[🇧🇩] Monitoring Bangladesh's Economy

[Krishna with Flute]

Next budget to focus more on revenue

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

www.newagebd.net

Next budget to focus more on revenue
Shakhawat Hossain 25 January, 2025, 23:24

View attachment 13648

Economists want curb on corruption in NBR

Revenue generation will continue to get priority in the next budget as the interim government wants to pull up the country’s falling tax-GDP ratio.

Finance ministry officials said that they had focused on half a dozen areas to increase the revenue generation in the coming financial year of 2025–26 beginning from July 2025.

Rationalisation of income tax waivers will get top focus along with imposing 15 per cent Value Added Tax on most of the consumer goods, they said referring to the proposed revenue mobilisation target at Tk 5.5 lakh crore in FY2025–26.

Economists said that the finance adviser should also come up with specific proposals to curb revenue leakages and corruption by the tax officials which, according to them, significantly contributes to the falling tax-GDP ratio.

The National Board of Revenue in a report released in December 2024 has calculated that Tk 1,15,056 crore was exempted in direct taxes during FY2021–22, almost 2.9 per cent of the GDP in that financial year.

Of that exempted amount, Tk 71,394 crore or more than 60 per cent is linked to the exemption of corporate income tax.

The overall amount of revenue losses due to exemptions reached over Tk 1,50,000 crore in the past FY2023–24, said the finance ministry officials.

The interim government like the ousted Awami League regime is committed to the International Monetary Fund to reduce the tax exemption under the on-going $4.7 billion loan programme.

Tax exemption has been identified as a major reason for the country’s tax-GDP ratio falling over the last ten years with it dropping below 8 per cent in FY2023–24 from 9 per cent in 2013–14.

The low revenue has been a persistent headache for the successive governments, said Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development.

Resource crunch has constrained the government’s ability to allocate adequate fund for social protection amid high inflation prevailing persisting over the past three years, he said, adding that public expenditures on health and education were decreasing.

Revenue shortages also forced the government to rely on borrowing sending public debt to an unsustainable level, according to the ‘Medium-term macroeconomic policy statement from 2024–25 to 2026–27’ report by the finance division.

Economists said that revenue mobilisation measures were taken in the past also but failed to bring much results due to corruption by the tax officials and revenue leakages.

Unless the interim government could effectively curb corruption, there is no guarantee that the proposed tax measures would pay, said former World Bank Dhaka office chief economist Zahid Hussain.

He suggested automation of revenue collection as a step to check corruption helping generate more revenues.

The recently prepared ‘White Paper on the state of the Bangladesh economy’ calls the revenue board’s automation measures half-hearted and says that the half-baked steps are a major barrier to effective revenue generation, deepening inefficiencies and fostering a climate of non-compliance.

One of the most glaring examples in this regard is the lack of integration between the NBR and other relevant government agencies that severely limits the effectiveness of the taxation system, continues the White Paper prepared by the interim government to review the state of the economy for the period of 2009–2024, the tenure of the now ousted Awami League government.

The paper also identifies corruption and weak governance undermining tax revenue, stalling reform and service delivery.

Low tax revenue in the country is driven by weak governance, widespread corruption and a lack of trust in how tax revenue is used. Corruption, particularly in tax administration, has led to widespread tax evasion and poor compliance, adds the White Paper.​

That is one part but what about textile business quitting BD for India?

 

[Bilal9]

That is one part but what about textile business quitting BD for India?

What about it?

Back in August of last year - Indian trade rags were claiming

"India could gain 6-8% of Bangladesh’s monthly ready made garment (RMG) export orders in the short term and 10% in the long term, presenting an opportunity of increments of $200-250 million and $300-350 million respectively, rating agency CareEdge Ratings said Thursday."

Read more at:
India set for export order increase on the back of Bangladesh turmoil

But Bangladeshi exporters weren't sitting around.

"(Bangladesh) garment exports from July to November increased by 16.25 percent compared to the same period last year to $16.11 billion. According to industry insiders, garment exports will increase in the new year 2025."

2025 starts with a great vibe for Textile and Apparel industry - RMG Bangladesh

The year 2024 was a critical one for the country’s garment industry. As the market starts to recover, there is a new ray of hope in the new year. Energy and dollar crises, supply chain disruptions, workers’ demands for higher wages, political uncertainty, and lax law and order—all of these...

rmgbd.net

In fact the pent up demand for Bangladesh apparel exports caused a bounce back beyond expectations. There is a reason why Bangladesh has second place globally in all this, and India has 7th place. Apparel Factories in Bangladesh are huge places, their scale surpasses India's sweatshops in any state. India does not have the wage structure to compete with Bangladesh.

"Despite the unrest and dissatisfaction, Bangladesh’s ready-made garment sector has achieved growth in production and exports in the last 6 months. In the first half of the current 2024-25 fiscal year (July-December), garment exports from Bangladesh were worth $19.8877 billion."

Apparel exports exceed $19bn in July to Dec’24 - RMG Bangladesh

Despite the unrest and dissatisfaction, Bangladesh’s ready-made garment sector has achieved growth in production and exports in the last 6 months. In the first half of the current 2024-25 fiscal year (July-December), garment exports from Bangladesh were worth $19.8877 billion. Earlier, apparel...

rmgbd.net

 

[Saif]

Foreign loan surge in December brings some relief

A big chunk of foreign funds was provided as budgetary support from the World Bank and the Asian Development Bank (ADB) in December released $1.1 billion, leading to a rise in foreign aid disbursement and providing some relief to the government.

www.thedailystar.net

Foreign loan surge in December brings some relief

A big chunk of foreign funds was provided as budgetary support from the World Bank and the Asian Development Bank (ADB) in December released $1.1 billion, leading to a rise in foreign aid disbursement and providing some relief to the government.

In the last month, the government received around $2 billion while the average for the previous five months was only around $309 million.

In the six months from July to December, total foreign loan disbursement amounted to $3.53 billion whereas it stood at $1.54 billion at the end of November.

The highest amount of loans during the six-month period came from the ADB, amounting to $1.05 billion, of which $600 million came as budget support in December. The World Bank also provided $800 million, of which $500 million came as budget support in December.

Besides, Russia disbursed $532 million, mainly for the Rooppur Power Plant project, while Japan disbursed $441 million, China $268 million, and India $72 million during the six months.

However, despite such a big chunk being disbursed in December, it was not enough to stave off a year-on-year drop of 13 percent in foreign loan disbursement from $4.06 billion.

However, the rise was somewhat offset by the fact that Bangladesh's foreign debt servicing rose 27 percent year-on-year in the first six months of FY25.

From July to December of FY25, the country paid $1.98 billion in principal and interest, up from $1.57 billion in the same period of FY24 due to an expanded foreign loan portfolio and higher global interest rates.

In local currency, the payments increased to Tk 23,675 crore from Tk 17,240 crore, intensifying pressure on public finances.

According to the breakdown, the value of principal payments climbed 33 percent to $1.23 billion while interest payments rose 16 percent to $747 million.

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

In the first six months of FY25, total commitments for grants and loans fell sharply, plunging 67 percent to $2.29 billion compared to $6.98 billion in the previous year.

Loan commitments fell from $6.58 billion to $2 billion while grant commitments reduced to $289 million from $410 million.

With the obligations mounting and foreign commitments diminishing, economists called to renegotiate repayment periods and interest rates as well as prioritise foreign-funded projects.

This combination of rising debt obligations and declining foreign commitments is presenting a huge challenge for Bangladesh's fiscal management amid the lower domestic revenue collection.

"The debt-servicing cost was expected as we are approaching the loan repayment since the grace period is ending," said Mustafuzur Rahman, a distinguished fellow at the Centre for Policy Dialogue, a local think-tank.

"This will definitely create pressure on the foreign currency reserves," he said.

"Although it will be challenging, we should try to renegotiate in terms of both interest rates and repayment periods. The government is also trying to address the issue now," he said, mentioning recent negotiations with China.

However, Rahman added that a more sustainable route was to attract foreign direct investment alongside strengthening the negotiating capacity.

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

"The debt servicing scenario still does not pose any serious risk as exports and remittances offer a safe cushion that can help the treasury meet its immediate international debt obligations," he said.

As things now stand, payments for the first six months only account for 5.6 percent of foreign exchange earnings from exports and remittances in the corresponding period, which should not be a cause for concern for the interim government, he said.

In the current fiscal year, foreign exchange earnings from exports and remittances are likely to cross $75 billion, which means even if debt servicing obligations reach $4-5 billion, it poses no significant debt default risk for Bangladesh, he said.

Nonetheless, given that the exchange rate is likely to depreciate against the US greenback, the domestic fiscal burden of additional international debt servicing is going to increase, which necessitates that the Ministry of Finance keeps streamlining domestic resource mobilisation initiatives that can offer the government more fiscal space to manage this additional pressure.

However, domestic revenue mobilisation does not offer much hope.

During the July-December period of FY25, revenue collection logged nearly a 0.98 percent negative growth year-on-year, according to sources at the National Board of Revenue.​

 

[Saif]

Bangladesh badly needs economic reforms: Salehuddin

Bangladesh badly needs economic reforms at this moment, said Finance Adviser Salehuddin Ahmed yesterday.

www.thedailystar.net

Bangladesh badly needs economic reforms: Salehuddin

Bangladesh badly needs economic reforms at this moment, said Finance Adviser Salehuddin Ahmed yesterday.

"We are talking about reforms in areas like political reforms, economic reforms, and the electoral process. All are important. But at this moment, we badly need economic reforms," he said.

He made these remarks while speaking at an event marking International Customs Day at the National Board of Revenue (NBR) headquarters in the capital's Agargaon.

Acknowledging the "complexity" of implementing economic reforms, Ahmed said while the task was difficult due to numerous procedural laws and regulations, their proper and transparent application was critical for progress.

"We have some updated systems, but we can't use them properly," he said, pointing to inefficiencies in governance.

The adviser also expressed dissatisfaction with the delayed implementation of the National Single Window, a project initiated in 2017 but only partially launched last month.

He also urged businesses to actively cooperate in enabling revenue collections.

"We don't expect any illogical or illegal demands from you (businesses). You just pay your taxes. I assure you, no one will make unjustified or illegal demands, either officially or through unofficial means under the table," he said.

Ahmed called on the NBR officials to strengthen their efforts to meet revenue collection targets.

"This year is a challenging one, so we want to move forward," he said.

Addressing criticism over rising commodity prices, Ahmed said, "When rice prices increase, it is as if people think they have reached Tk 1,000."

"Prices of some items go up while others decrease. The government is putting in the efforts to address these issues," he said.

Ahmed urged for balanced criticism, adding, "Criticise our shortcomings, but also acknowledge the good work we do."

NBR Chairman Md Abdur Rahman Khan highlighted the agency's use of customs as a trade facilitation tool.

Khan pointed out the reluctance of businesses to maintain proper transaction records to avoid paying the full amount of taxes.

"While rural people and RMG workers have swiftly adopted mobile financial services, businesses are avoiding automation to evade value added tax (VAT) and tax by not keeping transaction records," he said, criticising businesses for their reluctance to adopt automation.

Addressing import-related challenges, Khan highlighted concerns over widespread misdeclaration at the import stage, describing it as a persistent issue.

"Misdeclaration during imports is a significant problem, and we are determined to eliminate this malpractice," he said.

Khan also acknowledged reports of misconduct among some revenue officials and assured that strict measures would be taken to address such behavioural issues.

"We are committed to ensuring accountability, and any misconduct by officials will be met with firm action," he added.

The event was attended by Md Hafizur Rahman, administrator at the Federation of Bangladesh Chambers of Commerce and Industry, and Finance Secretary Khairuzzaman Mozumder.​

 

[Saif]

Experts urge policy reforms to position Bangladesh as regional business hub

Speakers at a dialogue on Sunday expressed optimism that Bangladesh could unlock its full potential as a regional business hub and continue to build on its impressive economic trajectory with the right policy alignment. They sought joint efforts both from the government and private sector to

thefinancialexpress.com.bd

Experts urge policy reforms to position Bangladesh as regional business hub
UNB
Published :
Jan 26, 2025 22:02
Updated :
Jan 26, 2025 22:02

Speakers at a dialogue on Sunday expressed optimism that Bangladesh could unlock its full potential as a regional business hub and continue to build on its impressive economic trajectory with the right policy alignment.

They sought joint efforts both from the government and private sector to collaborate in creating a more favorable environment for Foreign Direct Investment (FDI).

The American Chamber of Commerce in Bangladesh (AmCham) hosted the dialogue on "Policy Alignment to Enhance the Trade and Investment Climate" at a city hotel.

They observed that Bangladesh has made significant strides in improving its trade and investment climate; there is still room for further reforms.

The speakers stressed the need for enhanced coordination between the private and public sectors to address challenges and capitalize on emerging opportunities, especially in sectors like technology, manufacturing, and infrastructure.

Key discussion points included payment issues/compliance between the government and stakeholders, improvements in investment policy, return on investment, turnover tax, tax redemption at the source, the needs of the recycling industry, and creating a more favorable tax environment compared to virgin material imports.

During the discussion, they shared their challenges and suggestions for policy alignment in the foreign trade and investment climate.

Finance Adviser Dr Salehuddin Ahmed, who spoke as the chief guest Chairman, National Board of Revenue (NBR) Md Abdur Rahman Khan attended as special guest.

Executive Director of the Centre for Policy Dialogue (CPD) Dr Fahmida Khatun presented the keynote paper at the dialogue.

The event was consisted with a high level panel discussion with the Finance Adviser, NBR Chairman, Forrest E. Cookson, economist and former AmCham President, Ala Uddin Ahmad, Director - FICCI and CEO, MetLife Bangladesh, Sabbir Ahmed, Country Manager, Bangladesh, Nepal and Bhutan, VISA Worldwide Singapore Pte. Ltd. , Shah Mohammad Mahboob, Executive Member, BIDA, Syed Nasim Manzur, MD - Apex Footwear Ltd. and President, LFMEAB.

Senior officials from Ministry of Power, Energy and Mineral Resources, Ministry of Foreign Affairs, Ministry of Commerce, Ministry of Environment, Forest and Climate Change, Information and Communication Technology Division, NBR, Bangladesh Trade and Tariff Commission, EPB, Petro Bangla, Bangladesh Bank, Dhaka Mass Transit Company Limited, BIDA, BSTI, Bangladesh Power Development Board, BEI, and other regulatory bodies, distinguished guests from the international organizations, and renowned economists attended the roundtable.

AmCham Vice President Eric Walker, Treasurer Mr. Al Mamun M. Rashel and Executive Committee Members Md. Moinul Huq, Rubaba Dowla, and Mirza Shajib Raihan attended the dialogue event, along with several other AmCham members.

Vice President of AmCham Bangladesh and President, Chevron Bangladesh mentioned Bangladesh needs to improve its business environment, infrastructure, and policies to enhance trade and investment competitiveness and align with global sustainability trends.

Fahmida Khatun emphasized revising policies, simplifying taxes, ensuring exchange rate stability, and improving infrastructure to boost trade and prepare for LDC graduation.

Dr Ahmed, in his opening remarks, emphasized the interim government's commitment to fostering an exclusive environment conducive to investment, particularly focusing on FDI.

He outlined how aligning policies across sectors can simplify processes and create a more predictable business environment that attracts international investors.

Khan stressed the NBR's efforts in streamlining tax policies and improving the ease of doing business in Bangladesh, emphasizing ongoing reforms to attract foreign investment and foster an entrepreneurial ecosystem for economic growth.

Additionally, he recommended shifting the focus from customs revenue as the primary income source to more sustainable taxation systems, such as income taxes and VAT.

Ala Uddin Ahmad, Director FICCI and CEO MetLife Bangladesh highlighted that as global trade relationships realign after the new US administration taking office, Bangladesh should look for new opportunities that could never be imagined before.

He also called for treating existing foreign investors equitably so that they do the investment promotion for Bangladesh.

Sabbir Ahmed, Country Manager for Bangladesh, Nepal and Bhutan at VISA Worldwide Singapore Pte, highlighted the need for policy changes to promote digital transactions suggesting that the NBR should align proof of tax return submission requirement with consumer loan and credit card limits above 300,000 BDT.

During the roundtable, Muhammad Imrul Kabir, Corporate Affairs Director at Chevron Bangladesh, highlighted Chevron's 60% contribution to the country's low-cost natural gas and 80% of condensate, addressing a significant amount payment shortfall and seeking support for Petrobangla payment and their onshore development proposal.

The dialogue focused on key topics such as the need for transparent, consistent, and well-coordinated policies across various industries.

Experts and business leaders discussed how policy misalignments often create barriers to investment, particularly for foreign enterprises.

The conversation underscored the importance of aligning fiscal, trade, and regulatory policies to ensure that Bangladesh remains competitive in the global market.

Syed Mohammad Kamal, Country Manager of MasterCard Singapore Holding Pte. Ltd. and former Vice President of AmCham Bangladesh moderated the discussion.​