[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Economy largely stagnant, with slight relief in reserves

The country began 2024 with negative economic indicators and when the political landscape changed in August, the economy was in dire state. While the interim government took some measures to handle the pressure, the economy did not pick up speed over the past five months

en.prothomalo.com

Economy largely stagnant, with slight relief in reserves
Jahangir Shah
Dhaka
Updated: 25 Dec 2024, 18: 15

The country began 2024 with negative economic indicators and when the political landscape changed in August, the economy was in dire state.

While the interim government took some measures to handle the pressure, the economy did not pick up speed over the past five months.

The biggest achievement during this period has been the acknowledgment of the economic crisis. The white paper detailing the economic situation also revealed widespread corruption under the Awami League government.

The people in general continue to suffer under high inflation. The price of the dollar has surpassed Tk 120. There are some positive developments in exports and remittances, but nearly all other macroeconomic indicators remain at rock bottom. Political uncertainty has led to stagnation in investment.

After the mass movement in July-August, the law and order situation has not been fully brought under control. As a result, there is ongoing instability in the industrial sector, particularly in the garment industry. Extortion continues, although reports indicate that some extortionists are being replaced. Overall, it can be said that 2024 is ending with the economy still in crisis.

After the change in power on 5 August, there were significant changes in economic leadership. Key positions, such as finance adviser, planning adviser, trade adviser, as well as the governor of Bangladesh Bank and the chairman of the National Board of Revenue (NBR), were filled with individuals of a good reputation. Over the past five months, the new economic leadership has mostly been focused on clearing the "mess" left by the previous government.

Inflation is villain of the year

The biggest struggle for the general public in the outgoing year has been the cost of daily necessities. For eight consecutive months, food inflation remained in double digits. Even though supply increased during the winter season, the price of vegetables did not decrease significantly. As a result, people with fixed incomes are struggling to make ends meet. According to the latest data from the Bangladesh Bureau of Statistics (BBS), food inflation in November reached 13.80 per cent, the second-highest in the past 13 and a half years. In July, food inflation had risen to 14.10 per cent.

Overall inflation has remained around double digits, but the national wage rate has been stuck at around 8 per cent for several months, meaning people's income is growing at a much slower rate than inflation. After the new government took office, steps like raising interest rates and reducing some duties were taken, but inflation has not been brought under control.

A look at the economy through the white paper

One of the major initiatives of 2024 was the publication of a white paper on the economy. For the first time, this document highlighted how bad the situation had become due to corruption at every level. It was revealed that during the Awami League government's tenure, nearly Tk 28 trillion had been laundered abroad, with an average of Tk 180 billion being sent out each year.

Over a period of 15 years, politicians and bureaucrats took bribes of up to Tk 2500 billion from government procurement. Development projects were plundered to the tune of nearly Tk 3 trillion, while the amount embezzled from the stock market amounted to Tk 1 trillion.

Over a period of 15 years, politicians and bureaucrats took bribes of up to Tk 2500 billion from government procurement. Development projects were plundered to the tune of nearly Tk 3 trillion, while the amount embezzled from the stock market amounted to Tk 1 trillion.

Current state of the economy

The revenue sector is struggling. According to the latest data from the National Board of Revenue (NBR), there was a shortfall of Tk 307.68 billion in customs and tax collection during the first four months of the current fiscal year (July-October). NBR has been falling short of its collection targets every month.

Expenditure on development projects has decreased. Due to many contractors with ties to the Awami League fleeing, the implementation of the Annual Development Programme (ADP) has been poor. In the July-November period, spending was Tk 1.25 trillion less compared to the previous year.

However, the good news is that there has been some momentum in exports and remittances under the interim government. For four consecutive months, remittances have exceeded 2 billion dollars each month. In the first five months of the 2024-25 fiscal year, remittances grew by approximately 26.4 per cent. Additionally, thanks to various measures, export earnings have surpassed 20 billion dollars in the past five months.

The positive performance of exports and remittances has helped prevent a further depletion of reserves.

However, non-performing loans have surged significantly. The loans taken from banks during the Awami League government's tenure, through irregularities and corruption, are now beginning to default. By the end of September, non-performing loans amounted to Tk 2.849 trillion.

Economists' view

Mustafizur Rahman, a distinguished fellow at the Center for Policy Dialogue (CPD), told Prothom Alo that the economy of 2024 should be viewed in two parts: one under the previous government and the other after the student-led uprising. Despite socio-economic progress under the Awami League government, various pressures were building up within the economy, such as unfair distribution, diminishing purchasing power, a sharp fall in the exchange rate, and high inflation. The accumulated economic issues also played a role in the student and public movements.

Mustafizur said that there are high expectations for the interim government regarding the economy and good governance. The second chapter, with aspirations for change, has begun. Issues of inequality and fair distribution are being discussed, but many economic problems remain, such as high inflation and a continuing decline in people's living standards.

The interim government is trying to tackle inflation through contractionary monetary policies, revenue policies, and market monitoring. However, it has not been able to bring about significant change in many economic indicators, and the economy has not gained momentum.​

 

[Bilal9]

Remittances reached $1.38 billion in 14 days of December​

As a result, the average daily remittance received was 98.7 million dollars.

https://bangla.dhakatribune.com/89550


Dollar/File Photo/AFP



Published: 15 December 2024, 07:47 PMUpdate: 15 December 2024, 07:47 PM

In the first 14 days of December, remittances worth 1.38 billion US dollars have been received in the country. In local currency, the amount stands at 16,576 billion taka (based on 120 taka per dollar). This brings the average daily remittance to 98.7 million dollars or 1,184 crore taka.

This information was revealed in an updated report published by the central bank on Sunday (December 15).

The report said that of the remittances received in the country in the first 14 days of December, $447.6 million came through state-owned banks, $69.4 million through a specialized bank, $860 million through private banks, and $3.88 million through foreign banks.

Additionally, remittances totaled $1.137 billion in the first five months (July-November) of the current 2024-25 fiscal year.

According to central bank sources, expatriates sent back $616.45 million to the country in the first week of December. And from December 8 to 14, remittances to the country totaled $764.91 million.

 

[Saif]

Horse-drawn carts, the lifeline of char economy

Horse-drawn carts remain the primary mode of transportation for goods in the char areas of Kurigram and Lalmonirhat, where the sandy riverbeds of the Brahmaputra, Teesta, Dharla, Dudhkumar, and Gangadhar rivers dominate the landscape.

www.thedailystar.net

Horse-drawn carts, the lifeline of char economy

Photo: S Dilip Roy/Star

Horse-drawn carts remain the primary mode of transportation for goods in the char areas of Kurigram and Lalmonirhat, where the sandy riverbeds of the Brahmaputra, Teesta, Dharla, Dudhkumar, and Gangadhar rivers dominate the landscape.

Each char typically has 10 to 50 horse-drawn carts, with approximately 500 chars spread across the region -- 400 in Kurigram and 100 in Lalmonirhat.

While buffalo carts were once common in these areas a decade ago, they have largely disappeared, though buffaloes are still reared for other purposes.

Raju Islam, a cart driver from Char Shakhahati on the Brahmaputra, said buying a horse costs between Tk 20,000 and 50,000, while building a cart can cost up to Tk 80,000.

The carts can carry 10-15 maunds of goods, but drivers usually limit loads to 7-8 maunds per trip to maintain the horses' health. They charge Tk 80-100 per maund for every 3-4 kilometres travelled on the sandy char land.

"The work is as hard for us as it is for the horses," said Raju.

Ahadul Haque from Char Kalmati on the Teesta river said horse-drawn carts are essential for transporting goods between the mainland and chars during the dry season. He earns Tk 1,200-1,500 daily from 3-4 trips but spends Tk 500-600 on horse feed.

Shafiqul Islam from Char Jatrapur in Kurigram said horse-drawn carts are even used to transport sick individuals and enable government officials and NGO workers to reach remote areas in the absence of other vehicles.

During the rainy season, boats replace carts as the main mode of transport.

"Until a specialised vehicle is invented for char terrain, horse-drawn carts will remain our primary form of transport," said Meher Ali from Char Harinchara on the Teesta.

Kabir Hossain, a trader at Jatrapur Haat, said the local economy revolves around horse-drawn carts. Goods are transported between the chars and mainland markets, but rising costs of horse feed have driven up transportation expenses.

Ahsanul Kabir Bulu, an NGO official working in the chars, said, "During the dry season, horse-drawn carts are the only way to transport goods across the sandy terrain. The economy of the chars cannot be imagined without them."​

 

[Saif]

Economy largely stagnant, with slight relief in reserves

The country began 2024 with negative economic indicators and when the political landscape changed in August, the economy was in dire state. While the interim government took some measures to handle the pressure, the economy did not pick up speed over the past five months

en.prothomalo.com

Economy largely stagnant, with slight relief in reserves
Jahangir Shah
Dhaka
Updated: 25 Dec 2024, 18: 15

The country began 2024 with negative economic indicators and when the political landscape changed in August, the economy was in dire state.

While the interim government took some measures to handle the pressure, the economy did not pick up speed over the past five months.

The biggest achievement during this period has been the acknowledgment of the economic crisis. The white paper detailing the economic situation also revealed widespread corruption under the Awami League government.

The people in general continue to suffer under high inflation. The price of the dollar has surpassed Tk 120. There are some positive developments in exports and remittances, but nearly all other macroeconomic indicators remain at rock bottom. Political uncertainty has led to stagnation in investment.

After the mass movement in July-August, the law and order situation has not been fully brought under control. As a result, there is ongoing instability in the industrial sector, particularly in the garment industry. Extortion continues, although reports indicate that some extortionists are being replaced. Overall, it can be said that 2024 is ending with the economy still in crisis.

After the change in power on 5 August, there were significant changes in economic leadership. Key positions, such as finance adviser, planning adviser, trade adviser, as well as the governor of Bangladesh Bank and the chairman of the National Board of Revenue (NBR), were filled with individuals of a good reputation. Over the past five months, the new economic leadership has mostly been focused on clearing the "mess" left by the previous government.

Inflation is villain of the year

The biggest struggle for the general public in the outgoing year has been the cost of daily necessities. For eight consecutive months, food inflation remained in double digits. Even though supply increased during the winter season, the price of vegetables did not decrease significantly. As a result, people with fixed incomes are struggling to make ends meet. According to the latest data from the Bangladesh Bureau of Statistics (BBS), food inflation in November reached 13.80 per cent, the second-highest in the past 13 and a half years. In July, food inflation had risen to 14.10 per cent.

Overall inflation has remained around double digits, but the national wage rate has been stuck at around 8 per cent for several months, meaning people's income is growing at a much slower rate than inflation. After the new government took office, steps like raising interest rates and reducing some duties were taken, but inflation has not been brought under control.

A look at the economy through the white paper

One of the major initiatives of 2024 was the publication of a white paper on the economy. For the first time, this document highlighted how bad the situation had become due to corruption at every level. It was revealed that during the Awami League government's tenure, nearly Tk 28 trillion had been laundered abroad, with an average of Tk 180 billion being sent out each year.

Over a period of 15 years, politicians and bureaucrats took bribes of up to Tk 2500 billion from government procurement. Development projects were plundered to the tune of nearly Tk 3 trillion, while the amount embezzled from the stock market amounted to Tk 1 trillion.

Over a period of 15 years, politicians and bureaucrats took bribes of up to Tk 2500 billion from government procurement. Development projects were plundered to the tune of nearly Tk 3 trillion, while the amount embezzled from the stock market amounted to Tk 1 trillion.

Current state of the economy

The revenue sector is struggling. According to the latest data from the National Board of Revenue (NBR), there was a shortfall of Tk 307.68 billion in customs and tax collection during the first four months of the current fiscal year (July-October). NBR has been falling short of its collection targets every month.

Expenditure on development projects has decreased. Due to many contractors with ties to the Awami League fleeing, the implementation of the Annual Development Programme (ADP) has been poor. In the July-November period, spending was Tk 1.25 trillion less compared to the previous year.

However, the good news is that there has been some momentum in exports and remittances under the interim government. For four consecutive months, remittances have exceeded 2 billion dollars each month. In the first five months of the 2024-25 fiscal year, remittances grew by approximately 26.4 per cent. Additionally, thanks to various measures, export earnings have surpassed 20 billion dollars in the past five months.

The positive performance of exports and remittances has helped prevent a further depletion of reserves.

However, non-performing loans have surged significantly. The loans taken from banks during the Awami League government's tenure, through irregularities and corruption, are now beginning to default. By the end of September, non-performing loans amounted to Tk 2.849 trillion.

Economists' view

Mustafizur Rahman, a distinguished fellow at the Center for Policy Dialogue (CPD), told Prothom Alo that the economy of 2024 should be viewed in two parts: one under the previous government and the other after the student-led uprising. Despite socio-economic progress under the Awami League government, various pressures were building up within the economy, such as unfair distribution, diminishing purchasing power, a sharp fall in the exchange rate, and high inflation. The accumulated economic issues also played a role in the student and public movements.

Mustafizur said that there are high expectations for the interim government regarding the economy and good governance. The second chapter, with aspirations for change, has begun. Issues of inequality and fair distribution are being discussed, but many economic problems remain, such as high inflation and a continuing decline in people's living standards.

The interim government is trying to tackle inflation through contractionary monetary policies, revenue policies, and market monitoring. However, it has not been able to bring about significant change in many economic indicators, and the economy has not gained momentum.​

 

[Saif]

Foreign fund flow, new pledges dwindle as debt servicing surges

Bangladesh’s foreign debt servicing surged 28 percent year-on-year in the first five months of fiscal year 2024-25 owing to the country’s expanded foreign loan portfolio and a rise in global interest rates.

www.thedailystar.net

Foreign fund flow, new pledges dwindle as debt servicing surges

Bangladesh's foreign debt servicing surged 28 percent year-on-year in the first five months of fiscal year 2024-25 owing to the country's expanded foreign loan portfolio and a rise in global interest rates.

In the same period, foreign loan disbursement fell by 27 percent year-on-year while commitments for new loans dropped by 91 percent, according to data released by the finance ministry yesterday.

With the obligations mounting and foreign funds diminishing, economists called for rejuvenating development spending as they argue this would streamline the foreign loan pipeline.

During the July-November period of FY25, the country returned $1.71 billion in principal and interest payments on foreign loans, up from $1.33 billion during the same period of FY24, according to finance ministry data.

According to the breakdown, the value of principal payments climbed by 37 percent to $1.05 billion while interest payments rose by 17 percent to $655 million.

Adding to the fiscal pressures, foreign assistance commitments have fallen precipitously.

In the first five months of FY25, total commitments for grants and loans stood at just $522.68 million -- a sharp drop from $5.86 billion in the previous year.

Loan commitments fell from $5.57 billion to $248.88 million while grant commitments remained relatively flat.

Disbursements also declined in the July-November period, with total project-related disbursements amounting to $1.54 billion, down from $2.11 billion during the same period last year.

This decrease reflects a slowdown in project loan inflows at a time when Bangladesh relies heavily on external financing for infrastructure and development initiatives.

The combination of rising debt obligations and declining foreign assistance is presenting a huge challenge for Bangladesh's fiscal management.

To cushion the increasing burden, economists suggested that the government should set priorities for annual development programme (ADP) implementation, stabilise the exchange rate and enhance domestic revenue mobilisation.

"The debt-servicing cost was supposed to surge as we have already seen the uptrend in the last couple of years," said MA Razzaque, chairman of Research and Policy Integration for Development (RAPID), a local think-tank.

Razzaque said higher interest rates and shorter grace and maturity periods for foreign loans are contributing to the debt burden.

However, the fall in foreign loan disbursement is a matter of fresh concern, he said.

"A lower government expenditure, including development spending, has contributed to the slow disbursement," he said, referring to a large chunk of foreign loans stuck in the pipeline.

"But the interim government is yet to streamline the loan pipeline as ADP spending slowed after the political changeover."

In the first five months of FY25, public agencies managed to spend Tk 34,214 crore or 12.29 percent from the overall development fund, as per the Implementation Monitoring and Evaluation Division (IMED) data.

The economist suggested trimming the ADP allocation and prioritising foreign funded projects.

In a recent report, titled "Medium-Term Macroeconomic Policy Statement (MTMPS)", the finance ministry said interest payments would continue to rise gradually in the coming years.

The proportion of external interest payments as a percentage of the national budget will rise to 2.6 percent in FY27 from 0.9 percent in FY22, reflecting the growing impact of external debt, the report said.

However, Ashikur Rahman, principal economist at the Policy Research Institute (PRI) of Bangladesh, does not believe the debt servicing would pose any risk for the country.

"Despite the rise in debt servicing, it does not pose any major risk even in absence of new loan commitments as exports and remittances offer a reasonable cushion that can help the treasury meet its immediate international debt obligations," he told The Daily Star.

"In the current fiscal year, foreign exchange earnings from exports and remittances are likely to cross $70 billion, which means even if debt obligations reach $4-5 billion, it poses no significant default risk for Bangladesh."

Nonetheless, given the local currency Taka is likely to further lose its value against the US dollar, the domestic fiscal burden of additional international debt servicing is going to intensify, he said.

"It necessitates that the Ministry of Finance keeps committing to streamlining domestic resource mobilisation initiatives that can offer the treasury more fiscal space to manage this additional pressure," Rahman added.

However, domestic revenue mobilisation does not offer much hope.

During the July-November period of FY25, revenue collection logged nearly a 2.5 percent negative growth year-on-year, according to national revenue board sources.​