[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Mending macrocosmic flaws an urgent must-do

The upcoming interim government should take the macrocosmic issues seriously as many economic parameters are unfavourable or destabilized, including inexorable inflation, economists say after an unceremonious exit of the Awami League regime. First to come is the financial sector which they suggest

thefinancialexpress.com.bd

Mending macrocosmic flaws an urgent must-do
Jasim Uddin Haroon and Jubair Hasan
Published :
Aug 06, 2024 01:02
Updated :
Aug 06, 2024 01:02

The upcoming interim government should take the macrocosmic issues seriously as many economic parameters are unfavourable or destabilized, including inexorable inflation, economists say after an unceremonious exit of the Awami League regime.

First to come is the financial sector which they suggest should be given the topmost importance to bring back confidence of the people in banking and other financial markets, including the capital market.

Dr Ahsan H. Mansur, executive director of Policy Research Institute of Bangladesh or PRI, told the FE that Bangladesh needs to form at least five separate taskforces to assess issues relating to the financial sector and revenue board.

He suggests two taskforces for the financial market --- one for the banking industry and the other for the non-banking sector including the stock market.

Dr Mansur thinks three separate taskforces need to be formed for the revenue board-one for direct taxation, one for indirect taxation, and one for customs.

"There is a need for experts to assess and recommend the suggestions, even, if required, international experts to truly assess the health of the financial and public key organs," he says, adding: "The organs need to be assessed properly and recommendation made for how to improve them."

The economist, who had once served the IMF, thinks inflation could be reduced within next four to five months.

He stresses restoring macroeconomic stability as many remain stressed.

He mentions that the central bank has taken some right directions to improve the forex market, but to some exceptions.

"We are now dictating the crawling-peg system-actually it should be market-based."

Former lead economist of World Bank's Dhaka Office Dr Zahid Hussain thinks the first challenge of the possible interim government would be bringing social stability immediately starting the trial for the killings in recent anti-discrimination student movement, which was one of key demands of the protestors.

Alongside creating a congenial atmosphere for bringing the students back to classroom with the opening of all the educational institutions, he says, the interim government needs to rebuild the damaged infrastructure and make those operational.

The eminent economist also suggests they have to start work to address the problems leading to growing inflation, volatility on the forex market and weaknesses in the financial sector.

Citing the just-ousted government's key reform measures in the financial sector under PCA (prompt corrective action) framework, he says the framework is scheduled for implementation from March 2025, based on performance and financial indicators as of December 2024.

"Why do we start it from now?" he questions, adding that the budget expenditure needs to be reviewed for suspending unnecessary and political projects.

Chairman of the Policy Exchange of Bangladesh Dr M Masrur Reaz says the interim government should take immediate actions to stop the bleeding of the system arising from "mismanagement, miss-governance and manipulation of economic data".

"Do an honest and thorough analysis to see what damages have been done. Based on the identification, two types of reforms are required: one is to see the governance failure and the other is forward looking to strengthen the macroeconomic situation," he adds.

The economist thinks there is a need for decoupling trade associations, giving them enough freedom to get engaged in critical and effective discussion with the policymakers for the betterment of the businesses.​

 

[Saif]

IMF says it is ‘fully committed’ to Bangladesh after protests oust PM

The International Monetary Fund said it remained ‘fully committed to Bangladesh and its people’ after protests ousted Sheikh Hasina from the post of prime minister. Bangladesh's president dissolved parliament on Tuesday, clearing the way for new elections a day after Prime Minister She

thefinancialexpress.com.bd

IMF says it is 'fully committed' to Bangladesh after protests oust PM
REUTERS
Published :
Aug 06, 2024 22:11
Updated :
Aug 06, 2024 22:11

The International Monetary Fund said it remained 'fully committed to Bangladesh and its people' after protests ousted Sheikh Hasina from the post of prime minister.
Bangladesh's president dissolved parliament on Tuesday, clearing the way for new elections a day after Prime Minister Sheikh Hasina resigned and fled the country following student-led protests that left hundreds dead.

Long-term lending from multilaterals including the IMF, World Bank and the Asia Development Bank amounts to roughly a quarter of Bangladesh's GDP, according to emerging market experts Tellimer, making their continued backing key to the country's economy.

The IMF, which approved a $4.7 billion loan programme with the country in January 2023, said it was following developments and "deeply saddened by loss of lives and injuries."

"We remain fully committed to Bangladesh and its people and support efforts to ensure economic stability and deliver inclusive growth," an IMF spokesperson said in an emailed statement.

On Monday, the World Bank, which had total commitments of $2.85 billion in the year to June 30, said it was still assessing the impact of the events on its lending, but remained committed to Bangladesh's development.

Bangladesh does not have any foreign currency bonds, and its short-term external debt is just 5% of GDP, limiting market reaction to the political turmoil.

But a stagnant economy contributed to the protests; nearly 32 million young people in the nation of 170 million are out of work or education in a population. Inflation hovers around 10% per year and dollar reserves have shrunk to just three months of import cover.

Multilateral lenders will be closely watching the next steps taken by the government and the military.

"A military coup, in legal terms, would put at risk fresh external sovereign debt from multilaterals," Hasnain Malik of Tellimer said.​

 

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[Saif]

Inflation will go down

Salehuddin Ahmed, finance and planning adviser to the interim government, yesterday said inflation in Bangladesh will go down within a reasonable amount of time.

www.thedailystar.net

Inflation will go down
Salehuddin says

Salehuddin Ahmed, finance and planning adviser to the interim government, yesterday said inflation in Bangladesh will go down within a reasonable amount of time.

However, newly-appointed Bangladesh Bank Governor Ahsan H Mansur said the burden of spiralling prices may be brought to tolerable levels within the next five to six months.

"I will not tell you to go to the market tomorrow and see how prices have declined because that will not be the case," Ahmed said while speaking to reporters at the Secretariat following a meeting on prices, production and supply of essentials.

"However, it will also not be the case that decades are required to reduce inflation," he added.

Ahmed also said the government would emphasise improving supply and production to tame inflation.

Alongside taking various measures in this regard, it will also evaluate whether those are effective.

Moreover, the interim government will impose measures or policies that are easily digestible, he added.

The meeting was also attended by the central bank governor, secretaries of the finance, commerce, and food ministries as well as senior officials of other relevant ministries.

After the meeting, the new central bank governor said it would be possible to work on the domestic market from three angles, one of which is the supply side.

"This relates to how we can increase supply by increasing production and create a positive impact on the market," he added.

Second, issues like extortion that have come to the fore need to be addressed. The third will be addressing demand-side issues.

Bangladesh Bank is already working to this end and there will be a review to know whether more can be done, Mansur said.

He said another important challenge is the dearth of foreign currency, as a result of which Bangladesh is currently unable to import as per previous levels, impacting the overall market.

Mansur said keeping inflation at a tolerable level will be possible within five to six months if issues like foreign currency reserves, extortion and lower production are addressed adequately.

"We are hoping for that but we need time to work," he added.

He also said it is not possible to solve the foreign currency crunch overnight.

Apart from that, Mansur said the reserves cannot be reduced illogically and that a minimum level has to be maintained. This is because an illogical decline would lower investor confidence in the market.

So, the central bank needs to maintain the minimum reserve level in sectors where US dollars are used for imports, he said, adding that calculated steps should be taken in this regard.

He also informed that they would discuss the issue with development partners.​

 

[Saif]

Reserve crisis will not be resolved overnight: New BB governor

Bangladesh Bank's newly appointed governor Dr Ahsan H Mansur has acknowledged the country's foreign exchange reserve crisis, cautioning that the situation will not improve overnight. However, he assured that the central bank will not drastically cut down on dollar supply to the market. In a press

thefinancialexpress.com.bd

Reserve crisis will not be resolved overnight: New BB governor
He pledges cautious approach
FE ONLINE DESK
Published :
Aug 14, 2024 17:04
Updated :
Aug 14, 2024 17:48

Bangladesh Bank's newly appointed governor Dr Ahsan H Mansur has acknowledged the country's foreign exchange reserve crisis, cautioning that the situation will not improve overnight. However, he assured that the central bank will not drastically cut down on dollar supply to the market.

In a press briefing at the secretariat on Wednesday, following a meeting on inflation and food supply, Dr Mansur said, "The reserve crisis is a reality, and it won't be resolved overnight. We need to assess our position and determine the optimal level of supply to the market while maintaining adequate reserves."

The governor emphasised the importance of maintaining market confidence and avoiding an abrupt reduction in dollar supply. He highlighted the need to balance the demand for imports and payments with the available reserves.

Dr Mansur further revealed plans to engage with development partners to explore avenues for increasing the country's foreign exchange reserves. He expressed optimism about the situation, stating, "We will tread carefully but move forward. I hope we will start seeing results within a few months."

The governor's comments come amidst growing concerns over Bangladesh's dwindling foreign exchange reserves, which have been impacted by factors such as rising import costs, higher debt servicing and a global economic slowdown.​

 

[Saif]

Bangladesh turmoil may slow financial reform, weaken banks: S&P

Moody’s Analytics said last week it has provisionally revised Bangladesh’s GDP growth forecast for this year to 5.1 per cent from 5.4 per cent previously

en.prothomalo.com

Bangladesh turmoil may slow financial reform, weaken banks: S&P
ReutersNew Delhi/Dhaka
Published: 15 Aug 2024, 10: 46

A vendor waits for customers at his fruits stall at a wholesale market in Dhaka on 14 August 2024, days after a student-led uprising that ended the 15-year rule of Sheikh Hasina AFP

Political turmoil in Bangladesh is likely to slow planned financial reforms and has already added to weakness in the banking sector, S&P Global Ratings said on Wednesday.

Prime Minister Sheikh Hasina quit and fled to India last week after student-led protests against her spiralled into some of the worst violence since Bangladesh’s 1971 independence from Pakistan, killing 300 people and injuring thousands.

An interim government, led by Nobel Prize winning economist Muhammad Yunus, has been appointed to plug a power vacuum and hold elections, but the protests have widened to target officials appointed during Hasina’s term, including the central bank chief and four deputy governors, who have resigned. A new central bank governor has been appointed.

“We see risk of policy inaction and a potential slowdown in financial reforms,” S&P Global Ratings credit analyst Shinoy Varghese said.

Weakness in the banking industry, including a lack of liquidity, thin capital buffers and ailing asset quality, has worsened while the departure of senior central bank officials could delay ongoing structural reforms, the rating agency said.

The anti-government protests emerged from a movement in July against quotas in government jobs, as the $450-billion economy - the world’s fastest-growing just years earlier - struggled with youth unemployment, inflation and shrinking reserves.

These conditions drove Hasina’s government to seek a $4.7 billion bailout from the International Monetary Fund, which was approved in January 2023.

Workers stand while waiting for vegetables to transport at a wholesale market in Dhaka on 14 August 2024, days after a student-led uprising that ended the 15-year rule of Sheikh Hasina AFP

Weeks of unrest have fanned inflation, which reached 11.66 per cent in July - when the government imposed a nationwide curfew, shutting down transport, offices and the mainstay garments industry for days - from 9.72 per cent the previous month, according to official data.

Moody’s Analytics said last week it has provisionally revised Bangladesh’s GDP growth forecast for this year to 5.1 per cent from 5.4 per cent previously.

“Bangladesh’s recovery from the currency crisis hinges on the ability of any replacement government to meet public concerns and reestablish social order,” it said in a note.

The Asian Development Bank, a key development partner for Bangladesh, said it would work with the interim government towards macroeconomic and fiscal sustainability.

“A second priority is the expansion of private sector development to enhance competitiveness and create new employment opportunities,” the ADB said in a statement.

“This includes working with the interim government to streamline government-to-business services to reduce the cost of doing business in Bangladesh.”​

 

[Saif]

Forthcoming $1.20b from four major financiers

A sum of some US$1.20 billion is expected to come from four major development partners willing to support Bangladesh's interim government in economic recovery, officials said, as the country's forex reserves have long been on depletion. The Ministry of Finance (MoF) has already started wor

thefinancialexpress.com.bd

Forthcoming $1.20b from four major financiers
FHM Humayan Kabir
Published :
Aug 16, 2024 00:33
Updated :
Aug 16, 2024 00:33

A sum of some US$1.20 billion is expected to come from four major development partners willing to support Bangladesh's interim government in economic recovery, officials said, as the country's forex reserves have long been on depletion.

The Ministry of Finance (MoF) has already started work to get the budget-support credit which will narrow down the income-expenditure gap in the current fiscal year's budget and improve foreign- exchange reserves, they said Thursday.

The World Bank (WB) is expected to provide $500 million worth of budget support to the government within this 2024-25 fiscal, a senior Economic Relations Division (ERD) official said.

Besides, the country's second-largest development partner-the Asian Development Bank (ADB)-is expected to extend $400 million in budgetary support by December this year, he added.

Additionally, the government is expecting at least $200 million worth of support from the Asian Infrastructure Investment Bank (AIIB) and another $100 million from Korea.

Bangladesh is struggling with economic crisis, especially with a crunch in foreign-exchange reserves, over nearly two years.

Bangladesh's reserves have fallen to only about $20 billion from about $46 billion three years back, resulting in tightfisted spending for imports with its domino effect on production and consumer market.

An ERD official says: "The expected budgetary support from the four major development partners will give a cushion to the economy by way of boosting the reserves."

In addition to the expected $1.20-billion support, the government is also expecting disbursement of IMF's ongoing support to Bangladesh.

The deposed government in June last announced a Tk 7.97-trillion budget with a total fiscal deficit worth Tk 2.516 trillion.

Of the total deficit, the government has set a target to fulfil 36 per cent from external assistance. The remaining 55 per cent of the budget deficit will be financed from domestic borrowings, 6.0 per cent from the national savings certificates and the remaining 3.0 per cent from other sources.

In the last FY2024, the government received a handsome amount of budget support from different lenders.

The IMF provided $1.15 billion in the 3rd tranche of its assured $4.7-billion loan in a package deal, the WB approved $500 million, the ADB $290 million, South Korea $100 million and France $107 million.

Besides, the AIIB confirmed $400 million loan for helping government for its development works.

In a meeting with newly appointed Finance and Planning Adviser Dr Salehuddin Ahmed on Tuesday in Dhaka, WB country director in Bangladesh Abdoulaye Seck affirmed their continuous support to the interim government.​