December, 2024, the NBR revenue accumulation fell short of the target by Tk 577.24 billion. Similarly, the mobilisation of the domestic revenue in the first half of the FY 2024-25 turned out to be lower than the amount of the same period in the previous fiscal. Its collection of Tk1.56 trillion in revenue against a target of Tk2.14 trillion in the same period can neither be helpful for the next national budget nor satisfy the IMF which has strings attached to the US$4.7 billion loan it has sanctioned for the country. The excuse that in a turbulent year, a dip in tax collection is quite natural may not explain the shortfall. Income tax and customs duty have reasons to fall for reasons understandable. But when value-added tax also registers a slide by 5.45 per cent in the half yearly tax mobilisation, it indicates a deeper malaise. The malaise concerns evasion of government duty.

How this may happen is best exemplified by the price differences of the same items between super stores and ordinary groceries. For example, a kilogram of milk powder or Quaker oat at a super store costs a consumer the price printed on the packet or container plus the regular VAT while at a grocery the same is available at a discount of more than Tk100. Thus the price difference for milk powder and oat between the two types of outlets varies between Tk 50 to Tk 150 respectively. Here is a missing link in the business transaction and VAT collection. These problems can be overcome by introducing barcode and QR (quick-response) code even at the grassroots level of retail transactions.

Finally, the NBR's effort to bring more people under the tax net has been appreciated by experts in the field. But the drive has a long way to go before it yields expected results. When only 0.5 million of the total 5.0 million industrial units pay taxes, the NBR efforts leave much to be desired. Similarly, some businesses such as saw mills, brick kilns, outlets of construction materials, local wholesalers of grocery items and sweetmeat shops etc., in peri-urban and rural areas have turnovers many times more than the taxable limit but because of their informal character they can evade paying taxes. The NBR should strengthen its manpower and capacity to explore all such areas for tax collection.​

 

[Saif]

Ensuring economic stability is paramount

Govt must rein in inflation, adopt more business-friendly policies

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Ensuring economic stability is paramount
Govt must rein in inflation, adopt more business-friendly policies

We are concerned about the sluggish business environment that has persisted in the country for the past several months now. According to a report, in the October-December period of 2024, most listed companies experienced a decline in profits compared to the same period in the previous year. This decline is primarily due to rising borrowing costs, high inflation, and other economic stresses. Out of 213 listed firms, 97 reported higher profits, while 116 saw a drop. While 18 of the profit-making companies recovered from previous losses, 32 of the loss-making firms reported fresh losses. During this period, GDP growth slowed, and consumer spending shrank. These factors, combined with persisting political uncertainties, have exacerbated the situation.

Reportedly, while large corporations such as Power Grid Bangladesh PLC, Square Pharmaceuticals, and DESCO are in a comparatively better position due to their diverse portfolios and vast market base, small and medium-sized businesses are still struggling to recover. Many have adopted a wait-and-see approach to business expansion due to political uncertainties and volatile law and order, while high interest rates and inflation have further increased the cost of doing business. According to Bangladesh Bank, the weighted average interest rate in the banking sector rose from 6.60 percent in October 2023 to 10.23 percent by December 2024—a 55 percent increase. And despite relatively stable foreign exchange reserves, driven by record remittance inflows and growing exports, private sector investment remains sluggish. Meanwhile, persistent high inflation has eroded people's purchasing power, and the recent increase in value-added tax (VAT) may worsen the situation.

Since taking office, the interim government has introduced several initiatives to stabilise the economy. But clearly, more needs to be done to ensure macroeconomic stability. To this end, controlling inflation remains a major challenge. According to the Bangladesh Bureau of Statistics, the country's inflation fell to 9.94 percent in January from 10.89 percent in December, but further measures are needed ahead of Ramadan when inflation typically rises. Besides, the government must prioritise improving political stability and law and order to support business growth. Political parties also have a major role to play in this regard. They must refrain from actions and statements that could destabilise the country.

Finally, the government must engage in dialogue with the business community to address their concerns and grievances. Our economy has been going through a difficult phase for quite some time now. Only coordinated, well-thought-out measures can help it recover.​