[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Efficient cross-border trade a boon for LDC graduation: ICCB

With the increase in international trade of Bangladesh, efficient cross-border trade will have notable implications for the country’s status graduation from the least developed country (LDC) to a developing one, said Mahbubur Rahman, president of the International Chamber of Commerce Bangladesh

www.thedailystar.net

Efficient cross-border trade a boon for LDC graduation: ICCB

With the increase in international trade of Bangladesh, efficient cross-border trade will have notable implications for the country's status graduation from the least developed country (LDC) to a developing one, said Mahbubur Rahman, president of the International Chamber of Commerce Bangladesh (ICCB).

"Therefore, understanding the foreign business partners is crucial," he told a workshop on "Trade Finance Legal Challenges and International Sanctions Regime & Requirements" on Saturday.

The ICCB, credit rating agency Moody's and ICC United Arab Emirates (UAE) jointly hosted the event at Renaissance Dhaka Gulshan Hotel in the capital.

Financing of international trade transactions plays a crucial role in facilitating global commerce, said Rahman.

However, the whole process operates within a complex legal framework shaped by regulatory requirements, including sanctions, presenting significant challenges for financial institutions and businesses dealing with international trade, he said.

"Therefore, financial institutions and businesses must navigate a labyrinth of sanctions imposed by various jurisdictions," he said.

"These sanctions can target specific countries, entities, or individuals, and often differ between regions, leading to complexities in ensuring compliance," Rahman said.

Banks are obligated to conduct thorough due diligence to prevent money laundering and terrorist financing, he said.

This involves verifying the identities of clients and understanding the nature of their business activities, which can be resource-intensive and legally complex, he added.

The ICCB president highlighted the recent trades in the global economic and political arena and added that the evolving geopolitical landscape has increased the compliance requirements for banks and businesses engaged in international trade.

To navigate these challenges, financial institutions and businesses should establish comprehensive policies follow regulatory requirements and educate employees on the latest developments in sanctions, laws and compliance obligations, he added.

ICCB Secretary General Ataur Rahman moderated the workshop.

Mohamed Daoud, director and industry practice lead for Moody's Financial Crime Compliance across the Middle East and India, and Vincent O'Brien, director of ICC-UAE, were present.​

 

[Saif]

Accelerating revenue collection by NBR

There is no denying that Bangladesh’s economy has grown at a fast and more or less constant rate since the early 90s. Similarly, our dependence on foreign loans and grants for development budget had also reduced after, among others, the introduction of VAT.

www.thedailystar.net

Accelerating revenue collection by NBR

There is no denying that Bangladesh's economy has grown at a fast and more or less constant rate since the early 90s. Similarly, our dependence on foreign loans and grants for development budget had also reduced after, among others, the introduction of VAT.

Various financial reforms and expanding and strengthening the private sector have contributed significantly to this growth. Exports have been diversified but still focus on garments and manpower. Currently, our GDP is at Tk 5 million crore with an average growth of 6 percent. Per capita income has also grown significantly, registering above $2,750.

This indicates that nationally, in spite of the economic growth, the number of taxpayers and revenue collection has not reached the desired level. The tax-GDP ratio is still below 7.5 percent compared to an average of 19 percent in the Asia Pacific and 34 percent in member countries of the Organisation for Economic Co-operation and Development.

There are about 10 million TIN holders in Bangladesh, of which only 3.4 million individuals and 34,000 corporates file tax returns covering all categories. The reasons for non-filing of tax returns need close scrutiny and monitoring. The possibility of TIN duplication cannot be ruled out either.

Of the total revenue collection of Tk 382,562 crore in fiscal 2023-24, the category-wise proportions of tax collection reveal that 13 percent came from individuals, 20 percent from corporates, 40 percent from VAT and 26 percent from other sources.

This indicates lower levels collection from corporate taxes. Many businessmen and entrepreneurs claim that they are paying huge revenue to the government exchequer. But the question is what the proportion between direct tax and indirect tax is.

It is well known that indirect taxes are added to product costs and recovered from consumers. So, there is no credit for it. It is a fact that our economy is currently passing through a challenging phase. The shortage of foreign currency has hampered imports, impacting production and exports while the cost of production has risen due to inflation. Businesses were also impacted by the recent mass movement.

In such a situation, it is very unlikely to collect significant revenue from businesses. However, minimising tax evasion and combating corruption are possibly the low hanging fruits to increase revenue collection.

In spite of various efforts over the years, adequate laws and regulations and pressure from the government, revenue collection could not be increased to the desired level.

People's apathy toward tax payments, tax evasion and corruption are the principal causes for this situation. On the other hand, in most cases corruption takes place principally by taxpayers in connivance with tax officials and consultants. The lack of transparency and accountability through reliable financial reporting is also responsible for this situation.

Credible and authentic financial statements are the basis of tax calculation. Unfortunately, many businesses are not reporting financial statements properly. Tax audit is the only way to mitigate this situation. It is important for the tax auditor to be different from statutory auditors. Similarly, there is no alternative to digitalisation to ensure transparency and accountability.

Besides, corruption has gone beyond tolerable levels so this must be controlled. Enforcement of law should be applied in a stringent way when tax evasion involving significant amounts is identified.

Finally, administrative and policy reforms for the National Board of Revenue are overdue. Also, genuine and regular taxpayers should be rewarded by minimising unnecessary harassment by way of arbitrary disallowances, simplifying the refund process and other similar incentives.

The author is a senior partner of Hoda Vasi Chowdhury & Co and former president of ICAB​

 

[Saif]

Govt to speed up development spending to revive economy

The interim government is going to ask ministries to accelerate the implementation of ongoing development projects, Planning Adviser Prof Wahiduddin Mahmud said, as he believes this would help avert a further economic slowdown.

www.thedailystar.net

Govt to speed up development spending to revive economy
Says planning adviser

The interim government is going to ask ministries to accelerate the implementation of ongoing development projects, Planning Adviser Prof Wahiduddin Mahmud said, as he believes this would help avert a further economic slowdown.

Citing how the economy is facing turbulence such as political turmoil, labour unrest, expensive loans deterring new investments and stubbornly high inflation, the adviser yesterday said that it was time for policy adjustments.

Emerging from the Executive Committee of the National Economic Council (Ecnec) meeting chaired by Chief Adviser Muhammad Yunus, the planning adviser revealed the decision.

This came a day after the government's Implementation Monitoring and Evaluation Division (IMED) reported at least 14-year low development spending in the July-October period of this fiscal year.

"It is time to shift our focus towards policy adjustments in project implementation," Mahmud told journalists.

While the government previously emphasised project selection and fighting corruption, he said the new directive prioritises the swift execution of ongoing projects by the end of the current fiscal year.

"A letter will be sent from the Planning Commission to all ministries and divisions in this regard," the adviser said.

Private sector is not going for fresh investment, and if the government expenditure also stagnates, it will cause economic downturn. — Wahiduddin Mahmud Planning adviser.

He said he would personally send demi official (DO) letters to advisers urging them to accelerate the execution of development projects.

Regarding the slow pace of project implementation, Mahmud cited instances of project directors fleeing sites after selling project materials. He mentioned the Matarbari project director as a specific example.

The adviser said the private sector has shown no interest in investment and interest rates have risen sharply. "Consequently, entrepreneurs are reluctant to undertake new ventures right now."

"The private sector is not investing and if the government expenditure too becomes stagnant, it will cause a further slowdown."

Usually, there is a project flow during the tenure of a political government as per the demand from the constituencies. But there are no such scopes for an interim government.

"We don't have constituencies and our time is brief. But obviously we do not have any tendency toward profiting from projects," he added.

He said the government plans to initiate innovative projects in human resources and education development.

"The economy is currently stagnant, with market instability and high inflation," Mahmud said. "Without expanding economic activities, job creation and wage growth will be impeded."

In October, overall inflation reached a three-month high of 10.87 percent due to rising food prices, especially for staples like rice and vegetables.

The adviser hinted at possible cuts to the annual development programme (ADP) allocation, similar to previous years.

However, he suggested that the education and health sectors might receive proportionally higher allocations, especially for educational equipment and scientific research materials.

The planning adviser also said if economic stability is restored, then private sector entrepreneurs would come in large numbers and stimulate growth.

The Ecnec yesterday approved five projects worth a total of Tk 5,915 crore, including one for improving the sewerage system of Chattogram with around Tk 5,152 crore.​

 

[Saif]

Planning Advisor Wahiduddin fears chaos could trigger ‘economic recession'

Planning Advisor Wahiduddin Mahmud is wary of an economic recession if the government does not raise development spending in the wake of the political and labour unrest and new investments drying up due to the high bank loan interest rates. Speaking to the media after a meeting of the Executive Co

thefinancialexpress.com.bd

Planning Advisor Wahiduddin fears chaos could trigger ‘economic recession'
bdnews24.com
Published :
Nov 26, 2024 00:03
Updated :
Nov 26, 2024 00:04

Planning Advisor Wahiduddin Mahmud is wary of an economic recession if the government does not raise development spending in the wake of the political and labour unrest and new investments drying up due to the high bank loan interest rates.

Speaking to the media after a meeting of the Executive Committee of the National Economic Council, or ECNEC, on Monday, the advisor said, “Stagnation is being seen in the private sector production alongside in the garment sector because of the political uncertainty and chaos.”

“There is almost no investment in the private sector. The bank loan interest rates have also increased a lot, discouraging entrepreneurs from making new investments. In these circumstances, an economic meltdown is likely if the government does not raise development spending.”

Asked what the government would do in this situation, Wahiduddin said the interim administration is planning to initiate new projects at the earliest for the development of new “innovative and human resources.”

He said a letter would be sent to all advisors to this end upon consultation with the chief advisor, calling for speeding up the implementation of the projects.

The advisor promised that efforts to keep the projects 'corruption-free' would continue.

Asked what will happen to growth if there is no investment in the private sector, he said: “A significant amount of growth is possible even if there is no investment in the private sector for a year."

DEVELOPMENT BUDGET SHRINKING

Wahiduddin also disclosed the decision to cut the size of the Annual Development Programme, or ADP, taken by the deposed Awami League government.

"We had said at the beginning that every year the implementation remains less than the budget. This time, the development budget will be reduced for several reasons.”

"Many old projects and those that were proposed have been dropped. Many of them appeared politically motivated and not profitable compared to the cost."

Regarding the size of the reduced plan, he said: “We have yet to plan the size of the budget this year. The revised budget is usually presented in December."

When asked about the ADP implementation rate in the first four months of this year, which was the lowest in the past 15 years, the advisor said: “This is the previous government’s budget, not ours.”​

 

[Saif]

Lower revenue collection narrows fiscal space

Revenue collection in the first four months of the current fiscal year declined by 1 percent year-on-year, according to official data, which is likely to complicate the government’s plan to revive the economy by accelerating development spending.

www.thedailystar.net

Lower revenue collection narrows fiscal space
Economists say this may complicate govt’s economic revival plan

Revenue collection in the first four months of the current fiscal year declined by 1 percent year-on-year, according to official data, which is likely to complicate the government's plan to revive the economy by accelerating development spending.

Lower revenue mobilisation has resulted in a tight fiscal space, which, according to economists, might force the interim government to curtail the development budget instead of increasing public works spending to avert a further economic downturn.

They argue that the ongoing tight liquidity situation makes domestic borrowing difficult for the government, while foreign funding commitments remain lacklustre compared to previous years.

In the July-October period of fiscal year (FY) 2024-25, the National Board of Revenue (NBR) collected Tk 101,281 crore, falling short of its target for the first four months by Tk 30,831 crore.

During the previous Awami League government, the tax administration set a revenue collection target of Tk 480,000 crore for FY25.

Although a mass uprising ousted the government in early August, leading to the formation of the interim government, Finance Adviser Salehuddin Ahmed recently said that the FY25 revenue target would remain unchanged.

Amid economic stagnation, the government's project monitoring and evaluation agency recently reported that development expenditure hit a 14-year low.

This prompted Planning Adviser Dr Wahiduddin Mahmud to announce the government's "policy adjustments" by prioritising the execution of development projects to avert a further economic downturn.

Meanwhile, the ongoing political turmoil and economic uncertainty, which had already hamstrung revenue collection in July and August, have led policy analysts to question the unchanged collection target.

"The existing target is unrealistic," said MA Razzaque, research director at the Policy Research Institute (PRI) of Bangladesh. "It is unlikely to be achievable this year."

Apart from nationwide unrest in the July-August period, Razzaque pointed out that slow imports and tariff exemptions on essential goods amid the double-digit inflation contributed to lower tariff collection.

During the July-October period, the revenue administration saw a 0.84 percent single-month growth in October, and Razzaque expressed optimism about the overall collection.

"Amid the economic slowdown, the year-on-year revenue collection still seems optimistic as we earlier thought that it may dip drastically," he said.

Echoing similar sentiments, Towfiqul Islam Khan, a senior research fellow at the Centre for Policy Dialogue (CPD), said the revenue collection target for FY25 should be revised by December this year.

Besides, he believes the budget should be revised accordingly.

However, the foremost priority for the NBR should be implementing measures to reduce tax evasion to stop immediate losses, Khan said.

Regarding funding the government's expenditure, Razzaque sees limited options available.

"Tight liquidity restricts bank borrowing, while borrowing from the central bank could further fuel inflation," he said as he assessed the options. "Moreover, funding commitments from foreign donors remain lacklustre."

Bangladesh received only $27 million in commitments from its international development partners so far this year, compared to $2.8 billion in loan pledges a year ago, according to the Economic Relations Division (ERD).

Razzaque suggested the NBR speed up customs activities, streamline port operations and expand the tax net. He also advocated for revenue reform measures through automation.

He said the focus should not solely be on achieving revenue growth but rather on ensuring implementation of ongoing reforms.

In the first four months of FY25, value-added tax declined year-on-year, while income tax and customs duties witnessed slight growth.

Duty collection from international trade increased by 0.84 percent to Tk 32,671 crore as political turmoil led to a decrease in imports.

Meanwhile, income tax receipts increased by 1.78 percent to Tk 101,281 crore. The collection of value-added tax, the largest revenue source, fell by 4.87 percent to Tk 36,729 crore.​