🇧🇩 Monitoring Bangladesh's Economy

[Saif]

ADB to review $13b projects next week

The Asian Development Bank (ADB) will review its nearly $13 billion projects in Bangladesh next week as many are struggling for implementation delays, officials said on Tuesday. The Manila-based lender would sit with all the project implementers in the Bangladesh government for analysing the proje

thefinancialexpress.com.bd

ADB to review $13b projects next week
FHM HUMAYAN KABIR
Published :
Jul 17, 2024 00:36
Updated :
Jul 17, 2024 00:36

The Asian Development Bank (ADB) will review its nearly $13 billion projects in Bangladesh next week as many are struggling for implementation delays, officials said on Tuesday.

The Manila-based lender would sit with all the project implementers in the Bangladesh government for analysing the project execution status, they added.

"All the ongoing ADB-funded projects will be reviewed at the tripartite meeting next week. Any problems are expected to be resolved at the meeting," said a senior official at the Economic Relations Division (ERD).

According to the ERD, the meeting between the ADB, the ERD and the projects implementers will be held in Dhaka from July 22 to 24.

Currently, the ADB has made a commitment of nearly $13 billion funds for 79 ongoing projects in the public sector.

The moneylender is the second largest multilateral development partner of Bangladesh in terms of its amount of foreign aid for implementing different projects and programmes after its independence.

"Some ADB-funded projects are struggling for implementation delays due to different reasons. We are hopeful of resolving the problems in the next tripartite review meeting (TPRM)," said the ERD official.

A senior official at the finance ministry said: "Some delays are taken place due to the under-performance of the implementing agencies and some are for the complex procurement approval process of the ADB side. So, we'll discuss all the problems in the next meeting for reducing the delays."

The ADB is bankrolling some mega projects in Bangladesh, including the Dohazari-Ramu-Cox's Bazar railway line, Dhaka Mass Rapid Transit Development Investment Project (Line 5, Southern Route), and South Asia Sub-regional Economic Cooperation Dhaka-Northwest Corridor Road Project, Phase 2 (Tranche 3).

The official said the bank will review the projects it is bankrolling in Bangladesh next week as some of them are 'slow-moving' and 'problematic'.

It is an important meeting from the perspective of the Bangladesh government side as this would remove many obstacles which are not resolved through writing letters on the way to the implementation, he said.

The ADB in the last TPRM called the government agencies for streamlining the implementation of slow-moving projects or it would divert funds to other schemes, another government official told the FE.

The last review also prepared an action plan for the ongoing ADB-funded projects which would be discussed at the next week's review meeting, he added.

In the July-April period of the fiscal year 2023-24, the ADB disbursed $1.499 billion worth of assistance and $1.787 billion in FY2023 to Bangladesh, ERD data showed.​

 

[Saif]

Meeting post-graduation challenges facing the country

As Bangladesh is all set for LDC graduation, it is imperative that it accelerated its efforts to meet the post-graduation challenges such as continued access to the various trade benefits including duty-free ones against its exports to the markets of advanced economies, especially the European Unio

thefinancialexpress.com.bd

Meeting post-graduation challenges facing the country
Published :
Jul 16, 2024 21:53
Updated :
Jul 16, 2024 21:53
As Bangladesh is all set for LDC graduation, it is imperative that it accelerated its efforts to meet the post-graduation challenges such as continued access to the various trade benefits including duty-free ones against its exports to the markets of advanced economies, especially the European Union (EU). Notably, as an LDC, the country has been the beneficiary of an arrangement called the Generalised System of Preference (GSP) under which it enjoys exemption of import (customs) duties on two thirds of the EU's tariff lines. But once Bangladesh joins the group of developing countries after graduation in 2026, it will lose much of these trade facilities after three years' grace period.

However, there is a special incentive arrangement called GSP+ available for vulnerable low-and-lower middle-income economies. In that case, Bangladesh will have to implement 27 international conventions related to labour and human rights, environmental and climate protection and good governance. This special incentive is for sustainable development and good governance. Naturally, following graduation, the government will be required to qualify for these facilities under GSP+ if it fulfils the conditions. Now, implementation of the labour sector reforms through revision of the country's labour laws under the proposed National Action Plan (NAP) is an important step in this direction. In this connection, outgoing head of European delegation in Dhaka, Charles Whiteley, during a recent interview with journalists, following his farewell call on Bangladesh's foreign minister, Dr Hasan Mahmud, reiterated the urgency of the issue.

The required labour law reforms under the proposed NAP involves issues including framing the country's labour law so that it is compliant with the standards of the International Labour Organization (ILO). Needless to say, those standards include freedom of association and collective bargaining right of workers and elimination of all forms of child labour by 2025. Notably, Bangladesh has been under pressure on these issues since long from different international quarters. Now, those issues have assumed a renewed importance when the country is on the verge of upgrading its status as a developing economy. Evidently, issues like ridding the country of child labour, for instance, and that too by not a distant deadline has indeed been a tall order in a populous and unequal society. Yet successive governments have been working relentlessly to address the issue to the satisfaction of the international community whose support is vital for Bangladesh's continued economic progress. Facing the prospect of Bangladesh's post-graduation loss of trade facilities it benefited from so far thanks to its longstanding trade relations with the EU under the Everything but Arms (EBA) trade regime, it has to redouble efforts to comply with their conditions. This is required to access the next most generous post-EBA arrangement, the GSP plus incentives. As the timelines for meeting the conditions of the different international conventions are drawing to a close, the government needs to expedite its work to fulfil its commitments to that effect.

The amendment to the Bangladesh's labour act is critical in this connection. Repeated reminders from the EU envoy on this subject at different discussion events arranged from time to time in the past only stress the point. Not surprisingly, a high-level European Commission monitoring mission will reportedly be visiting Bangladesh in November this year to review work progress in this regard. Since 58 per cent of Bangladesh's total export and 64 per cent of its apparel export are dependent on EU market, the government would, hopefully, be well-equipped to meet the EU GSP+ challenges.​

 

[Saif]

Economy with deep scars limps along

Business and industrial activities resumed yesterday amid a semblance of normalcy after a spasm of violence, internet outage and a curfew that left deep wounds in almost all corners of the economy.

www.thedailystar.net

Economy with deep scars limps along
Businesses, factories reopen amid curfew break


People queue up at a bank counter as services resumed after days. The photo was taken at the Sonali Bank in Motijheel yesterday. Photo: Palash Khan

Business and industrial activities resumed yesterday amid a semblance of normalcy after a spasm of violence, internet outage and a curfew that left deep wounds in almost all corners of the economy.

Violent clashes, stemming from the quota reform demonstrations, shuttered garment factories and shops and choked port activities when the country was grappling with the toughest economic challenges in decades: high inflation, falling exports and a persistent dollar crisis.

Economists predict that the impact of the widespread unrest and internet blackouts will be much greater than the fallout of the Covid-19 pandemic. By one estimate, the economy bled out about $1 billion a day for a stretch of five brutal days that saw deaths and destructions of a scale never before seen in independent Bangladesh.

Amid economic gloom, garment factories restarted production yesterday to meet the tight deadline for delivery. Shipments of export containers and delivery of imported items gained pace, and trucks began to roll as the broadband internet was restored.

However, factories faced a scarcity of raw materials due to supply chain disruptions, according to Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association.

"Had the government given importance to resolving the quota issue through dialogues, the situation would not be so dire," he added.

Banks reopened their gates to provide services to customers, who lined up for cash withdrawal, encashment of inward remittances and payment of utility bills after a three-day general holiday announced in the wake of the unrest.

Despite the pressure, most banks were able to provide services by and large, said Selim RF Hussain, chairman of the Association of Bankers Bangladesh.

The moribund stock market nervously resumed trade at 11:00am yesterday, but the key index of Dhaka Stock Exchange sank 1.76 percent, the steepest decline in almost two years.

Retail shops in Dhaka, the main hub of trade, reopened but salespeople were disappointed by the thin presence of customers.

Alam Sheikh, a salesman at a clothing store at Nurjahan Supermarket, opposite to Dhaka College, was one of them.

"Customers seems to be afraid of the risk of violence," he said.

Between 10:30am and 1:30pm, Alam Sheikh's sales stood at Tk 3,000, a third of his sales revenue on a regular business day.

All these bleak data point to Bangladesh's plunge into an economic stasis, however short-lived. Save for agricultural activity, trade, manufacturing and all other economic activities were almost suspended for a week.

In the months to come, consumer prices may go further up. New investments will be on hold and jobs will evaporate. Bangladesh also runs the risk of losing export orders and many companies will struggle to pay their employees on time.

"This is a huge loss for Bangladesh when the country is already facing an economic crisis. The latest unrest has a significant impact on the economy," said Ahsan H Mansur, executive director of the Policy Research Institute, sharing his estimate that the country lost around $1 billion a day over the last few days.

"Supply chain disruptions will fuel inflation, which is already high," he said.

His grim prediction has a basis as annual inflation rose to 9.73 percent in fiscal 2023-24, the highest in 12 years, overshooting the government's target of containing it to 7.5 percent.

Ahsan Mansur, a former economist at the International Monetary Fund, warned that export orders might be diverted to other countries in the wake of the recent crisis in Bangladesh.

Zahid Hussain, another noted economist, described the crisis as the nation's double jeopardy: a real-life lockdown and a virtual lockdown.

"Its impact will be more severe than the Covid-19 pandemic, as people could run businesses at the time. During the pandemic, online payments were unhindered. But this week, everything was closed due to internet outage," he said.

The unrest killed at least 154 people, according to The Daily Star's count based solely on hospital sources, although it could be higher as this newspaper could not reach all the hospitals where many critically injured patients were taken for treatment. Also, many friends and families reportedly collected the bodies of their loved-ones from the scenes, and this newspaper could not contact them. Additionally, many hospitals did not even record the deaths, and asked the relatives to take them away.

All these will hit the confidence of foreign buyers and dent the image of the country which registered about 6 percent GDP growth over the last one and a half decades thanks to the political calm, Hussain said.

"The internet blackout was suicidal for the economy. How deep the injury is and how long it will stay remains to be seen," he said. "But we cannot count the loss of lives, which is countless."

With additional reporting from Sukanta Halder​

 

[Saif]

ADB lowers growth forecast for Bangladesh

Asian Development Bank (ADB) has revised down the economic growth projection for Bangladesh but said inflation might creep up further during the current fiscal year of 2024-25.

www.thedailystar.net

ADB lowers growth forecast for Bangladesh
Inflation to creep up further, it says

Asian Development Bank (ADB) has revised down the economic growth projection for Bangladesh but said inflation might creep up further during the current fiscal year of 2024-25.

According to Asian Development Outlook July 2024 published last week, Bangladesh's economy might grow 6.5 percent in this fiscal year, which is lower than its forecast in April of 6.6 percent, owing to sluggish growth of the industrial sector.

The Manila-based lender's projection is lower than the government's 6.75 percent growth target for the economy.

The ADB's forecast came just before the country witnessed five days of severe disruptions in economic activities amidst an internet outage, violence centring a movement for reforming quota at public jobs and subsequent curfew to control the situation.

The multilateral lender said monthly inflation rates in Bangladesh continued to be near double digits in the first 11 months of FY2024 and may persist due to high domestic food prices.​

 

[Saif]

National revenue collection takes a hit

With the internet blackout and nationwide shutdown comes a host of problems for internal revenue generation. According to a report published in this newspaper on July 22: "State exchequer counts an estimated domestic revenue loss of Tk 8.73 billion daily as production, trade and services falter for

thefinancialexpress.com.bd

National revenue collection takes a hit
SYED MANSUR HASHIM
Published :
Jul 24, 2024 11:17
Updated :
Jul 24, 2024 11:17

With the internet blackout and nationwide shutdown comes a host of problems for internal revenue generation. According to a report published in this newspaper on July 22: "State exchequer counts an estimated domestic revenue loss of Tk 8.73 billion daily as production, trade and services falter for the ongoing nationwide quota-protest shutdown coupled with internet blackout." The domino effect on production, trade and services due to the cumulative loss of internet access, production and distribution of products and the halting of digital services is contributing to this loss in revenue.

The stakes could not be higher for the economy right now. The volatility on city streets and in various districts around the country will hopefully see some respite as the Appellate Division has delivered its verdict on the quota situation. The gazette publication of the same should take place as soon as possible, and then the question will come whether this will lead to a negotiated settlement with protesters.

Leaving that aside, the current situation has brought economic activity down to a trickle. As stated by revenue officials, a large portion of revenue generation comes from value-added-tax (VAT) on products and services. The internet blackout has hit revenue hard since millions of people use digital services, both on cell phones and broadband. Financial institutions have by and large gone online with their services, as have utility services (gas, water, electricity). Hence, there are serious financial implications to shutting down internet services in the country.

Since VAT collection forms a cornerstone of direct revenue for the National Board of Revenue (NBR), there is simply no way to take this matter lightly. The hospitality industry with its thousands of restaurants, hotels and inns, vacation resorts all depends on daily sales of services. These have taken a serious hit because an increasing percentage of consumers depend on credit / debit card facilities to make payment. With the onset of curfews, few people are venturing out and most commercial establishments have shuttered their shops, not simply due to the fact that there are few people coming, but there are serious security concerns. The relative security enjoyed by the diplomatic enclave is not enjoyed by the rest of Dhaka residents, and why on earth would establishment owners bother to keep their respective shops open when there is serious supply chain disruption?

Moving on, Chattogram Customs House (CCH) ordinarily collects Tk 1.86 billion per day. Indeed, CCH's annual revenue collection in the just-concluded financial year was Tk 680 billion. According to an analysis by this newspaper, the revenue board may suffer a loss up to Tk 3.19 trillion - a mammoth loss! Of course this is not the final tally. With disruption of digital services, customs officials have instructed stations across the country to accept any bank document on releasing perishable items and this makes sense.

It is essential at this time to keep the supply chain for foodstuffs flowing because the main wholesale markets in the city, including Kawran Bazaar which serve as a hub for other retail markets in the city, have been suffering from intermittent supply of various items including vegetables. Indeed, price per kilogram of green chilli (a wholly domestically produced essential food) has shot up to Tk 600/kg. Better it is to forget about revenue loss and keep the goods flowing. This is a national priority. Stock taking on the revenue part can be done later. Imports of raw materials (including food and industrial inputs) need to clear customs on a war-footing so that essentials can get to people and factories can keep operating.​

 

[Saif]

Remittance collection disrupted

The internet blackout for five days has affected remittance collection through banks and mobile financial services (MFS), which may put pressure on the country’s foreign exchange reserves.

www.thedailystar.net

Remittance collection disrupted


The internet blackout for five days has affected remittance collection through banks and mobile financial services (MFS), which may put pressure on the country's foreign exchange reserves.

Bankers and officials of MFS providers said their remittance collection remained suspended from midnight of July 18, when the internet shutdown was imposed, to July 23, when broadband services were partially reinstated.

After the partial resumption of broadband internet services, overall remittance mobilisation by banks and MFS was lower than that on a regular day, they added.

Around $80 million to $100 million in remittances are sent to Bangladesh on a regular day, as per industry insiders.

The reserves stood at $21.78 billion as of June 30, according to calculations based on the International Monetary Fund's Balance of Payment Manual 6.

"We were unable to collect inward remittance for five days amid the internet shutdown but the remittance flow became normal when broadband internet was made available," said Selim RF Hussain, managing director of BRAC Bank.

Hussain, also the chairman of the Association of Bankers, Bangladesh, told The Daily Star that overall remittance collection of July was likely to be low due to the overall situation but a better understanding can be availed next week.

A chief executive officer of a private bank said that liaison offices of the banks and MFS providers received remittance but were unable to send it to the local banks due to the internet outage.

However, some banks failed to collect remittance for the availability of banking services on a limited scale following the partial resumption of broadband internet.

Mercantile Bank faced difficulties in collecting remittance despite the resumption of broadband internet.

Its additional managing director, Mati Ul Hasan, said the bank faced problems collecting remittance as it could not access SWIFT due to slow internet connections.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides the main messaging network through which international payments are initiated.

The MFS providers were faced with the same situation.

An official of a leading MFS provider said they mobilise Tk 5 crore to Tk 7 crore in remittances on a normal day but it had come down to Tk 80 lakh due to the slow internet connections.

During July 1 to July 13, Bangladesh received $978 million in remittances.

Islami Bank Bangladesh PLC usually channels the major portion of remittances to Bangladesh. The Daily Star could not reach the bank's managing director, Mohammed Monirul Moula, over the phone.​

 

[Saif]

Bangladesh's trade deficit reaches $20b

The country’s trade deficit reached $20.22 billion in the July-May period of the 2023-24 financial year, according to the Bangladesh Bank.

www.newagebd.net

Bangladesh's trade deficit reaches $20b
Staff Correspondent 25 July, 2024, 23:22


A file photo shows containers being arranged with a crane at the Kamalapur Inland Container Depot in the capital Dhaka. | New Age photo

The country's trade deficit reached $20.22 billion in the July-May period of the 2023-24 financial year, according to the Bangladesh Bank.

The deficit was reported at $4.74 billion for the July-March period of FY24, but surged in a month to $18.7 billion in the July-April period after the central bank and National Board of Revenue addressed the export data discrepancies.

This correction revealed that the actual export earnings were about $12 billion less than the previously reported.

The Bangladesh Bank data showed export earnings of $37.34 billion for the July-May period, while the Export Promotion Bureau had reported $51 billion in export earnings for the same period.

The correction led to a recalibration of various economic indicators, creating confusion over economic data, including balance of payment figures.

Consequently, the financial account turned positive from negative, and the current account switched to negative from positive in the July-April period of FY24.

The financial account recorded $2,080 million in the July-May period, down from $5,515 million in the July-April period of FY23.

Previously, it had showed a deficit of $9,258 million in the July-March period of FY24.

The current account recorded a deficit of $5,982 million in July-May, compared with that of $12,020 million in July-April of FY23, shifting from a surplus of $5.8 billion in July-March.

The trade deficit was $26.02 billion in July-May of FY23.

BB officials said that the EPB statistics were based on customs house data, which often included duplicate export entries due to procedural issues.

Corrected data reduced the discrepancies between reported exports and actual repatriation of goods, significantly decreasing trade credit and transforming the financial account from a deficit to a surplus.

In the July-May period, the gross inflow of foreign direct investments declined by 6.5 per cent to $3.8 billion compared with that in the same period of the previous year.

Foreign portfolio investments were $111 million negative, compared with that of $38 million negative in the same period of the past financial year.

In response to a severe dollar crisis in the country's banking system, the Bangladesh Bank sold nearly $34 billion to banks over the past 36 months.

The country's foreign exchange reserves, as per International Monetary Fund guidelines, were $21.8 billion as of June 30.

The interbank dollar rate soared to Tk 118 after the central bank raised the rate by Tk 7 on May 8.

The deficit in trade services expanded to $3,475 million in the July-May period of FY24, compared with that of $2,849 million in the corresponding period of the previous financial year.​

 

[Saif]

Export-import operations getting in full gear with systems resurrection

Export-import operations get back in full gear with the resurrection of electronic systems of port processing after a breakdown amid countrywide internet blackout. Both Chittagong Custom House and Chittagong Port Authority (CPA) have said the internet-network systems are now working smoothly in th

thefinancialexpress.com.bd

Export-import operations getting in full gear with systems resurrection
DOULOT AKTER MALA
Published :
Jul 26, 2024 10:15
Updated :
Jul 26, 2024 10:15


Export-import operations get back in full gear with the resurrection of electronic systems of port processing after a breakdown amid countrywide internet blackout.

Both Chittagong Custom House and Chittagong Port Authority (CPA) have said the internet-network systems are now working smoothly in the seaport area in completing trade-clearance processes.

"The CCH started clearing goods more than average on Wednesday to ensure smooth delivery of essential commodities and avoid any congestion in port," says an official.

The CCH and the CPA stopped manual clearance and restored electronic systems on July 23, officials said.

A senior customs official said the CCH assessed some 8,153 bills of export and import Wednesday--it usually clears 7,000 per day on average. On Tuesday, the CCH cleared 3,853 export-import documents.

Officials of CCH, however, say cargo delivery has been slow for few days due to manual assessment as the customs process is solely dependent on Asycuda worldwide network.

"We had resumed 50 per cent of customs-assessment activity since July 23, 2024 and it returned to normal on Wednesday," the official says.

The customs house in the port city CCH is receiving duty taxes through electronic payment switching back from the temporary manual system, he adds.

Md Omar Faruk, Secretary of the CPA, told the FE that there was no congestion in the port yet as its capacity is higher than what it needs to deal with the current stock of goods.

"The Chittagong port has the capacity to store 53,000 TEUs of goods while existing goods aggregated 41,000 TEUs as of Thursday," he said.

Mr Faruk, however, said the pressure of imported goods awaiting delivery increased Thursday as some of the importers could not release goods for the unrest that rattled normal life and business across Bangladesh centering round students' quota-reform movement.​

 

[Saif]

BIDA witnesses surge in investment proposals

A total of 254 industrial establishments have registered with the Bangladesh Investment Development Authority (BIDA) in the past three months through June. Among them, 220 are local enterprises, 19 are foreign-owned firms, and 15 are joint ventures. The combined proposed investments by these esta

thefinancialexpress.com.bd

BIDA witnesses surge in investment proposals
254 firms to invest Tk 773.64b
FE REPORT
Published :
Jul 26, 2024 10:26
Updated :
Jul 26, 2024 10:26


A total of 254 industrial establishments have registered with the Bangladesh Investment Development Authority (BIDA) in the past three months through June.

Among them, 220 are local enterprises, 19 are foreign-owned firms, and 15 are joint ventures.

The combined proposed investments by these establishments reached Tk 773.64 billion in the last quarter of the financial year 2023-24. This figure marks a significant increase from Tk 338.06 billion proposed by 302 industrial units in the previous quarter (January to March), according to official data.

Of the Tk 747.15 billion local investment proposals, the industrial sector accounted for Tk 573.13 billion, followed by the chemical industry with Tk 66.29 billion, engineering industry with Tk 38.07 billion, garments industry with Tk 27.45 billion, and printing and press industry with Tk 17.10 billion.

The foreign investment proposals amounted to Tk 26.48 billion, with the chemical industry receiving the highest share of Tk 14.48 billion, followed by the garments industry with Tk 3.73 billion, agriculture industry with Tk 3.17 billion, engineering industry with Tk 2.51 billion, and tannery and leather industry with Tk 865.32 million.

These investments are expected to create around 47,105 job opportunities across the country.​

 

[Saif]

Economic loss: Restore a state normalcy

The violence that erupted centering the quota reform movement of the students, the curfew and stern action like shutting off the internet service has pushed the economy towards a direr situation.

en.prothomalo.com

Economic loss: Restore a state normalcy
Editorial Desk
Published: 26 Jul 2024, 18: 11


The country's economy is already under considerable pressure because of the dollar crisis, reduction of foreign currency reserve and the price hike of daily commodities. And, there's no doubt the violence that erupted centering the quota reform movement of the students, the curfew and stern action like shutting off the internet service has pushed the economy towards dire staits.

The business community believes Bangladesh has incurred huge losses due to the export-oriented factories remaining closed. Garments industries owners' association BGMEA president Abdul Mannan said that there has been financial loss of about 110 billion (11,000 crore) taka in the few days of stand still. Out of this, BGMEA has incurred a loss of Tk 64 billion (6,400 crore) in direct export.

According to knitwear industries owners' association BKMEA executive president Mohammad Hatem, if the factory remains closed even for a day the financial loss incurred is 160 million (16 crore) dollars which amounts to 17.28 billion (1,728 crore) in Bangladeshi taka.

Policy Research Institute's executive director Ahsan H Mansur said that the economy has suffered a loss of more than Tk 840 million (84,000 crore) in the past one week.

There has been a daily loss of almost Tk 120 billion (12,000 crore) in the ongoing stagnation. It might be possible to measure the economic loss in terms of money but there's no scale to measure the damage done to country's image.

International transactions of the banks in the country is completely dependent on internet. Since the internet was down, communication with the foreign banks as well as with the buyers and the sellers was totally closed.

The internet service has been reactivated on limited scale since Wednesday. The industries have restarted production. Meanwhile, the banks, government and private offices also remained open for a limited period in the last two days.

Users submitted 7,819 export and import consignment documents online for taxation at Chattogram Customs House this Wednesday. The clearance of goods from the port has also resumed in full swing.

But, when the government is considering that everything has become normal, why delay in reopening everything? On one hand, policy makers of the government are saying that the students are not involved in the violence and destruction caused centering the quota reform movement, on the other hand, cases are being filed one after another against unknown number of protesters.

This is clearly a self-contradictory stand. Already, allegations have been found about several leaders of the quota reform movement being picked up from their homes and being tortured. These need to be investigated properly.

There has been extensive loss to the economy of the country. More than 200 people have been killed centering an apolitical issue like quota reform. Many have been crippled or lost their vision for good. This loss cannot be allowed to increase any further. Let the government take legal action against those who destroyed property based on investigation. But, no innocent people can be harassed.

To restore normalcy in public life, ensure a fear-free environment alongside security and democratic rights of all citizens.​

 

[Saif]

Inflation increase feared due to unrest and uncertainty

The supply chain of daily essentials had almost collapsed due to the violent incidents from the past couple of days. So, the prices of commodities started rising.

en.prothomalo.com

Inflation increase feared due to unrest and uncertainty
The inflation rate has been higher than 9 per cent for over a year. Prices of commodities have gone up due to the violence over the past few days.
Staff CorrespondentDhaka
Published: 25 Jul 2024, 14: 32


The common people were already floundering under the high inflation rate for the past two years. The people feel this pressure in the market every day. Various initiatives of the government have also failed to relieve the pressure of inflation. The prices of rice, lentils, onions, garlic, sugar, vegetables, fish and meat are hardly affordable by the low and fixed income group.

Under these circumstance the ongoing uncertainties have created newer crises regarding high inflation in the economy, believe economists. The poor people have fallen in trouble afresh from the price of commodities going up. Since the internet is down about 10 million (one crore) families with TCB cards have not been receiving daily commodities at subsidised prices over the last couple of days.

The supply chain of daily essentials in the country had almost collapsed due to the violence over the past couple of days. The prices of commodities started rising in the markets of the capital. The government took initiative to bring the situation under control by imposing curfew. However the supply chain of commodities between the capital and the whole country only started becoming active again over the last two days.

Supply of commodities in the markets of the capital has increased and the prices have also started coming down a bit. However, it still hasn't returned back to the situation from two weeks back yet. Controlling the high inflation rate is indeed a major challenge for the government. The price hike of commodities or the high inflation rate directly impacts the common public. And, the cost of running their households goes up.

Speaking on this topic, executive director of South Asian Network on Economic Modeling (SANEM), Selim Raihan told Prothom Alo that the public is under the pressure of high inflation for about two years. But, the low and limited income population has fallen under unnatural pressure because of the recent violent incidents. Nobody was prepared for this situation.

On one hand the low income population is left without work as almost everything is closed, on the other hand the prices of commodities in the markets are mounting. The working class people don't even have the savings to survive two to three days. So, the growing prices of commodities have increased the ongoing new crisis of high inflation even further, he added.

People under most pressure in 12 years

The people have been under the most pressure of inflation for one year over the last 12 years. The income of people is not increasing in line with the rate inflation is increasing. The pace of expenditure being higher than the income has caused trouble for the low income population.

According to latest data from Bangladesh Bureau of Statistics (BBS) the average inflation rate in the recently over 2023-24 fiscal was 9.72 per cent, which is the highest among the last 12 years as per the fiscal-based records. The overall inflation did not drop below 9 per cent in any month of the whole year. Meanwhile, the national wage rate has experienced an increase of roughly 7.5 per cent.

food inflation had already been in a bad shape for the last one year. This had been above 10 per cent in as many as seven out of the last 12 months. The food inflation had risen to 12.54 per cent in August last year, which was the highest in that fiscal.

While the target was to retain the inflation rate within 6 per cent in the last fiscal, it's nowhere near that actually.

Market is heated

The supply of daily commodities to the capital from different parts of the country had almost closed because of the clashes that erupted in the last couple of days. So, the prices of various items including rice, broiler chicken, chicken eggs, fish, meat, green chillis, onions and potatoes increased considerably in the market. However, the prices of vegetables have relaxed a bit in the last two days. The retail sellers and the buyers are saying that the market is still heated and the prices have not come down to the previous levels yet.

Visiting Mohammadpur Town Hall, Krishi Market, Shewrapara and Karwan Bazar kitchen markets in the capital on Tuesday it was found that the prices of various rice varieties have increased by Tk 2 to 5 per kg. For example, a kilogram of coarse rice (paijam) was selling for Tk 54 at Mohammdpur Krishi Market on the retail level. The same rice was sold for Tk 50-51 two weeks back.

Traders from Mohammadpur Krishi Market, the largest wholesale depot of rice in the capital said that no rice trucks have arrived there since Friday till Tuesday because of the uncertainties caused from the clashes. However, the price remains stable there as rice had been stored on the wholesale level. Seller of the Bengal Rice Agency in Krishi Market, Md Nazim Uddin hopes the price of rice will come down in the retail market when the supply increases.

Except for rice the prices of other daily commodities like sugar, onion, broiler chicken and chicken egg have increased a little. Sugar sold for Tk 135-140 per kg in the markets of Dhaka on Tuesday. Just two days ago, the price of sugar was Tk 5-10 less on a kg. Local verities of onion are selling for Tk 110-120 per kg in the market now. While the import from India has increased, there's no news of the price coming down yet.

Broiler chicken is selling for Tk 190 per kg now, which cost Tk 170 two weeks back. The price of browns egg from farm chickens has also increased by Tk 10-20 per dozen and are selling for Tk 150-160 now.

The supply of vegetables to Dhaka from different districts of the country has increased in the last two days. So, the price of vegetable has started decreasing. Most of the vegetables are selling below Tk 100 right now. The retail sellers however say that the prices of the vegetables are yet comparatively very high. The prices were supposed to be a lot lower in this peak season.

Meanwhile, the fish market has been impacted as well. The prices of fish are high as the supply has been low in the past few days. People with a limited income consume rui, tilapia, pangash and shrimp more. The prices of these varieties of fish are Tk 20-40 higher compared to normal times.

Consumer Association of Bangladesh (CAB) president Golam Rahman said if the supply of commodities is fine, the prices also remain under control. But it cannot be denied that there is high inflation in the country. Common people are in a difficult predicament with the increased prices. So, the government needs to focus on increasing people's purchasing power as to their income. However, an environment for normal economic activity needs to be created at the earliest by fixing the supply chain that has come to a standstill in the last few days.

State minister reassures

After remaining closed due to the clashes in the past few days, the supply of daily commodities to the capital has been increasing gradually from Monday. The state minister for commerce Ahsanul Islam visited the Karwan Bazar and Mohammadpur kitchen markets in the capital in person on Tuesday to explore how much the supply of daily commodities has increased in the markets. At the time he visited the shops and enquired about the price as well as supply of commodities.

Following the market visit, Ahsanul Islam told the journalists that the supply chain has been restored within the fastest time possible even after so much destruction. There's no shortage of supply for any of the daily commodities in the wholesale market. When these commodities reach the retail markets, the price will logically come down there as well.

The state minister for commerce also stated that the government is working especially to ensure that there is no obstruction in the supply of perishable commodities like onions and green chillies even during the curfew. So, he hopes that there will be no shortage of supplies.

Ten million TCB card-holder families in trouble

A few daily commodities including rice, lentils and edible oil are supplied among ten million (one crore) families of the country at susidiesed prices from the Trading Corporation of Bangladesh (TCB). The distributers run the whole operation through a specific app. However, the app cannot be activated as the internet is down. The supply of these products among the beneficiaries has been suspended for the last three to four days. So, many of the TCB card-holding consumers are buying commodities at higher prices from outside markets.

Commenting on the overall situation, SANEM executive director Selim Raihan told Prothom Alo, "The violent incidents of the past few days turned into a heavy loss for the economy. A sort of fear, uncertainty and insecurity has risen among the public. We are still unable to fix the trade and movement of the commodities. The supply chain of goods needs to be restored by strengthening security. Plus, it's necessary to introduce special aid interventions for poor families."

Selim Raihan also stated that the government is failing to bring the ongoing high inflation rate under control for the last two years. There is a lack of coordination between the monetary policy, revenue policy and market management. Concerted efforts on these issues are needed to control the inflation.​

 

[Saif]

Govt may miss IMF’s revenue collection target

Bangladesh is unlikely to fulfil the revenue collection target set by the International Monetary Fund (IMF) as part of its conditions for the fourth tranche of a $4.7 billion loan programme.

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Govt may miss IMF's revenue collection target


Bangladesh is unlikely to fulfil the revenue collection target set by the International Monetary Fund (IMF) as part of its conditions for the fourth tranche of a $4.7 billion loan programme.

The target is measured through the performance of both revenue collection by the National Board of Revenue (NBR) and non-NBR taxes.

As per the IMF target, the government was supposed to collect Tk 394,530 crore in taxes in fiscal year 2023-24.

According to the NBR's provisional data, the tax administrator collected Tk 371,842 crore in FY24 against a collection target of Tk 410,000 crore in the revised budget.

On the other hand, the collection target for non-NBR taxes was Tk 19,000 crore in the revised budget.

Although data for non-NBR tax was not available for the entire fiscal year, finance ministry statistics showed that only Tk 5,109 crore was collected as non-NBR taxes in the first eight months of the last fiscal year.

This means that even if the target set in the revised budget is met, it will still not be possible to meet the revenue collection target set by the IMF.

In FY23, only Tk 7,978 crore was collected as non-NBR taxes.

Finance ministry officials said the country may fail to meet the target for revenue collection but it had already met the target for forex reserves.

Bangladesh was tasked with keeping net international reserves (NIR) of $14.79 billion on June 30. On that date, Bangladesh had an NIR of $16.7 billion.

Prior to that, the country had failed to fulfil the NIR target ahead of each instalment of the loan.

The country could achieve the target for the first time after record budgetary assistance from global creditors as several bilateral and multilateral lenders approved $4.8 billion in June alone.

The IMF approved the $4.7 billion in January last year.

In its first review, Bangladesh failed to fulfil the conditions for both revenue collection and NIR.

As a result, Bangladesh sought a waiver from the global lender's board against the two key conditions.

In the IMF's second review, which was based on the performance of December last year, Bangladesh successfully fulfilled both targets as the NIR target was revised down to $14.78 billion from $20.10 billion.

In May this year, Bangladesh also requested the IMF to revise down the revenue collection target but the lender did not do it.

An IMF mission is likely to visit Bangladesh to review the conditions by the end of this year. The fourth tranche is expected in December this year.​

 

[Saif]

Internet outage, curfew leave foreign investors in a bind

Violence centring the quota reform movement as well as a five-day internet blackout and the ongoing curfew has shaken foreign investors’ confidence in Bangladesh, tarnishing the country’s image as a reliable investment destination.

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Internet outage, curfew leave foreign investors in a bind
Future FDI inflow may be affected, say experts



Violence centring the quota reform movement as well as a five-day internet blackout and the ongoing curfew has shaken foreign investors' confidence in Bangladesh, tarnishing the country's image as a reliable investment destination.

This is likely to affect the inflow of foreign direct investment (FDI) at a time when Bangladesh is in desperate need of foreign funds to diversify its manufacturing bases, enable technology transfer, and attain its goal of becoming a developed economy by 2041.

The country needs to annually attract FDI equivalent to 1.66 percent of its GDP, which was around $459 billion in FY24, to become an advanced economy by 2041.

In regards to luring investors, a country's reputation as a reliable investment destination is vital. In that sense, the damage done in the recent week was severe.

"Beyond financial impacts, the image issue that the country is facing cannot be quantified as the reputation has been severely damaged in the past few weeks," said Zaved Akhtar, president of the Foreign Investors' Chamber of Commerce and Industry (FICCI).

"The credibility of Bangladesh as a reliable investment destination is in question. It is not just important but crucial that we work on rebuilding Bangladesh's reputation as a stable nation and resilient economy, capable of delivering results regardless of circumstances. Rebuilding the confidence of existing investors by smoothening operations and improving the ease of doing business is also critical," he added.

His comments came following an internet outage in the aftermath of the violence centring the quota reform movement, which claimed at least 161 lives, left thousands injured and led to the vandalism of public and private properties.

The FICCI president said the recent shutdown had an economic impact of over $10 billion on Bangladesh in the last seven days.

The fast-moving consumer goods industry faced a setback of over $100 million during the past week as supply lines and operations were significantly impacted, Zaved added.

The recent upheaval affected export-oriented industries, e-commerce, freelancing, ride-hailing, software development, and many micro, small and medium enterprises that rely on social commerce.

"While the country is slowly recovering with limited online and physical connectivity, full operations are yet to revive. We are at best meeting 50 percent of our economic potential," he said.

He added that industries require full broadband and mobile connectivity to operate to their full potential.

Furthermore, businesses are facing challenges related to the release of goods from ports and accumulating demurrage because of the recent inactivity.

"Numerous existing investors are currently in uncertainty as their teams aim to resume regular operations. Challenges and inefficiencies in terms of goods release, running operations and physical reach are driving up the cost of business," he said.

Bangladesh Bank data shows that net FDI inflow fell to $3.8 billion in the July-May period of FY24, down 6.5 percent from $4 billion during the same period the year prior.

Yuji Ando, country representative of the Japan External Trade Organisation (JETRO), said there would be a tremendous negative impact on FDI as Bangladesh failed to ensure internet connectivity, which hindered business operations significantly.

He said Japanese companies in Bangladesh could only resume operations on July 24 after the curfew was relaxed and the internet was restored.

This is because around 20 percent of Japanese companies work remotely, he said. Moreover, some Japanese companies have evacuated their employees due to safety concerns.

According to Ando, at this moment, two major factors are needed to grow FDI inflow. The most fundamental one is to ensure safety. Secondly, internet facilities must be provided without restriction.

M Masrur Reaz, chairman of Policy Exchange of Bangladesh, said: "The economic impacts of last week's incidents can be grim... some foreign investors are nervous about a potential repetition of what occurred over the past week and what it means for their investment on the ground."

According to him, one common concern among investors was that they were almost completely cut off from communications with foreign buyers due to the lack of internet, which is quite rare in today's world where uninterrupted business communication is considered an essential feature of any trade and investment destination.

Reaz added that foreign investors with a stake in the export sector are anticipating losses and increased expenses due to overtime bills as workers will be required to make up for production loss over the past six days.

Additionally, they will now have to go for costly air shipments to make up for lost time and meet their lead times, he commented.

Besides, the inability to take delivery of supplies has led to additional port and transportation charges as well as penalties.

Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue, said the recent scenario would create confusion among potential foreign investors despite the country's positive aspects, such as cheap labour.

He added that the recent incidents would also raise questions about political stability among foreign investors, who are already concerned by the gas crisis and problems in profit repatriation.

Reaz further opined that FDI inflow would not decline significantly, but predicted that existing foreign investors would stop expansion for a certain period.

Syed Almas Kabir, former president of the Bangladesh Malaysia Chamber of Commerce and Industry, echoed those sentiments.

"The recent turmoil in Bangladesh has made both investors and clients alarmed over doing business with us," he said.

Moreover, the internet blackout made it virtually impossible for them to contact their counterparts in Bangladesh, which made them even more worried, he added.

"Even after internet connectivity was restored, slow speeds have been hindering smooth communication," he said, adding that invoices and pictures could hardly be transferred at present due to slow internet speeds.

"Such incidents have tarnished the business-friendly image of Bangladesh. As a result, it has made foreign investors and clients increasingly wary of doing business with us," Kabir said.​

 

[Saif]

IMF’s assessment and the real risks for Bangladesh’s economy

Risk assessments of the kind done by the IMF are not usually done by the government, although it would have been desirable.

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IMF's assessment and the real risks for Bangladesh's economy


FILE VISUAL: SALMAN SAKIB SHAHRYAR

The International Monetary Fund (IMF) occasionally makes headlines in Bangladesh, the most recent being in June this year. But that already seems to have been long ago. And this is simply because the work they did at that time appears to have been overshadowed—to some extent, at least—by recent events.

It may be recalled that against the backdrop of multiple challenges (viz., balance-of-payment deficit, depletion of foreign exchange reserves, depreciation of the taka, and rising inflation) faced by the economy, the government went for the easy solution of a loan from the IMF. And a credit programme for $4.7 billion was agreed upon in January 2023. The loan, whose duration is 42 months, is to be disbursed in seven instalments—subject to satisfactory review by the agency. In June this year, the second review was successfully completed and the third tranche of $1.15 billion was released.

The loan, of course, came with conditionalities that include attaining a certain level of foreign exchange reserves (four months' imports), raising tax revenues, periodic adjustments in the prices of petroleum products and electricity, scrapping of the fixed interest rate regime, moving to market-determined exchange rate, etc.

As part of the second review of the credit programme, the IMF came up with a risk assessment for the economy in which nine risk factors, local and international, have been identified. Such assessments are useful even under normal circumstances. And when the going gets tough, it is more so. The assessment, therefore, is welcome.

However, given the multifarious challenges, the complexity of the situation, and expectations from a partner like the IMF, a few questions arise. What, for example, is the value of the exercise? Does it remain focused on the key issues and attach priority to them? How well do they address the key challenges faced by the economy? More importantly, have the real risks been identified and ways of addressing them explored? While some of such risks are structural (to be discussed presently), some come as unforeseen shocks—like the current situation—whose roots are also structural.

Interestingly, risk assessments of the kind done by the IMF are not usually done by the government, although it would have been desirable to have a homegrown exercise reflecting the national context and priorities more closely.

To be useful, a review of challenges and risks faced by the economy would have to be cast against their genesis and evolution. It is by now well-known that wrong policies were pursued for several years in the areas of exchange rate determination and interest rates. They helped keep imports as well as capital cheap. Exporters were compensated in various ways. Credit at a low rate of interest encouraged capital flight. Uncertainty in the business environment led exporters to park their export earnings abroad.

Not only were wrong policies pursued, necessary corrective measures—and some half-hearted—were adopted with considerable delays. Even now, the uncertainty in the policy environment has not been overcome completely.

The situation was compounded by political economy forces and interests of influential groups. Valuable time was lost in 2023 in the run-up to the national election. Even after that, concrete steps to reform exchange rate determination were taken only in May 2024. The real risk for the economy lies in such policy inertia of the government and continuation of protection for its cronies. Add to that the possibility of sudden shocks from unforeseen events.

For the economy to come out of the current abyss and for growth to turn around, the crisis of confidence will need to be overcome and basic conditions for growth restored urgently. And for that to happen, the foreign exchange reserves will have to start rising, which, in turn, would depend critically on not just export flows but also on prompt and full return of the export proceeds and normal flow of remittances. Only then will the regime of import compression give way to normal business and growth. That is also needed to fight inflation, which is an issue of immense concern.

The rate of inflation has been rising steadily since 2021, and the annual inflation rate has been hovering near a double digit figure for some time. Inflation can be caused by a variety of factors operating from demand and supply sides, and Bangladesh is no exception. In fact, the recent IMF review of the economy (June 2024) acknowledges this and estimates that half of the recent price increases can be attributed to the "pass through" effect of exchange rate depreciation. And yet, the organisation recommends monetary tightening as the measure needed for fighting inflation.

The Bangladesh Bank has abandoned the policy of fixed interest rates—even though the decision came later than warranted. It started a policy of monetary tightening in 2023 and is continuing that stance. But that does not seem to be producing the desired effect on the inflation rate. The proponents of this approach are mentioning the delay in the adoption of this policy as a reason for its ineffectiveness, and are suggesting further tightening. Under the loud chorus produced by this group of policy analysts and the international backers of the approach, voices for pragmatic solutions to the problem are getting drowned. We are forgetting that even economists like Olivier Blanchard and Ben Bernanke are attributing inflation to both demand and supply side factors.

In Bangladesh, it has of late become customary to cite other countries and say that they have succeeded in containing inflation by raising the policy rate and Bangladesh has not because of not using the instrument at the right time. While doing so, we forget that one size does not fit all. Among the major developed countries, for example, the success the US has achieved is not matched by countries of Europe and the UK. Also, the latter have not been able to avoid slowdown in their economies and recession in the process. Even in the case of the US, the extent to which monetary policy has contributed to the success in fighting inflation is being debated by researchers. In India, although the policy rate has been raised substantially in 2022 and 2023, it did not have an adverse effect on credit growth because of a variety of factors.

While dealing with macroeconomic issues of immediate importance, major structural issues like employment—especially jobs for the youth and first-time job-seekers, and livelihoods of the low-income people have either been ignored or relegated to the category of "also." The potential risk from such a narrow focus has been ignored by the external agencies as well as by the government. And when issues come to a fore, the usual response is to bury them under the refrain of "destructive forces." The danger of doing so is illustrated by the shock inflicted on the economy by the current situation.

Unfortunately, the Bangladesh government has never come up with a clear thinking on either the macroeconomic issues like inflation, or on jobs and livelihoods of the poor and low-income people and approaches to fighting such evils. The real risks here are continued dependence on (or adoption of) "policy advice" from outside, adoption of half-hearted and one-sided measures, ignoring the potential shocks arising out of deeper discontent, and the lack of a clear and coherent approach on the part of the government.

Dr Rizwanul Islam is an economist and former special adviser to the Employment Sector, International Labour Office, Geneva.​

 

[Saif]

Monetary policy faces fresh challenges

The latest monetary policy, declared two weeks ago, seeks to keep the growth of domestic credit flow at a moderate level during the first half of the current fiscal year (FY25). It wants to keep the growth of private credit unchanged while allowing the public sector credit grow to a certain extent

thefinancialexpress.com.bd

Monetary policy faces fresh challenges
ASJADUL KIBRIA
Published :
Jul 27, 2024 21:57
Updated :
Jul 27, 2024 21:57



The latest monetary policy, declared two weeks ago, seeks to keep the growth of domestic credit flow at a moderate level during the first half of the current fiscal year (FY25). It wants to keep the growth of private credit unchanged while allowing the public sector credit grow to a certain extent during the period. The Bangladesh Bank (BB) had maintained the same stance during the immediate past fiscal year.

As the share of credit to the private sector is around four-fifths of the domestic credit, the central bank does not have any option other than containing the private credit flow to ensure its tight monetary stance, as declared in the latest monetary policy.

The Monetary Policy Statement (MPS) for the first half of FY25 categorically said that Bangladesh would maintain a cautiously tight monetary policy stance, keeping the policy (Repo) rate at 8.50 per cent, the SDF rate at 7.0 per cent, and the SLF rate at 10.0 per cent unchanged. "Additionally, BB will continue quantitative tightening by streamlining Open Market Operations, ceasing currency swaps among banks and BB, and refraining from creating new money for government spending," it added.

As the hike in the policy rate in the last fiscal year curbed the growth of private credit significantly, Bangladesh Bank expects that higher lending rates would continue to discourage the private sector from borrowing from the banking sector. The repo rate was increased from 6.0 per cent to 8.50 per cent throughout FY24. The repo rate is at which the BB lends money to commercial banks in case of any shortfall of funds. So, a higher repo rate means a higher cost of borrowing for the banks. International Monetary Fund (IMF) had suggested enhancing the repo rate to 9.0 per cent by December next or the end of the first half of FY25. A slowdown in private credit is expected to reduce the pace of inflation in the coming months.

The central bank also said that it would not print money to finance the government's budget deficit. This stance is critical, as printing money means issuing high-powered money that increases the monetary base and enhances the supply of money in the market. The net outcome is an increased inflation.

How successful will the central bank be in maintaining its declared tight monetary stance? Though it is difficult to give a clear-cut answer, one thing is certain: the BB will be under pressure to relax the tight monetary stance soon, mainly due to the evolving situation in the country.

The central bank has designed the latest monetary policy, presuming that political stability will continue. However, when it announced the MPS formally on July 18, the situation had already turned volatile following the students' movement for quota reform. The situation deteriorated rapidly, and violence erupted in Dhaka and many other places in the country. Violent incidents led to several deaths, more than 200, and thousands of injuries. Public and private properties were damaged making the situation worse. To control the destructive situation, the government has finally imposed a nationwide curfew and announced public holidays. The damage caused to the data centres and the cautionary moves also led to a week-long broadband internet shutdown across the country. Though broadband has become operational, mobile internet is still shut. Thus, internet disruption has caused enormous loss to businesses. Exports and imports have stalled, internal commercial activities are almost suspended, and the supply chain has broken down. Internet-based freelancing was also severely affected.

All these have already taken a heavy toll on the national economy, although no concrete estimate is available until now. Recouping economic losses will be difficult, and almost impossible in a few cases. The sudden and unforeseen changes on the domestic front make it difficult to pursue the just-declared monetary stance for obvious reasons.

The central bank's standpoint to keep the policy rate unchanged until December this year is backed by some assumptions. It had expected that inflation will gradually subside in the next few months, thus, easing pressure to hike policy rate up further. Fall in inflation would also ultimately open room for rate cut giving signals to the banks to enhance credit disbursement. The decisions made by the central bank carry significant weight and can profoundly impact the economy. The annual average inflation stood at 9.73 per cent at the end of June last year, and the BB wants to bring it down to around 6.50 per cent at the end of FY25, or by end of June next, to be precise.

In the changed scenario, inflation seems unlikely to be moderated, as full supply chain restoration will take some more time. Already, prices of essentials and many other goods and services have jumped due to a breakdown in the domestic supply chain and disruption in imports. So, the risk of higher inflation is now there. In that case, the central bank may face pressure to hike the rate up further, making lending even costlier.

Though containing inflationary pressure is the prime duty of the central bank, it also has a subsequent task of supporting growth momentum. The government has set a target to achieve 6.75 per cent growth of gross domestic product (GDP) in FY25, which was estimated at 5.82 per cent in the last fiscal year. The damage caused to public properties and disruption to economic activities during the last two weeks will affect economic growth negatively. Demand for money will increase to support economic recovery, forcing the monetary stance to relax soon. The BB may even cut the policy rate in extreme cases, reversing the course of monetary tightening. Moreover, the central bank may also print money against its declared stance to support the government's budget deficit.

In sum, the central bank of the country is likely to face unprecedented challenges if it keeps the just declared monetary policy stance unchanged. It may also have to make certain compromises to rein in inflation. This situation underscores the need for fiscal policy support on an urgent basis. The importance of this measure cannot be overstated.​

 

[Saif]

Ensuring smooth FDI inflow will be a challenge

Govt has a lot to do to recover business and investor confidence

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Govt has a lot to do to recover business and investor confidence


VISUAL: STAR

Violence centring around the quota reform movement, a five-day total internet blackout, and the ongoing curfew have naturally shaken foreign investor's confidence in Bangladesh, which must be addressed. According to a report in this daily, the country needs to attract foreign direct investment (FDI) equal to 1.66 percent of its GDP annually to become an advanced economy by 2041. But in 2022, Bangladesh's FDI inflow amounted to only 0.75 percent of its GDP. Bangladesh Bank data shows that in 2023, net FDI inflow fell to $3 billion, a decrease of 14 percent from $3.5 billion in 2022. Against this backdrop, the confidence crisis caused by recent events becomes more concerning.

When it comes to attracting investors, a country's reputation as a reliable investment destination is vital. Investors already had a number of issues with Bangladesh in that regard. Problems like corruption, bureaucracy, anti-competitive procurement system, violation of intellectual property rights, and inconsistent policy shifts have all been previously identified as barriers to Bangladesh attracting higher FDI. With several international rights organisations and foreign countries having identified a number of human rights violations during the government's brutal crackdown on protesters recently, the country's image as an investment hub has surely taken a further hit. And this crisis cannot be quantified, as explained by the president of the Foreign Investors' Chamber of Commerce and Industry (FICCI).

The modern nature of business is such that all business activities around the world have become tremendously dependent on the use of the internet. The five-day total internet shutdown—along with the fact that internet services across the country are yet to be fully restored—has had a massive impact on all businesses. And although the country is slowly recovering with limited online and physical connectivity, full operations are yet to be revived. On top of that, foreign investors with a stake in the export sector are anticipating losses and increased expenses due to overtime bills. Some of them will now have to go for costly air shipments to make up for lost time and meet their lead times. And the uncertainty that many businesses and investors faced during the internet outage have made them particularly antsy, with many foreign investors raising questions about the country's political stability.

Even though the government has remained confident about the country's ability to attract FDI despite recent turmoil, we believe there is a lot that can, and should, be done to regain investors' trust. First, the government must urgently restore full internet services, and reinstate normalcy by lowering tensions within society at large. It also needs to take all necessary steps to ensure a positive business environment that is conducive to attracting investment, and that can largely mitigate the losses businesses suffered.​

 

[Saif]

Remittance shows signs of decline

Bangladesh received $1.65 billion in remittances in the first 28 days of July, signalling a decline owing to the internet blackout, which blocked banks from collecting much-needed foreign currencies from migrant workers.

www.thedailystar.net

Remittance shows signs of decline


Bangladesh received $1.65 billion in remittances in the first 28 days of July, signalling a decline owing to the internet blackout, which blocked banks from collecting much-needed foreign currencies from migrant workers.

The inflow was 16 percent lower compared to the full month of July a year ago, according to central bank data. It was also 35 percent lower than the remittance inflow in June this year.

"Remittances did not arrive as the internet connection was disrupted for four or five days," said Selim RF Hussain, chairman of the Association of Bankers Bangladesh (ABB).

Bangladesh witnessed an internet outage around 9pm on July 18 in the face of violence, deaths, and injuries centring the quota reform movement.

The government only restored broadband connection on a limited scale from July 23 before restoring broadband internet across the country the next day.

Remittance collection remained suspended during the outage, said bankers, adding overall flow of receipts did not pick up even after the restoration of the internet.

Central bank data showed that the inflow of remittances, a key source of foreign currencies, stood at $138 million from July 21 to July 27, the lowest among the four weeks of the month.

Hussain, also managing director and CEO of BRAC Bank, said overall flow may fall this month because of the internet outage.

In the four weeks of July this year, daily average remittance flow declined 7 percent year-on-year to $59.18 million.

The daily average inflow so far in July was also lower than the daily inflow of $84.7 million in June this year.

Hussain said expatriates send money to their families based on their needs.

"I do not believe that remittance inflows will be affected due to any negative campaign by any group," he added.

Bangladesh Bank also believes that remittance flow has been returning to normalcy for the past three days.

The flow will increase in the coming days, said BB spokesman Md Mezbaul Haque.

Remittances grew 10 percent year-on-year to $23.9 billion in FY24, according to central bank data.​

 

[Saif]

Economy: troubling time ahead

The country's economy was passing through a challenging time well before the start of the 'quota reform' movement. The situation has become far more difficult following the violent protests that have claimed many lives and left public and private properties worth billions of taka damaged. People i

thefinancialexpress.com.bd

Economy: troubling time ahead
RAFEEN HUQ
Published :
Jul 29, 2024 21:44
Updated :
Jul 29, 2024 21:44


The country's economy was passing through a challenging time well before the start of the 'quota reform' movement. The situation has become far more difficult following the violent protests that have claimed many lives and left public and private properties worth billions of taka damaged.

People in this part of the world have witnessed movements and protests on several occasions in the past, but never like the very recent one. The happenings centring the students' movement are bound to leave widespread ramifications, social, political, and economic. The trauma and shock emanating from death and destruction will last for a longer time in the public mind. Though normalcy has returned to a large extent following the imposition of a curfew and deployment of the army to restore law and order, there is a sense of uneasiness.

Whatever the situation, life must go on with the economy's wheels moving. What remains in store for the economy in the coming days is haunting businesses and policymakers' minds. All the ominous rumours and developments have only compounded their worries.

Businesses had faced prolonged trouble during the Covid pandemic. Yet they could continue with their activities albeit in a curtailed form. Uninterrupted internet communication helped them operate from home and maintain contact with local and foreign counterparts. In contrast, the events during the last couple of weeks came quickly. None was prepared for such a countrywide upheaval that has taken a heavy toll on the economy.

It is hard to assess the economic loss because of the latest disturbances. However, the Foreign Investors' Chamber of Commerce and Industry (FICCI) has come up with an estimate of losses caused to the economy. It says the economic impact of the shutdown is around US$10 billion. Its estimate comes close to the one done by economist Dr Ahsan H Mansur of the Policy Research Institute (PRI), who puts the economic loss per day at US$1.0 billion. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has said its members have suffered losses worth Tk.64 billion because of the recent unrest. Others will surely come up with similar estimates, making the amount of losses a substantial one. The businesses always seek fiscal support from the government following any significant disturbance, natural or manmade. They usually want bank financing at a lower interest rate and other loan-related facilities, such as rescheduling with a nominal down payment.

Under the prevailing circumstances, the banks might find it difficult to offer any concessions to the businesses. They, however, could be pressured into swallowing the bitter pill.

The shutdown, marked by killings and widespread violence, has dented the image of the country abroad. Foreign investors, buyers and lenders might find Bangladesh violence-prone and unreliable. The international media highlighted the latest violent incidents in Bangladesh prominently. The positive image built through hard work and dedication of all over the years has come under threat because of violence that many think could have been avoided through timely and appropriate administrative measures.

The inflow of export orders in the coming weeks or months will show the buyers' attitude towards Bangladesh. Following the troubled times in the past, foreign buyers of apparel hardly deserted Bangladesh. They now have viable alternatives such as Vietnam, Cambodia, and Indonesia. Yet, they are unlikely to leave Bangladesh as a sourcing destination soon.

The inflow of greenbacks, such as export receipts, remittances, foreign investment, and assistance, must worry policymakers and businesses. The country's reserves have been under pressure despite a substantial cut in imports.

The Taka-dollar exchange rates stabilized because of the introduction of the so-called crawling peg system, which is somewhat near to the free float. However, stability is at risk because of the downward revision of export incomes through data correction last month and the latest violent incidents.

Remittance inflow, the second most important lifeline of Bangladesh's economy after RMG exports, is also facing uncertainty. The inflow has not been smooth in recent months, as there have been fluctuations. Demonstrations staged by a section of Bangladeshi expatriates in support of the quota movement and a campaign urging the expatriates not to send their money through legal channels might impact the forex reserves. There is a strong possibility that the majority of the expatriate population would ignore such a vicious campaign.

Another issue that the central bank and relevant authorities should note is that during uncertain and turbulent times, some people who have amassed enormous wealth through illegal means feel insecure and resort to transferring funds abroad. The Financial Intelligence Unit at the Bangladesh Bank needs to be vigilant against such moves, which can potentially erode the country's reserves.

There is no denying that the economy, which was amid a turnaround during the last couple of months, now faces unforeseen risks because of the latest developments. In a relatively tight situation, the government must meet certain conditions set by the International Monetary Fund (IMF) before the next tranche of the latter's $4.0 billion-plus loan is due. Implementing a few conditions might invite the wrath of the consumers, who are already hard-pressed because of soaring inflation.

Overall, the economy needs deft handling under the prevailing situation. We need to find out whether the men in charge are shouldering that responsibility. For quite some time, the finance minister has not been seen in public, nor has he spoken on the economy. It is a testing time for him, no doubt.​

 

[Saif]

https://thefinancialexpress.com.bd/economy/sp-global-downgrades-bangladeshs-credit-ratings

S&P Global downgrades Bangladesh's credit ratings
FE REPORT
Published :
Jul 31, 2024 01:00
Updated :
Jul 31, 2024 01:00

American agency S&P has relegated Bangladesh's long-term creditworthiness ratings to "B+" from "BB-" on grounds of elevated external vulnerabilities coupled with latest domestic sociopolitical situations.

The US global credit-rating agency lists the downside risks and says Bangladesh's external profile remains under pressure. It specifies reasons for downgrading like depleting foreign-exchange reserves, unfavourable balance of payments and rising debt service.

In its ratings report released Tuesday S&P notes that Bangladesh has been facing its forex-market volatility since the beginning of the war in Ukraine. Later, it tightened imports to curb the demand for foreign exchange.

Bangladesh is also taking loan from the International Monetary Fund or IMF worth US$4.7 billion to avert further volatility on the forex market.

The S&P Global notes a high interest-expense ratio and a narrowing but still relatively large budget deficit will continue to weigh on fiscal assessment.

"We lowered our long-term sovereign credit ratings on Bangladesh to "B+" from "BB-"and affirmed our "B" short-term ratings. The outlook is stable," S&P said in a press release.

According to the S&P assessment, the downgrade reflects persistent pressure on Bangladesh's external metrics, particularly a continued decline in foreign-exchange reserves.

The country's outlook is stable, reflecting S&P's view that its per-capita real growth rate will remain very strong compared to peers, the ratings agency opines.

In May, Fitch downgraded Bangladesh to "B+" from "BB- due to a sustained weakening of external buffers that could likely prove challenging to reverse, despite recent policy reforms.

"We could raise our ratings on Bangladesh if it materially improves its external metrics. That improvement would likely be indicated by current-account receipts or foreign-exchange reserves rising substantially beyond our forecasts, such that gross external-financing needs remain lower than 100 per cent of current-account receipts plus usable reserves on a sustained basis," S&P Global says.

Bangladesh's highly concentrated political landscape may constrain the effectiveness of its institutions and limit checks and balances on its government.

As high inflation, rising domestic interest rates, limited access to foreign exchange, and policies aimed at compressing imports continue to bite, domestic demand will likely remain modest in comparison to the long-term trend, it notes.

These soft conditions are likely to persist for the remainder of calendar 2024, with recovery set to take shape from 2025 onward.

Economists say as the other rating agencies also downgraded the country, so the market is already witnessing its pains.

"Moody's also downgraded Bangladesh. So Bangladesh is passing through the pains of the downgrading," says Dr Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh.

Focusing on the political front, the S&P points out that the government faces little opposition in parliament, which limits checks and balances.

"Foreign direct investment has remained persistently low, possibly reflecting the country's evolving institutional settings, infrastructure deficiencies, and bureaucratic inefficiencies."

Bangladesh is also currently grappling with widespread student-led protests that have reportedly led to more than 200 deaths, according to local news sources.

The protests arose after a lower court reinstated a system of quotas for civil- service jobs. In response to the protests, the government imposed a telecommunications blackout and nationwide curfew. On July 21, the supreme court scaled back most of the quotas.

Also noted are financial constraints, like interest-expense burden is elevated, especially relative to government's meagre revenue collection.

Bangladesh relies entirely on official bilateral and multilateral partners for its foreign-currency borrowing, which partially mitigates risks to its debt profile.

The latest data show that gross reserves, measured on a BPM6 basis, stood at US$21.8 billion as of end-June 2024. This is 35-percent lower than the figure in June 2022, and enough to cover only about 3.3 months of current-account payments.

Domestic inflation is elevated, and well above the central bank's target with headline inflation at 9.7 per cent in June 2024.​

 

[Saif]

Climate-proofing the economy: an urgent call for action

In the face of escalating climate crises, the imperative to climate-proof our economy has never been more pressing. The relentless march of global warming, marked by more frequent and severe natural disasters, threatens not just our environment but the very fabric of our economic systems. To ensure

thefinancialexpress.com.bd

Climate-proofing the economy: an urgent call for action
Tanvir Ahmad
Published :
Jul 30, 2024 21:44
Updated :
Jul 30, 2024 21:44

In the face of escalating climate crises, the imperative to climate-proof our economy has never been more pressing. The relentless march of global warming, marked by more frequent and severe natural disasters, threatens not just our environment but the very fabric of our economic systems. To ensure a resilient future, we must undertake a holistic approach to embed sustainability and climate resilience at the core of our economic policies and practices.

Bangladesh stands at a critical juncture where the realities of climate change threaten to derail its economic progress. As one of the most climate-vulnerable countries in the world, Bangladesh faces rising sea levels, more frequent and severe cyclones, and unpredictable rainfall patterns. These challenges pose significant risks to the nation's agriculture, infrastructure, and overall economic stability. To safeguard our future, we must urgently climate-proof our economy through strategic investments and policy reforms.

Bangladesh's reliance on fossil fuels for energy production exacerbates its vulnerability to climate change. Transitioning to renewable energy sources such as solar, wind, and biomass is not only environmentally sustainable but also economically prudent. By investing in large-scale renewable energy projects, the government can reduce greenhouse gas emissions, create green jobs, and decrease dependence on imported fossil fuels. Initiatives like the Solar Home System program, which has already brought solar energy to millions of rural households, should be expanded and supported with robust policy incentives.

One of the most effective ways to climate-proof our economy is by investing in green infrastructure. This includes the development of renewable energy sources such as wind, solar, and hydroelectric power, which can reduce our dependence on fossil fuels and mitigate greenhouse gas emissions. Additionally, enhancing urban infrastructure to withstand extreme weather events - through flood defenses, green roofs, and permeable pavements - can protect communities and reduce the economic toll of natural disasters.

A shift from a linear to a circular economy is crucial. In a circular economy, resources are reused, recycled, and repurposed, minimising waste and reducing environmental impact. This not only conserves resources but also fosters innovation and creates new economic opportunities. Companies that embrace circular principles can reduce costs, improve efficiency, and enhance their competitiveness in a rapidly changing market landscape.

With a vast coastline and densely populated cities, Bangladesh must prioritise the fortification of its coastal and urban infrastructure. Constructing and maintaining embankments, cyclone shelters, and flood defenses are critical to protecting vulnerable communities from the impacts of rising sea levels and extreme weather events. In urban areas, investments in resilient infrastructure such as improved drainage systems, green spaces, and disaster-resistant buildings can mitigate the effects of urban flooding and heatwaves. Collaborative efforts between the government, private sector, and international partners will be essential to mobilize the necessary resources and expertise.

Agriculture is the backbone of Bangladesh's economy, employing a significant portion of the population and contributing to food security. However, the sector is highly susceptible to climate impacts. To enhance resilience, farmers must be equipped with knowledge and tools for climate-smart agriculture practices. This includes adopting drought-resistant crop varieties, efficient water management techniques, and integrated pest management. Extension services should be strengthened to provide timely weather forecasts, training, and access to modern agricultural technologies. Furthermore, financial support in the form of crop insurance and subsidies for sustainable practices can help farmers withstand climate shocks.

Effective policy frameworks are crucial for guiding climate resilience efforts. The Bangladesh Climate Change Strategy and Action Plan (BCCSAP) provides a comprehensive roadmap, but its implementation must be accelerated and adequately funded. Enforcing regulations that limit deforestation, promote reforestation, and protect natural habitats can enhance the country's natural defenses against climate impacts. Additionally, integrating climate risk assessments into national development planning will ensure that all economic activities are aligned with sustainability goals.

Building a climate-resilient economy requires an informed and engaged citizenry. Education systems should incorporate climate change topics to raise awareness from a young age. Public awareness campaigns can highlight the importance of sustainable practices and encourage community participation in resilience-building activities. Empowering local communities with knowledge and resources to take proactive measures can significantly enhance collective resilience.

Investing in research and development is key to finding innovative solutions to climate challenges. Universities, research institutions, and the private sector should collaborate on projects that explore new technologies and practices for climate adaptation and mitigation. Government support for research in renewable energy, sustainable agriculture, and disaster management can lead to breakthroughs that strengthen the economy and protect the environment.

Financial mechanisms must be in place to support climate resilience initiatives. Establishing a dedicated climate resilience fund, supported by both national and international contributions, can provide the necessary capital for large-scale projects. Microfinance institutions can offer loans to small and medium-sized enterprises (SMEs) for adopting sustainable practices. Additionally, climate risk insurance schemes can protect businesses and individuals from the financial losses associated with climate-related disasters.

Effective disaster preparedness and response mechanisms are vital for minimising the economic impact of climate-related events. Establishing early warning systems, conducting regular disaster drills, and creating efficient evacuation plans can save lives and reduce economic losses. Training local communities in disaster response and providing necessary resources can enhance their ability to cope with emergencies. Additionally, developing a comprehensive disaster management strategy that includes rehabilitation and reconstruction plans will ensure a swift recovery and reduce long-term economic disruptions.

Bangladesh's fisheries and aquaculture sectors are crucial for food security and livelihoods but are threatened by climate change. Promoting sustainable practices in these sectors can enhance their resilience. Implementing community-based fisheries management, protecting mangrove forests, and adopting climate-resilient aquaculture techniques can help sustain fish populations and protect coastal communities. Providing training and resources to fishers and aquaculture farmers can improve their adaptive capacity and ensure the long-term viability of these important sectors.

The private sector has a significant role to play in climate-proofing the economy. Encouraging businesses to adopt sustainable practices, invest in green technologies, and disclose climate-related risks can drive substantial progress. Public-private partnerships can mobilise resources and expertise for climate resilience projects. Incentivising corporate social responsibility initiatives focused on climate adaptation and mitigation can also contribute to building a resilient economy. Furthermore, fostering a culture of innovation within the private sector can lead to the development of new products and services that support climate resilience.

Social resilience is a key component of economic resilience. Ensuring that vulnerable populations, including women, children, and marginalised communities have access to resources and opportunities is essential for building a resilient society. Social protection programmes, such as conditional cash transfers and employment guarantee schemes, can provide a safety net during climate shocks. Promoting gender equality and empowering women to participate in decision-making processes can enhance community resilience. Strengthening social cohesion through community-based initiatives and participatory approaches can also foster collective action and support climate adaptation efforts.

Climate-proofing Bangladesh's economy is not merely an option but a necessity for ensuring long-term prosperity and security. By harnessing renewable energy, strengthening infrastructure, promoting climate-resilient agriculture, implementing robust policies, enhancing education and public awareness, fostering innovation, securing financial resilience, strengthening disaster preparedness, promoting sustainable fisheries, encouraging private sector engagement, and building social resilience, we can build an economy that withstands the challenges of climate change. The time to act is now, and with concerted effort and unwavering commitment, Bangladesh can emerge as a leader in climate resilience, setting an example for other vulnerable nations.

Tanvir Ahmad, climate change & public health researcher.​