[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Challenges and opportunities for Bangladesh economy in 2024

Bangladesh has demonstrated remarkable development progress in the last five decades. The country’s journey from one of the poorest countries at independence to a lower-middle-income nation within four decades is a testament to its resilience, policy decisions, and commitment to reducing pove

thefinancialexpress.com.bd

Challenges and opportunities for Bangladesh economy in 2024
FE ONLINE DESK
Published :
Apr 08, 2024 14:07
Updated :
Apr 08, 2024 14:07

Bangladesh has demonstrated remarkable development progress in the last five decades. The country's journey from one of the poorest countries at independence to a lower-middle-income nation within four decades is a testament to its resilience, policy decisions, and commitment to reducing poverty and fostering shared prosperity, said the World Bank in its recent publication 'World Bank in Bangladesh in 2024', according to the editorial of the current News Bulletin (January-March 2024) of the International Chamber of Commerce-Bangladesh (ICCB) released on MMacroeconomic stability with low levels of inflation and high levels of GDP growth have been key to Bangladesh's underlying strengths and major drivers of socio-economic achievements. Bangladesh reached lower-middle income status in 2015 and is on track to graduate in 2026 as a middle-income country, aspiring to be an upper-middle-income country by 2031.

However, Bangladesh, after LDC graduation in November 2026, will experience significant preference erosion. Although the EU and UK have offered to extend preferential duty-free market access for an additional three years, the export scenario to other markets will change immediately after graduation. Bangladesh has a greater opportunity to increase exports to ASEAN, having a population of 661 million with a GDP of $3.08 trillion and trade exceeding $2.7 trillion. According to 2020 data, Bangladesh imports goods worth nearly US$7.0 billion from ASEAN countries, as against its exports of only $1.0 billion. So, Bangladesh should give priority to having a free trade agreement with ASEAN in order to increase its exports.

With several major infrastructure projects reaching completion of the Padma multi-purpose bridge, Dhaka Elevated Expressway, and the Bangabandhu Tunnel linking Dhaka to the tourist haven of Cox's Bazar, 3rd terminal at Hazrat Shahjalal International Airport, 2024 is anticipated to be a year to reap the benefits.

However, in 2024, the economy is also facing challenges on multiple fronts such as rising inflation, the balance of payment deficits along with budget shortfalls, a declining foreign exchange reserve, a contraction in remittances, a depreciating currency, rising income inequality, the demand-supply imbalance in the energy sector, and an ailing banking sector crippled by loan defaults. Bangladesh could not bring down inflation, whereas it has come under control in most countries.

Despite impressive growth rates, Bangladesh faces challenges in its export basket's diversification, more than 80 per cent of Bangladesh's total export earnings come from garment exports. Bangladesh has significant opportunities in leather, and footwear, food processing, pharmaceuticals, light engineering, assembling plants, and API production. Both domestic investment and FDI will need to be geared towards these sectors.

Despite developing economic zones, adopting one-stop services, and various other steps, Bangladesh is far behind Maldives and Sri Lanka in attracting FDI. Bangladesh is the second-largest economy in the South Asian region. Vietnam, comparable to Bangladesh, ranked fourth in Asia-Pacific after China, India, and Indonesia in attracting FDI. The majority of total FDI inflows of US$ 274 billion at the end of 2022 into Vietnam were in the manufacturing sector, which accounts for 61 per cent of the total registered FDI. Bangladesh received an annual average of $2.92 billion in FDI as against Vietnam's US$ 36.61 billion. FDI is one of the key elements for increasing export earnings and the much-needed foreign exchange reserve, Bangladesh should review its strategy for attracting FDI.

Bangladesh is facing an energy crisis due largely to its reliance on imported fuels, which is estimated at US$ 2.5 billion a year for power generation, and also a lack of renewables and cleantech alternatives. In fact, instead of moving towards exploring renewable energy sources, Bangladesh turned to the use of more fossil fuels such as coal, oil and LNG. With a depreciating currency, a reliance on imported fuels for power generation has led to a significant rise in power generation costs.

Climate change is a critical issue in Bangladesh, as it is one of the most vulnerable countries to the effects of climate change, according to Germanwatch's 2021 Global Climate Risk Index, Bangladesh ranked seventh in the list of countries most affected by climate calamities during the period 2000-2019.

Bangladesh has achieved today's position by overcoming many obstacles and setbacks. With targeted actions and appropriate policy followed by timely implementation to overcome the key challenges, Bangladesh has the capacity to become an upper-middle-income country by 2031.​

 

[Saif]

Foreign exchange reserves go above $20 billion again

The foreign exchange reserves of Bangladesh have gone above $20 billion again, according to central bank data. The export earnings and flow of inward remittances marking Eid-ul-Fitr contributed to the increase in foreign exchange reserves, local news portals said. According to the Bangladesh Bank

thefinancialexpress.com.bd

Foreign exchange reserves go above $20 billion again
FE ONLINE DESK
Published :
Apr 13, 2024 12:35
Updated :
Apr 13, 2024 12:35

The foreign exchange reserves of Bangladesh have gone above $20 billion again, according to central bank data.

The export earnings and flow of inward remittances marking Eid-ul-Fitr contributed to the increase in foreign exchange reserves, local news portals said.

According to the Bangladesh Bank's calculation based on the International Monetary Fund's Balance of Payments and International Investment Position Manual (BPM6), the foreign exchange reserves reached $20.11 as of April 8. The figure was $19.45 billion on March 27.

Meanwhile, the gross reserves were $25.39 billion as of April 8 and $24.81 as of March 27.

However, the gross amount of country's foreign exchange reserves was $31.20 billion during this period last year.

Last month, The Financial Express said in a report that the gross volume of forex reserves in Bangladesh Bank's calculation rose to $26.17 billion as on March 5, from $25.16 billion recorded on February 19, with the central bank having booked around US$1.0 billion from commercial banks in just seven days of deals under the currency-swap window.

In accordance with IMF's BPM6 arithmetic, the gross reserves rose to $20.98 billion until March 5 from the February-19 count of $19.97 billion.​

 

[Saif]

Making a smooth, sustainable graduation for LDCs

We are meeting at the 13th Ministerial Conference (MC13) at a time when the world is facing multidimensional challenges in the form of post-pandemic shocks, economic volatility, food insecurity, rising inequality, increasing unemployment, and climate disaster, all accentuated by ongoing internation

thefinancialexpress.com.bd

Making a smooth, sustainable graduation for LDCs
AHASANUL ISLAM TITU
Published :
Feb 27, 2024 11:37
Updated :
Feb 27, 2024 11:37

A view of the opening session of the WTO MC13 in Abu Dhabi on Monday- WTO Photo

We are meeting at the 13th Ministerial Conference (MC13) at a time when the world is facing multidimensional challenges in the form of post-pandemic shocks, economic volatility, food insecurity, rising inequality, increasing unemployment, and climate disaster, all accentuated by ongoing international crises. In such a situation, strong multilateral cooperation among countries is highly needed. Bangladesh has always been a strong supporter of multilateralism and expects the same from the member states of the World Trade Organization (WTO).
It is often said that trade is the most effective engine for economic growth and development. We fully subscribe to this view. However, our experience suggests that Least Developed Countries (LDCs), small economies, and other developing countries face significant difficulties in their endeavours to integrate with the process of globalisation from a position of strength and benefit from the potential of international trade.

Regrettably, we are witnessing a resurgence of nationalism and protectionism worldwide, impeding collective endeavours to advance our common interests. Distrust among countries paralyzes progress in multilateral cooperation. The multilateral trade system has been no exception. We are yet to conclude the negotiations of the Doha Agenda, the development dimensions of which could have been an effective tool to further integrate developing countries and LDCs into the world trading system. This would have ensured that trade can only be free if it is fair.

We are ready to discuss WTO reforms. Such reforms, however, must strengthen this body to bring welfare to all of our member states. We emphasise that the reform exercise should be inclusive, and transparent, and reaffirm the founding principles of the WTO. More affirmative actions are required for the developing countries, particularly for the LDCs, including those on the track of graduation.

Ahasanul Islam Titu, State Minister of Commerce, Government of Bangladesh

The WTO dispute settlement system is currently incapacitated, leading to an erosion of trust in multilateral trade. Apart from its negotiating and norm-setting weaknesses, its ability to respond to pressing trade-related challenges of our time is under question. While we are open to improvements in some aspects of operations in the dispute settlement system, we want a two-tier, fully functional dispute settlement system and an immediate restoration of the Appellate Body.

On the fisheries subsidies regarding overcapacity and overfishing (OCOF) negotiation, Bangladesh strongly urges targeting the largest subsidisers that have historical responsibility and contributed significantly to OCOF as well as distance water fishing. It is also important to bring Common but Differentiated Responsibility (CBDR) and polluters pay principle for the marine fisheries damage, caused by those subsidising members. LDCs graduated LDCs for at least some years after graduation, and small-scale and artisanal fisheries must be outside the discipline as they were never part of the problem.

It is rather disappointing that the TRIPS Council has failed to reach a consensus to extend the MC12 TRIPS Waiver to therapeutics and diagnostics. We hope WTO members will not fail to take the necessary calls to better prepare for future pandemics.

We need clarity on the definition and scope of e-commerce. Bangladesh is in favour of an e-commerce moratorium on a temporary basis. Before further extension of the moratorium for a longer time, the economic loss of importing members should be taken into consideration. Decisions on agriculture, particularly for food security purposes and a permanent solution to public stockholding, remain a major target for all of us.

In this connection, we call upon Members to implement the MC12 Declaration on the Emergency Response to Food Insecurity and, given the critical necessity of food security in LDCs, to refrain from imposing export restrictions on food imports by LDCs for domestic consumption. LDCs need an environment of predictability and continued support for a smooth and sustainable transition.

We appreciate the General Council decision in October last year regarding unilateral tariff or Duty-Free Quota-Free (DFQF) programmes in Annex-1 of the LDC graduation proposal. However, Annex-2 is still pending.

We sincerely hope that members will make a decision in favour of a transitional arrangement regarding LDC-specific provisions for the LDCs after graduation. Special and differential treatment was at the heart of the Marrakesh package of the mid-1990s.

The G-90 proposal on elaboration and operationalisation of S&DTs is a long pending issue. It is important to build convergence and make progress on this important topic mandated by ministers in Doha in 2001.

We are well aware of the climate crisis and LDCs are the victims of the climate vulnerabilities. While Members' trade-related measures to protect the environment are well understood, at the same time, it is expected that Members' measures do not serve as disguised barriers to trade, especially the trade of LDCs. All countries, including LDCs, do their level best to create employment opportunities through trade, with a focus on vulnerable segments of society, in particular women and the climate vulnerable.

As a graduating LDC, we would like to particularly remind all of us that the Doha Programme of Action adopted at the LDC-5 Summit in March 2023 make a pledge to help the graduating LDCs towards smooth and sustainable graduation and support their smooth transition plans.

We believe that MC13 of the WTO could play an important role in realising the commitment of the global community.

Ahasanul Islam Titu is the State Minister of Commerce, Government of Bangladesh. The piece is his written statement presented at the WTO MC13 (February 26–29) in Abu Dhabi.​

 

[Saif]

Economy in for a double whammy

With inflation edging towards double digits and quarterly GDP growth nearly halving year on year, pressure on consumers is mounting and experts are pointing at even darker clouds.

www.thedailystar.net

Economy in for a double whammy
Quarterly GDP growth almost halves to 3.78 percent year on year; inflation keeps creeping up Inflation in Bangladesh

Star file photo

With inflation edging towards double digits and quarterly GDP growth nearly halving year on year, pressure on consumers is mounting and experts are pointing at even darker clouds.

Economists said escalating tension in the Middle East could affect Bangladesh's economic outlook and called upon the government to carefully manage the economy to ease the pressure on people.

Bangladesh's economic growth stood at 3.78 percent in the second quarter of fiscal 2023-24, the slowest pace in three quarters, according to the latest data from the Bangladesh Bureau of Statistics (BBS).

The sharp decline in growth in manufacturing and service sectors is to blame.

In the second quarter of fiscal 2022-23, the GDP grew by 7.08 percent and in 2021-22, by 9.3 percent.

In March, inflation, a measure of the increase in the prices of a basket of goods and services over a period, rose 9.81 percent after easing in the previous month. In February, inflation was 9.67 percent. High prices are consistently eroding consumers' buying capacity.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said in Bangladesh's context, inflation is increasing while economic growth is declining.

"As a result, the people's income opportunity and purchasing capacity are declining," he added.

BBS, the national statistical agency, said industrial production expanded 3.24 percent in the October-December period of 2023 from 10 percent in the same period a year ago.

In the same quarter of fiscal 2021-22, the industrial sector grew by 14.50 percent. Even in the first quarter of the current fiscal year, the sector grew by 9.63 percent.

Growth in manufacturing saw a 0.45 percent decline in the second quarter of the current fiscal year.

On the other hand, the services sector, which accounts for half of the GDP, increased 3.06 percent in the second quarter of fiscal 2023-24 against a growth of 6.62 percent in the same period of the last fiscal year.

However, farm production grew 4.65 percent in the October-December period from 4.22 percent a year ago.

Economist Zahid said the decline in manufacturing sector growth could be because imports are becoming more difficult due to the central bank's restrictions. It is difficult to keep up the pace of production if machinery cannot be imported, he said.

The country's manufacturing sector is both export-oriented and domestic-oriented, he said, adding that manufacturing aimed at the domestic market saw a decline because of a lack of demand caused by the reduction of people's purchasing power.

Zahid identified three factors behind the overall decline in economic growth: macroeconomic mismanagement, import restrictions, and a distressed financial sector.

He said macroeconomic mismanagement became evident as inflation could not be controlled, which resulted in people's reduced purchasing capacity.

Also, imports had to be restricted because of the crisis in the foreign currency reserves, he said, adding that such a crisis could not be overcome as the foreign exchange market management was not proper.

Besides, good borrowers do not get loans from the financial institutions. Instead, bad borrowers are entertained as per their requirements, he further said.

Prof Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, echoed Zahid and said high inflation, low investment, and import restrictions have adversely affected the country's economy, especially the manufacturing and service sectors.

"Domestic factors are more responsible than outside factors behind the slow economic growth," he said.

He also said the country's exports and inward remittances were turning around slightly, however, fresh escalation in tension in the Middle East might add to Bangladesh's economic stress.

Already fuel prices in the international market have started to increase. If fuel prices increase, then shipping costs and other commodity prices will also increase, he added.

How much Bangladesh's economy will be affected depends on how long the tension persists, he said.

In this context, the Bangladesh government has to beef up its measures to control inflation and encourage investment, he added.​

 

[Saif]

Is Bangladesh's economy showing signs of recovery?

As Bangladesh concluded 2023, it faced a series of macroeconomic challenges, including soaring inflation, dwindling foreign currency reserves, a weakened taka against the US dollar, slowing exports, lower-than-expected remittance inflows, and a troubled banking sector.

www.thedailystar.net

Is Bangladesh's economy showing signs of recovery?

As Bangladesh concluded 2023, it faced a series of macroeconomic challenges, including soaring inflation, dwindling foreign currency reserves, a weakened taka against the US dollar, slowing exports, lower-than-expected remittance inflows, and a troubled banking sector. These factors converged, presenting a significant economic turbulence exacerbated by political uncertainties surrounding impending national elections.

However, as we transitioned into the second quarter of 2024, it appears that Bangladesh has managed to evade the immediate crisis, buoyed by policy interventions and improvements in the external environment. Nevertheless, the imperative for structural reforms remains paramount to diversify the economy and foster resilience in the medium to long term.

Urgent monetary reforms, including the implementation of a single exchange rate regime, are critical to bolster foreign exchange reserves and mitigate inflationary pressures. Concurrently, measures aimed at enhancing government revenues to facilitate investments in infrastructure and human capital are essential for sustainable long-term growth.

Following the national elections, there has been a discernible realignment and easing of geopolitical tensions, particularly with Western nations, assuaging concerns regarding Bangladesh's international relations.

Moreover, major multilateral and bilateral development partners have reaffirmed their commitment to supporting Bangladesh's development endeavours as domestic consumption as well as private sector entrepreneurship are holding up.

Efforts to address the persistent dollar-taka crisis have yielded some progress, thanks to initiatives by the Bangladesh Bank and commercial banks targeting both demand and supply dynamics in the foreign exchange market. Import restrictions imposed by regulators have curbed the outflow of foreign currencies, leading to a notable decrease in import payments in the first half of the fiscal year.

Remittance inflows have witnessed an uptick, attributable to a surge in manpower exports and a convergence of foreign exchange rates between official banking channels and the informal market. This convergence, coupled with stabilised expectations of further exchange rate fluctuations, has incentivised higher remittance flows.

Furthermore, initiatives such as offering competitive interest rates on dollar deposits and facilitating the use of resident foreign currency deposit accounts have spurred the return of foreign currency holdings to the banking system, augmenting the dollar reserves and alleviating challenges in opening letters of credit for imports to an extent.

Meanwhile, liquidity conditions in the banking sector have improved, owing to measures such as loan rescheduling and restructuring, alongside initiatives by the Bangladesh Bank to inject liquidity through the dollar-taka swaps. These efforts have mitigated the taka crisis and enabled banks to access liquidity facilities as needed.

Despite these positive developments, the World Bank's latest macroeconomic update projects relatively subdued real GDP growth for Bangladesh, highlighting the need for sustained policy and structural reforms. With a projected growth rate of 5.6 percent in the current fiscal year and 5.7 percent in the subsequent year, emphasis on bolstering private consumption amid moderate inflation remains crucial.

While Bangladesh has somehow demonstrated resilience in navigating immediate economic challenges, the focus must now shift towards implementing comprehensive reforms to foster sustainable growth and resilience in the face of evolving global dynamics.

Increased focus is expected on improving the supply side economics, be it commodities or foreign currencies. Official remittance must increase, government revenues must go up, and taking up not-so-worthy projects must reduce. The market must be allowed to behave like other comparable and similar markets.

The author is an economic analyst.​

 

[Saif]

Rocky road ahead for economy

Continued misgovernance will push it into deeper trouble

www.thedailystar.net

Rocky road ahead for economy
Continued misgovernance will push it into deeper trouble

Visual: Star

According to the Bangladesh Bureau of Statistics (BBS), the country's quarterly GDP growth has halved to 3.78 percent in the second quarter of FY2023-24, the slowest pace in three quarters. This, along with a number of other factors, should make it abundantly clear that the economy is not heading in the right direction. As growth slows, inflation has edged close to double digits, rising to 9.81 percent in March. With prices rising and wages failing to maintain parity with it, consumers are feeling increased pressure as their buying capacity continues to erode over time. This is leading to decreasing domestic demand, which is also affecting businesses and investment.

The World Bank and the Asian Development Bank had earlier projected that Bangladesh's GDP growth will be comparatively lower than in previous years. However, it is not just growth that is weakening. According to the BBS, the expansion of industrial production worsened to 3.24 percent in the October-December period of 2023 from 10 percent in the same period a year before. The services sector, which accounts for half of the GDP, increased 3.06 percent in the second quarter of FY2023-24 against a growth of 6.62 percent in the same period of the last fiscal year. And growth in manufacturing actually saw a 0.45 percent decline in the second quarter of the current fiscal year.

Economists have identified three main factors for the overall decline in growth: macroeconomic mismanagement, import restrictions, and a distressed financial sector. Due to previous policy mistakes leading to the foreign currency reserves crisis, it can be argued that the government had no choice but to implement import restrictions. However, the government can have no excuse for its macroeconomic mismanagement and the distressed financial sector, given that its own policies have fed these. For years, we have stressed in this column the urgent need for financial sector reforms. But far from it, the government has continually allowed defaulted loans to grow, weakening the financial sector, by protecting vested quarters responsible for the looting of the sector.

Unabated corruption, extortion and other abuses by powerful interest groups have caused unimaginable harm to the economy. And it is an undeniable historical fact that when corruption thrives, the economy ultimately suffers—as ours is currently doing. Therefore, unless the government acknowledges this reality and conjures up the political will to change things around, it is safe to say that the economy is heading into darker clouds.​

 

[Saif]

How we are missing out on higher remittances

Do we have the vision and political will to accelerate change and make the most of the opportunities that are about to unfold?

www.thedailystar.net

How we are missing out on higher remittances

VISUAL: NAZIFA RAIDAH

Migrant workers from Bangladesh are disadvantaged in many ways compared to their counterparts from other countries. To cite one disadvantage: as per a February report by The Business Standard, an aspiring Bangladeshi migrant worker bound for Malaysia pays between $4,000 and $4,500 for employment in the manufacturing or construction industries. But for the same opportunities, Indonesian workers pay between $340 and $742. This is despite the Bangladesh government setting a maximum Tk 78,990 (less than $1,000) migration cost for workers travelling to Malaysia. The cost of migration is equally exorbitant for Bangladeshi workers travelling to other countries in search of livelihood. In fact, a 2020 International Organization for Migration (IOM) report suggested that the migration cost of Bangladeshi workers is considered one of the highest in the world.

This is attributed mostly to the corruption in the system that has enabled syndicates to be formed among recruitment agencies, in addition to ineffective migration diplomacy, and limited efforts from the concerned authorities to ensure the wellbeing and rights of the migrant workers.

While the remittances sent by the migrant workers are valued highly, we have not taken effective measures over the years to map international market demand for skilled labour and accordingly upskill aspiring migrant workers, which would have translated into higher remittance for us.

we must understand that in a fast-changing landscape, where quality of work is becoming increasingly important for employers, new avenues are opening up for the skilled workforce. So, being content with pushing more unskilled workers into the global labour market is no longer an option.

Even at a time when our volatile forex reserve remains a major economic concern and despite the growth in the number of migrant workers—around 1.3 million workers migrated abroad in 2023, a 15 percent increase from 1.13 million in 2022, thanks to Saudi and Malaysian markets opening up—we have not been able to tap the full potential of the expanding job market abroad, both in terms of revenue volume and skilled worker migration.

The remittance inflow in 2023 remained stagnant at the $21 billion mark, despite more workers migrating abroad. In 2022, remittance inflow was $21.28 billion and in 2021 it stood at $21.74 billion. Given the 15 percent year-on-year increase in worker migration in 2023, the mere 2.54 percent year-on-year increase in remittance in 2023 is a telling tale of wasted opportunities and the inability of formal banking channels to woo customers.

A study of government data by the Refugee and Migratory Movements Research Unit (RMMRU) revealed that of the workers who migrated in 2022, a staggering 78.64 percent were less skilled. In 2021, it stood at 75.24 percent. While there was some improvement in 2023, with an increased number of skilled and semi-skilled worker migration, less skilled workers still made up more than half of the entire pie, at 50.28 percent, according to the Bureau of Manpower, Employment and Training (BMET).

This is mostly due to our lack of demand mapping, planning, and political will to tap into the skilled labour market. Bangladesh has always eyed the less skilled market with its lower barrier to entry, entertaining demand from traditional markets needing low-paid unskilled, less skilled workers. But we must understand that in a fast-changing landscape, where quality of work is becoming increasingly important for employers, new avenues are opening up for the skilled workforce. So, being content with pushing more unskilled workers into the global labour market is no longer an option.

Our Asian peers are quickly upskilling their workforce to capture the new markets and their workers are earning higher wages, while in Bangladesh, we are patting ourselves on the back for sending about 1.3 million workers abroad, without a plan on how to tap into the new markets and enable our workers to find better-paying jobs, in turn us getting higher remittance.

We must study the global labour market patterns to identify new destinations for Bangladeshi workers, and the skill sets required to make sure our workers succeed there. Better coordination, cooperation, and oversight among the government and private sector actors are critical to improving the living conditions of our workforce abroad and driving forex earnings.

However, for this to happen, we would need to overhaul our overseas employment system which is lethargic by nature and mired in corruption. There is no way that notorious syndicates are given free reign to do as they wish—exploiting unsuspecting and powerless migrant workers—without the system benefitting from their illegal gains.

The transformative push in the labour migration landscape of our country would also mean that the Bangladeshi missions abroad would have to make efforts to identify potential industries for foreign worker recruitment in the countries where they are located and the skills that would be required to fill those requirements. The concerned officials would have to engage in robust migration diplomacy to negotiate good deals for our workers—both in terms of wages and living conditions.

It is true that in Bangladesh we lack adequate technical training centres and polytechnic institutes. So the focus should be on building additional capabilities while fully utilising the existing facilities.

It is high time the government came out of its complacency mindset and transformed the overseas employment sector to make the most of the new opportunities opening up for Bangladesh. While demand for unskilled and less skilled workers will sustain in the traditional markets for some more years, if we do not compete for the new markets in need of a semi-skilled and skilled workforce, our Asian peers will win them over, leaving us little room to manoeuvre.

Do we have the vision and political will to accelerate change and make the most of the opportunities that are about to unfold?

Tasneem Tayeb is a columnist for The Daily Star.​

 

[Saif]

Bangladesh\'s gross forex reserve dips to $19.89b

The gross foreign exchange reserves in Bangladesh, according to the International Monetary Fund guidelines, dropped to $19.89 billion again on Wednesday.

www.newagebd.net

Bangladesh's gross forex reserve dips to $19.89b
Staff Correspondent 18 April, 2024, 22:33

A file photo of Bangladesh Bank headquarters in Dhaka.

The gross foreign exchange reserves in Bangladesh, according to the International Monetary Fund guidelines, dropped to $19.89 billion again on Wednesday.

According to Bangladesh Bank data, the foreign exchange reserves reached the current level on the day from $19.91 billion on March 31 and $21.86 billion on December 28, 2023.

However, according to Bangladesh Bank's conventional valuation, the foreign exchange reserves were reported as $25.3 billion on that day.

The reserves had dropped to $19.13 billion on December 6, 2023, but rebounded to $21.74 billion on January 4 after receiving $689 million in loans from the International Monetary Fund and $400 million from the Asian Development Bank.

The reserves, however, started declining again thereafter.

This decline in Bangladesh's foreign exchange reserves is primarily due to a significant dollar shortage in the market.

The shortage has compelled the central bank to continue selling dollars to banks from its reserves.

The reserves significantly depleted as import payments of $1.29 billion were made to the Asian Clearing Union for January and February.

The Asian Clearing Union is a payment settlement forum whereby the participants settle payments for intra-regional transactions through participating central banks on a net multilateral basis.

Payment obligations of transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are settled through the ACU payment system.

Apart from the payment obligations to ACU, the ongoing sales of foreign currency to the country's banks by the central bank contributed to the reduction in the country's foreign exchange reserves.

The central bank has been selling dollars to commercial banks, with more than $30 billion sold over the past 32 months.

This included $9.7 billion allocated to banks in July-February of the financial year 2023-24, $13.5 billion in FY23 and $7.62 billion in FY22.

The country's financial sector is facing a severe dollar shortage.

To address this, the government and the central bank have implemented measures to restrict imports, especially luxury and non-essential items.

Due to a liquidity crisis in the market and a sharp rise in government treasury bonds, banks are providing about $2 billion to the central bank in exchange for local currency.

The dollar rate has been set at Tk 110 a dollar by the Association of Bankers, Bangladesh, and the Bangladesh Foreign Exchange Dealers' Association.

According to IMF guidelines, the net reserve is below $17 billion.

The Bangladesh Bank follows the IMF's BPM6 for calculating gross and net international reserves.​

 

[Saif]

IMF’s 3rd loan tranche on track despite repeated failure to hit reserve goal

The minimum net international reserves (NIR) will also remain below the threshold when an IMF mission visits Dhaka next week to review the progress of the programme before releasing around $681 million in the third tranche in May.

www.thedailystar.net

IMF's 3rd loan tranche on track despite repeated failure to hit reserve goal

3rd tranche of IMF loan

Bangladesh has repeatedly failed to retain foreign currency reserves in line with the goals set under the International Monetary Fund's $4.7 billion loan since the programme was launched in January last year.

The minimum net international reserves (NIR) will also remain below the threshold when an IMF mission visits Dhaka next week to review the progress of the programme before releasing around $681 million in the third tranche in May.

Despite the shortfall, driven by lower-than-expected remittance and export receipts and foreign direct investments, the country managed to secure the first two instalments of the multi-year loan.

And Bangladesh Bank Governor Abdur Rouf Talukder told reporters that the country will receive the third instalment on time as well.

In 2022, Bangladesh turned to the global lender after its forex reserves plunged to a critically low level amid higher import bills, leading to a sharp depreciation of the taka and an unprecedented level of inflation, hurting the poor and derailing the economic growth trajectory.

Initially, the government was given a target to keep a minimum NIR of $26.81 billion for December 2023. Later, it was revised downward to $17.78 billion since the reserve situation showed no signs of major improvements. Still, the country fell short of the target by $58 million.

The goal for NIR was $23.74 billion for June last year. However, the country had a reserve of $19.56 billion. Bangladesh also failed to meet the condition of the tax revenue at that time.

A central banker said this time the reserve shortfall will be comparatively low.

The NIR is defined as reserves assets minus reserve liabilities. Reserves liabilities are all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives and all credit outstanding from the IMF.

Officials at the finance ministry and the BB said except for the reserve-related criteria, all other conditions have been met.

During its visit, the IMF mission will review the government's performance against the targets set for December 2023.

Out of six quantitative targets set for the third tranche, the government has met five targets.

For December last year, the goal for tax revenue was set at Tk 143,640 crore. The government has already met the target.

According to the finance ministry, Tk 1,62,164 crore was collected in tax revenue in the first six months of the current fiscal year.

Another loan condition is that the budget deficit must not surpass Tk 90,520 crore. In December, the deficit stood at Tk 8,338 crore.

As per another target, the reserve money had to be within Tk 400,400 crore in December and it stood at Tk 372,715 crore in the last month of the year.

Besides, two of the loan conditions are that the government's social spending and capital investment had to be more than Tk 50,000 crore as of December.

The government spent around Tk 200,000 crore from the budget between July and December of 2023-24 and about Tk 100,000 crore was spent in these two segments, a finance ministry official said, adding that the government also met the condition on external payment arrears.

Apart from the quantitative and indicative targets, there are some structural conditions set by the IMF. The official said the structural conditions associated with the third tranche of the loan have been achieved.

As part of the structural conditions, the government adopted a periodic formula-based price adjustment mechanism for petroleum products in March and has adjusted it twice.

The Bangladesh Bureau of Statistics has begun publishing quarterly data on the gross domestic product (GDP) and released the economic growth figure for the first two quarters of FY24.

Besides, the parliament passed the Bank Companies (Amendment) Act and the Finance Companies Act and the laws have already been implemented, in line with the IMF recommendations.

Levi's now in Dhaka

Refayet Ullah Mirdha

Renowned American clothing company Levi Strauss & Co has opened a store in Dhaka offering its range of products under the third franchise deal secured by local conglomerate DBL Group following similar contracts with Nike and Puma.

Levi's is one of the world's biggest fashion retailers. Its products are sold in more than 110 countries through approximately 3,000 stores.

The 2,270 square feet store on Banani Road 11 opened on April 1, aiming to draw the rising middle-income population with an assortment of imported denim jeans, t-shirts, polo shirts, and formal and casual woven shirts for men and women.

Levi's will continue its expansion across key markets in Asia, with plans to open another store in Chattogram, said PR Newswire in a statement on April 17.

The company's focus are dynamic markets undergoing swift urbanisation, said Amisha Jain, senior vice president and managing director of South Asia-Middle East and Africa at Levi Strauss & Co.

"With a population exceeding 160 million, Bangladesh presents significant opportunities for retail expansion," she said.

The DBL plans to open Levi's stores in other parts of Dhaka, such as Dhanmondi, soon and eventually in Chattogram, said a senior official of the group asking not to be named.

"The response from consumers is good," said the official, adding that the country's economy has been growing and the purchasing power of consumers was also improving, enabling them to afford branded products.

Annual sales of clothes in Bangladesh are estimated to amount to over $15 billion.

Per capita consumption of apparels has been rising with a rise in income, for which the presence of international brands is also increasing gradually.

Three growth drivers, including farmers, remitters and garment workers, pushed the country's GDP to more than $460 billion in 2022. The nation is also set to graduate from least developed country (LDC) status in 2026.

Bangladesh's real GDP growth is projected to remain relatively subdued at 5.6 percent in FY24, compared to the average annual growth rate of 6.6 percent over the decade preceding the COVID-19 pandemic, according to World Bank (WB).

Persistent inflation is expected to weigh on private consumption growth, and shortages of energy and imported inputs combined with rising interest rates and financial sector vulnerabilities are expected to dampen investor sentiment.

Growth is expected to increase gradually over the medium-term as monetary, exchange rate, and financial sector policy adjustments are implemented, the WB said.

Stocks slip below 5,700 points after 35 months

Star Business Report

Stocks in Bangladesh suffered a massive setback yesterday with the benchmark index of the Dhaka Stock Exchange (DSE) falling below 5,700 points for the first time in 35 months as nervous investors sold their scrips.

This led to the price erosion of large-cap stocks, bringing down the benchmark index of the country's premier bourse by 77.08 points, or 1.33 percent, to 5,686 points, its lowest level since May 9, 2021.

Beacon Pharmaceuticals, the British American Tobacco Bangladesh Company, Renata, Olympic Industries, BRAC Bank, LafargeHolcim Bangladesh, Mercantile Bank and Pubali Bank were among the large-cap scrips that suffered the biggest losses.

Beacon Pharmaceuticals was the top dragger of the index, claiming 5 points, followed by British American Tobacco Bangladesh with 4 points, according to LankaBangla Securities.

The market dropped as investors panicked seeing the continuous fall of market indices, said a top official of a leading stock brokerage.

Foreign investors are still selling shares, so blue-chip stocks are falling even though these stocks are already traded at a very low price.

And as these stocks have been falling for the past few days, some brokerage houses are selling them by executing forced sales, he added.

If brokerage houses and merchant banks lend funds to investors to buy stocks and the stock price falls massively, then the brokers first call the investors to repay their loans or otherwise sell their shares in what is called forced sales.

The DSES, the index that represents shariah-compliant companies, shed 1.26 percent to close at 1,246 points yesterday while the DS30, which comprises blue-chip stocks, plunged 1.13 percent to 2,014 points.

However, daily turnover, which indicates the volume of shares traded during the session, increased 8.29 percent to Tk 522 crore compared to the previous trading session.

Almost all sectors closed in negative territory, with the non-bank financial institution, paper and printing and mutual fund sectors shedding the most, as per the daily market update of UCB Stock Brokerage.

The pharmaceuticals sector dominated the turnover chart, accounting for 18.98 percent of the total.

Of the issues traded at the DSE, the values of 29 increased, 342 decreased, and 24 did not see any price swing.

Asiatic Laboratories took pole position on the top gainers' chart with a rise of 9.96 percent followed by Dutch-Bangla Bank with 7.20 percent, Heidelberg Cement Bangladesh with 6.19 percent, Salvo Chemical Industry with 5.11 percent and IFAD Autos with 4.50 percent.

Best Holdings, HR Textile, Sikder Insurance Company, Shyampur Sugar Mills and First Janata Bank Mutual Fund also featured on the gainers' list.

Meanwhile, EXIM Bank 1st Mutual Fund shed the most, losing 6.81 percent, followed by IFIL Islamic Mutual Fund-1.

The two were followed by SEML FBLSL Growth Fund, Capitec Grameen Bank Growth Fund, Khulna Printing and Packaging, IDLC Finance, Apex Ternary, and Prime Bank 1st ICB AMCL Mutual Fund.

The Chittagong Stock Exchange saw a similar trend as the Caspi, the main index of the port city bourse, fell by 215 points, or 1.30 percent, to close at 16,244.52 points.

Rajesh Saha, chief executive officer of CAL securities, blamed the country's market situation for the abrupt ups and downs of stocks.

"Outsiders control the stock market in our country. Keeping them in the market, we can't expect a better situation. What is happening in the market, that's a normal thing. The market will not be well until we take back control of the market from outsiders," he said.

"Such things will happen until the market is structured. Look at our neighbouring countries, where markets are structured. Investors do not fear to invest there because no one can dare to earn in the wrong way," Saha added.

He also put forward a slew of suggestions to develop the market.

"We have to bring IPOs to the market in a proper way. So, we have to bring the companies under proper regulations. If any company breaches any rules, the regulatory body has to slap stiff punishments on them," Saha said.

"But in our market, we clearly understand what is happening and what will happen in such a situation. The shares we bought we are now selling out of fear," he added.

Saha pointed out that in developed countries, it is seen that there are some companies which are financially sound.

"So, investors pass their money to those companies if they get any indication of a bad situation. But we have no such places or companies in our market," he said.

"In our country, people see earning is tough through traditional ways. So, they choose poor stocks and try to chalk up more earnings. Our regulatory body knows well how to tackle the market and what needs to be done for the market's wellbeing," Saha added.​

 

[Saif]

What Bangladesh needs to do to shift gears

So, what is the takeaway for Bangladesh from these warnings coming from different corners?

www.thedailystar.net

Towards a trillion-dollar economy
What Bangladesh needs to do to shift gears

VISUAL: AZMIN AZRAN

In 2024, Bangladesh's economy has a firm footing. But what about the future? Will we continue to rely on the ready-made garments (RMG) industry for employment and export earnings, and depend on expatriate remittances to fuel a lopsided economy? This question came to my mind as I watched millions of RMG workers return to their factories, ploughing through traffic jams, clogged roads, and dilapidated infrastructure, with concern in their minds about their future job prospects.

And what about those with a graduate degree, who need help finding employment in their preferred profession? Or those who have bagged a low-paying job in a temporary gig—like my own nephew, who has an MBA and is an accountant, but is struggling pay his bills with a minimum wage job in a travel agency?

Bangladesh needs to embrace digital technology to modernise its economy and expand opportunities for people from all walks of life. We are already approaching the quarter-century mark of the 21st century, but the economy is stuck in a rut. It reminds me of the sculpture "The Struggle," based on painter Zainul Abedin's "Sangram," where two bullocks with the driver try to pull a cart laden with logs out of the mud while the wheels are stuck.

On April 2, The New York Times ran a long story which lauded Bangladesh's growth model of the last half a century. It gave leaders credit for lifting up millions of poor people and praised the success of turning farmers into textile workers. But the article also cautioned that changes in trade, supply chains, and technology are making our journey into the next quarter of the century perilous. I am sure this precaution applies to other nations, too. On April 1, in an opinion piece for The Wall Street Journal, Robert B Zoellick, former president of the World Bank, lashed out at Biden and Trump, the two presumptive candidates for the US presidency. He attacked them for their inability to see the writing on the walls, and rather than preparing the US for the challenges of the 21st century, taking it back to the 20th.

Earlier this year, the World Economic Forum (WEF) released its Future of Growth framework, which advised that with "the pressing need to rekindle global economic growth, we must move to innovative, inclusive, sustainable and resilient growth."

So, what is the takeaway for Bangladesh from these warnings coming from different corners?

Manufacturing, which should still form the base of our economy in the coming decades, must be more productive and will, in any case, require fewer workers to make garments, leather goods, and IT products. We will depend on innovation in artificial intelligence, quantum computing and general-purpose technologies.

To compete in the world, we can no longer rely on the two bread-and-butter sectors of our economy—the RMG sector for jobs and foreign exchange, and the external jobs market for further employment and remittances. Remarkably, we have a very educated young labour pool ready to tackle the challenges, but we need to remove the hurdles they face: nepotism, crony capitalism, and the stagnant services sector, which is only worsened by short-term profit motives.

The question, now, is this: what will spur the economy to reach the trillion-dollar target and the middle-income status? The answer lies within ourselves.

In an article on her Substack titled "Visiting the Future," Susan Crawford, a law professor at Harvard University, wrote in an admiring tone about the climate adaptation of Bangladesh after visiting the country. "They, too, are living in a future that hasn't quite reached everyone in the US yet. Extreme heat, salty water, destructive sea level rise and storms are all facts of life in Bangladesh," she wrote. "The country, in one of the most densely populated and lowest-elevation regions on the planet, was among the first to recognise the need to adapt to the climate changes that are already baked into our world." In her opinion, the country is ahead of the US on the climate curve, and she concluded very optimistically that "being there felt like visiting the future."

How can this country and its leaders, then, miss the cue on the world's economic future? We must marshal our resources and exploit the broad global economic trend. But we also need to support the economy's evolution from agriculture to manufacturing, and now to services, to reflect changes in our growing domestic demand. Our exports need to take advantage of economies of scale with a diverse array of manufacturing and services.

My friend, Prof Rahul Roy of Boston University's School of Medicine, just returned from a trip to Kolkata. I was curious to know how West Bengal was doing amidst the "chaos" in India. He simply said, "Fine." But he then added that West Bengal, like the rest of India, is moving towards rapid industrialisation. "Bangladesh needs to change direction to diversify and broaden its domestic market," he said. "As you know, the IT sector in India contributes only 15 percent to the GDP [actually, it is only 13 percent]. So, while you guys [Bangladesh] are going gung ho about AI and all that, the industrial sector needs to move away from its over-reliance on garments."

Prof Rashed Al Mahmud Titumir of Dhaka University agrees. In a recent article in The Daily Star, he outlines that the necessary conditions for our transition from the present stagnation are industrialisation, diversification, competitiveness, and technological catch-up through structural transformation to enhance the capabilities of our amazingly resilient labour force. Someday, a new cadre of leadership will tap into this opportunity with the spirit of embracing science, technology, innovation, and opportunity.

As I was finishing up this article, I came across a message from Prof Rehman Sobhan: "We are taking development forward, but there are gaps and continuing weaknesses of our institutions. This is a very central element," he said at the launching event in Dhaka of the book Fifty Years of Bangladesh: Economy, Politics, Society and Culture, that he co-authored. I am glad that he and I see eye to eye on some matters.

Dr Abdullah Shibli is an economist and works for Change Healthcare, Inc, an information technology company. He also serves as senior research fellow at the US-based International Sustainable Development Institute (ISDI).​

 

[Saif]

Labour intensive digital economy is growing

Graduate employment is highly stressed in Bangladesh with the middle class unable to cope with the nature of changing market demands and its contingent labour market. The World Bank says the rate of unemployment is roughly 4.7 per cent but it's based on official statistics which is rarely reliable.

thefinancialexpress.com.bd

Labour intensive digital economy is growing
AFSAN CHOWDHURY
Published :
Apr 08, 2024 22:10
Updated :
Apr 15, 2024 21:32

Graduate employment is highly stressed in Bangladesh with the middle class unable to cope with the nature of changing market demands and its contingent labour market. The World Bank says the rate of unemployment is roughly 4.7 per cent but it's based on official statistics which is rarely reliable. It could be more or less but field level data by researchers show more hidden employment than is thought of.

Barring the hardcore unemployed including the disabled, it's best to say we don't know accurately and research doesn't throw up high rates. The problem is in the sushil white collar sector or the graduate desk bound jobs.

Many new urban employment sectors are emerging which are less known. One sector that is almost invisible is the global digital sector involved in both legal - freelancing -and non-legal employment led by gaming and betting.

Former Planning Minister MA Mannan had said that Bangladesh's economy was increasing due to the contribution of the freelancers. This was stated by him at a meeting, titled "City Bank BFDS Conference", organized by Bangladesh Freelancer Development Society (BFDS). "Our remittances are growing with the money earned by freelancers," Mr Mannan remarked. Freelancers will get 4 per cent cash assistance against the money brought home and it has been helped by the availability of the internet.

The size of the freelancer market is important. BFDS Chair Dr Tanjiba Rahman said the global market size of freelancers is about $1.5 trillion. There are over 10 lakh Bangladeshis working in this market, both online and offline. In fact, it's the global market segment that has withstood all pressures caused by the various conflicts around the world and the Covid pandemic as well.

With a 26 per cent growth rate, it's a very healthy situation. Of the 1.0 million freelancers, 0.65 million are in the field of IT.

Almost 75 per cent of freelancers are doing it as a part-time job. Freelancing in Bangladesh serves as a very good antidote to the current pay scale in our country relating to the educated.

Although the GOB is now promoting this sector, it has no role in the development of this sector. In fact, like all the major successful sectors such as external migration and RMG it can't claim any credit for its birth, growth and development. They have expanded due to opportunities taken advantage of by the entrepreneurs themselves, individual and collective.

While the RMG sector was the product of the initiatives of the better off investors, both external migration and digital freelancing belong to the rural and urban middle class respectively. It has been on for several decades and its only now being recognized by the GOB as dollar shortage has become an issue and freelancing has gained importance due to that.

Many problems and obstacles are there which the formal regulatory agencies can tackle and agencies can help. These include better policing of the internet scam including those aimed at the freelancers, training initiatives and help the freelancers with better capacity to negotiate and deal with new and regular clients. Lack of English language skills remains a major issue. However, as with the migration sector, the interest is more about incoming dollars and less about the sustainability of the sector as a whole by supporting the workers there.

The informal and non-legal digital sector is of course a shadowy world. The rise and explosive growth of the internet gaming and betting sector has largely gone unnoticed in the media but its growth is phenomenal and is the largest internal economic sector drawing particularly the young.

"The total value of bets placed through sports betting is estimated at around 8.5 billion taka per year. As of today, the most popular sports in Bangladesh are cricket, football, athletics, cycling, swimming, and other sports that are played in South Asia. The most popular sporting event in Bangladesh is the cricket match between Bangladesh and India. Each year, more than 10 million Bangladeshi people view cricket matches on television, which is the highest number of viewers of any event in the country."

No estimate is possible but that millions of bettors are involved is a fact. The issue is, most don't guarantee regular payments but like all gambling outfits offer uncertainty and insecure income. On top of that a significant percentage of the outfits operate outside the law. However, the gambling market size is so huge that international betters are hiring locally for even external employment.

Most of the gambling networks are controlled from outside Bangladesh and the locals are not English friendly. As a result a new sector has grown up where youth are hired and taken abroad to work in betting help centres who can communicate with Bangladeshi clients.

Given the internet penetration in Bangladesh, this can only grow. Unlike the freelancers their work is only of one kind and the system of payment is also not transparent. Their linkages with the other sectors including drugs and sex work sites are also common knowledge.

The fact remains that the formal institutional economy is weak in Bangladesh and given the global competitive scenario, the chances of becoming competitive is not high. The formal sector and the state agencies are unable to develop a framework that ensures higher employment. Plus the education system is not employment friendly. That has led to this situation where informal employment arrangements by individuals and groups score much better than state agencies.

Since nothing suggests that the capacity of the GOB to be a major player in employment generation is about to happen quickly, the support and capacity development will be fulfilled by the private sector. They do exist but much more needs to be done to meet the growing demand of the internet-based private sector labour intensive economy.​

 

[Bilal9]

$31b foreign loans in pipeline, transportation gets lion's share
Loan deals with global and bilateral lenders are expected in three fiscal years till FY26 for 115 projects

Transportation continues to remain the government's top priority, accounting for one-third of the $30.89 billion in external loans expected in the current and next two fiscal years for projects that have been greenlighted by development partners.

Among the 115 projects listed by the Economic Relations Division (ERD), 30 are for road and railway networks with loan proposals totalling $10.7 billion. The energy sector follows the transportation sector with 17 projects expecting $4.77 billion in external funding.

The major projects include Metro-5 in Dhaka, Kalurghat rail-road bridge in Chattogram, Dhaka-Cumilla chord line, railway container depot in Gazipur's Dhirasram and container terminals at the Chattogram Port.

Loan deals are expected in three fiscal years till FY26 for projects to be implemented within five years of signing.

While resource mobilization prioritizes infrastructures for trade and investment, with $10.7 billion planned road and railway networks, education and healthcare will receive comparatively less funding at $1.64 billion and $1.19 billion, respectively.

This continues the trend of lower allocations for education and healthcare in annual development budgets. These sectors, crucial for human capital development, receive significantly less funding compared to transportation, which accounts for 26% of the current year's development budget. In contrast, education and health are allocated only 7% and 5%, respectively.

However, proposed education projects are mostly focused on skills training while health projects include an extension of a multi-lender funded nutrition scheme.
Prudence urged in project selection

Selim Raihan, a professor of economics at Dhaka University, feels Bangladesh continues to prioritize physical infrastructures, but lags behind competitors in social infrastructures such as education and health. "Health and education also need mega projects, otherwise we will miss out on broader development as envisaged in SDG, five-year plan and so on," he told TBS.

These two social sectors are not even capable of utilizing whatever mere allocations they get, he points out, stressing major reforms to enhance efficiency of these sectors.

"We talk about development, productivity and demographic dividend, but we do not invest much in health and education," said Prof Raihan, who is also the executive director of local think-tank South Asian Network on Economic Modeling (Sanem).

The ERD maintains a monthly updated list of promising loan agreements for upcoming projects. The Asian Development Bank is expected to contribute half of the total, $14.95 billion with the World Bank already approving $3.73 billion. Loan agreements for an additional $11.12 billion are in preparation for signing with other development partners including the Asian Infrastructure Investment Bank, China, South Korea, and the New Development Bank.

Its latest report also mentions a proposed $3.61 billion budget to address the country's upcoming budget challenges and economic situation.
Zahid Hussain, a former lead economist of the World Bank's Dhaka office, urges caution in project selection to maximize economic benefit and keep repayment pressure in check.

He noted the importance of selecting projects with a clear economic benefit.

"Investing in vanity projects using foreign loans is not justified. The Hambantota International Port project in Sri Lanka was also a vanity project. Our Karnaphuli Tunnel is a similar case," the economist told TBS.

The former World Bank economist said that priority should be given to projects that attract foreign investment and generate foreign currency.

"Projects that will increase export productivity should be selected. Priority should also be given to projects that will improve the logistics system and projects related to fuel supply which will directly contribute to increasing foreign exchange," he added.

Share of bilateral loans growing

The share of bilateral loans, some high-interest bearing, is growing in Bangladesh's external debt portfolio.

Bilateral debts accounted for 40% of Bangladesh's external debt stock in FY23, up from 31% in FY20. ERD data shows as of 30 June 2023, borrowing from multilateral sources totalled $37.25 billion, while loans from bilateral sources were $25.15 billion.

The additional loan from external sources would add to the amount when Bangladesh's annual repayment crossed $2 billion in eight months of the ongoing fiscal year to February, 43% up from the same period last year.

Economist Zahid Hussain expressed concerns about Bangladesh's growing reliance on market-based external loans for infrastructure development.

"The government's operating expenses are increasing, debt repayment is also going up. Global interest rates are also high. Market-based loans with tough terms should now be used less," he said.

However, IMF-WB's Debt Sustainability Analysis assessed Bangladesh is at low risk of external and overall debt distress.

Economist Professor Mustafizur Rahman of Centre for Policy Dialogue says Bangladesh's public sector external debt to GDP ratio is "quite comfortable," but increase in external borrowing and debt servicing liability in recent years is a cause of concern.

ADB focuses transport, WB local govt

The Asian Development Bank (ADB)'s pipeline loan projects include major road, railway, inland depot and container terminal works involving $4.93 billion – higher than any other sector. The government has secured $2.6 billion from the ADB for 12 projects.

A key project is the $5.47-billion Dhaka metro (Line-5) Southern Route, expected to start next year. It is in the final stage of the approval process, according to the Planning Commission. After a committee meeting this month, it will be presented to the Executive Committee of the National Economic Council for final approval.

The 17km mostly underground metro rail line connecting Gabtali and Dasherkandi will be co-funded by ADB and South Korea. The first $300 million tranche from the ADB is expected this October.

The Manila-based agency has committed $600 million for the first phase of the Dhaka-Chattogram broad gauge rail track project aimed at faster connectivity between the two cities.

Railway officials said they aim to sign two loan agreements with ADB by next year.

The loan agreement with ADB for the $250-million inland container depot project at Gazipur's Dhirasram is nearing finalisation. The railway ICD will connect Chattogram and Matarbari ports to capital Dhaka by rail.

Approval has been received from the World Bank for 11 projects, with a larger share ($1.76 billion) going to local government and rural development.

A $350-million loan agreement for a component of the Chattogram Bay Terminal, a crucial project for port expansion, is expected this year.

Asian partners teaming up

The government is preparing to sign loan agreements for 29 infrastructure development projects with Asian development partners including the Asian Infrastructure Investment Bank, the New Development Bank, Japan, China and South Korea.

The transport sector will receive over $5 billion, nearly a half of the amount agreed on or being negotiated.

A loan deal with China is expected this fiscal for digital connectivity at Bangabandhu Hi-Tech City in Gazipur's Kaliakoir, while preparations are at final stage for South Korean loan for a rail-road bridge across the Karnaphuli River at Chattogram's Kalurghat.

Furthermore, Japan has already signed loan agreements for three projects this year, worth over $2 billion.

Health, education getting some boost too

ERD officials are expecting loan deals till June next year with World Bank, ADB, Asian Infrastructure Investment Bank and South Korea for a number of national and urban health and nutrition projects including the 5th Health, Population and Nutrition Sector Programme, Healthcare Improvement Project and BSMMU Super Specialized Hospital.

The education sector is also set to receive major funding with loan agreements for multiple projects pending according to ERD's list.

Of them, ADB will support programmes such as NextGen Secondary Education Programme, Technical Education Modernisation and Fifth Primary Education Development Programme, the latter may be signed in March 2026.

The Saudi Fund for Development will support construction of 10 secondary schools in Haor areas, with a loan agreement expected this year.