[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

World Bank approves $1.16bn for three Bangladesh projects

The World Bank today approved three loans totalling $1.16 billion to help Bangladesh improve health services, boost water and sanitation services and achieve greener and climate-resilient development, it said in a statement.

www.thedailystar.net

World Bank approves $1.16bn for three Bangladesh projects

The World Bank today approved three loans totalling $1.16 billion to help Bangladesh improve health services, boost water and sanitation services and achieve greener and climate-resilient development, it said in a statement.

Of the amount, $500 million is under the second Bangladesh green and climate resilient development credit and the WB said the fund will support reforms to help the country's transition to green and climate-resilient development.

"The financing supports policy reforms to improve public planning and financing and implementation for green and climate-resilient interventions at local and national levels and promote clean and resource-efficient production and services in key sectors," it said.

The WB said as a prerequisite to the credit, the Planning Commission has adopted the Multi-Year Public Investment Program Guidelines for key sectors, integrated with the Medium-Term Budget Framework.

The financing also supports policies to reduce air pollution, improve environmental enforcement, expand access to carbon markets, enhance sustainable water and sanitation services, improve the efficiency of the Bangladesh Delta Plan 2100, and advance a climate-resilient and sustainable environment, it added.

The financing also supports sustainable public procurement incorporating environmental and social considerations, said the multilateral agency adding that the loan will further help improve the energy efficiency of buildings and appliances and incentivise the construction sector to become greener.

Besides, the WB executive board approved $379 million credit under health, nutrition, and population sector development program-for-results to improve access to quality health and nutrition services and build resilient health systems in Sylhet and Chattogram divisions.

It will provide quality health, nutrition, and population services to about 5.1 million people, said the WB.

The program will help reduce maternal and neonatal mortality by increasing the number of births, both normal delivery and Caesarian section deliveries, in public health facilities.

Alongside the WB financing, the Global Financing Facility for Women, Children and Adolescents (GFF) is providing a catalytic $25 million grant to support the government in prioritizing interventions such as child nutrition, adolescent health, quality maternal and newborn care, data use, and coordination.

The WB said it approved $280 million Chattogram water supply improvement project to provide safe water through new and rehabilitated piped water connections to over one million people in Chattogram.

It will build about 200,000 new household water connections and provide improved sanitation services to about 100,000 people in low-income communities, said the WB adding that the project is part of a World Bank South Asia regional initiative or program of programs to provide Water, Sanitation and Hygiene (WASH) services to about 100 million people across the region by 2035.

The WB said the project will also help the Chattogram Water Supply and Sewerage Authority (CWASA) improve operational efficiency and financial sustainability and address issues related to water loss such as high levels of leakage, metering inaccuracies, and illegal connections.

World Bank Country Director for Bangladesh and Bhutan Abdoulaye Seck said these new financing will bring to the people of Bangladesh essential services such as health and water and sanitation while laying the foundation for clean, climate resilient and sustainable development.

He said Bangladesh is among the most vulnerable countries to climate change and faces the greatest pollution challenges.

"Improving climate resilience in every sector and tackling the pollution scourge has become a critical development priority."

The WB has so far has committed more than $45 billion in International Development Association (IDA) financing in the form of grants, interest-free loans, and concessional credits to help the country address its development priorities following Bangladesh's independence.​

 

[Saif]

Govt expects $1.1 billion from WB, ADB in Dec

The finance ministry on Sunday said that it expected $1.1 billion in loan support from the World Bank and the Asian Development Bank would be disbursed in the current month.

www.newagebd.net

Govt expects $1.1 billion from WB, ADB in Dec
Staff Correspondent 23 December, 2024, 00:08

The finance ministry on Sunday said that it expected $1.1 billion in loan support from the World Bank and the Asian Development Bank would be disbursed in the current month.

The finance ministry led by adviser to the interim government Salehuddin Ahmed made the expectation in a press release against the backdrop of loan approvals by both the multilateral lenders recently.

On December 11, the Manila-based ADB approved $600 million as budget support while the Washington based WB approved $500 loan, also as the budget support, on December 20.

In its press release, the finance ministry said that the availability of funds would bolster the reform programme being implemented under the interim government that assumed power after the fall of the Awami League amid a mass uprising on August 5.

Earlier, the finance adviser told reporters that the interim government sought $6 billion from multilateral lenders for the current FY25 in connection with the reform programme for reviving the economic activities that came under serious stresses during the AL regime.

Besides, the International Monetary Fund announced to make $645 million available in February under the current $4.7 billion loan programme that began in 2023.

The IMF has already disbursed around $2.3 billion in two tranches including $1.1 billion as the second tranche in June 2024, assisting the country’s balance of payment.

The ADB, while approving $600 million, said that the loan aimed at bringing structural reforms to support domestic resources mobilisation, enhancing the efficiency of public investment projects, developing the private sector, reforming state-owned enterprises, and promoting transparency and good governance.

This particular loan programme of the ADB has been developed in close collaboration with the International Monetary Fund, World Bank, and other multilateral lenders following requests for extra funds.

The IMF has already lowered Bangladesh’s gross domestic product growth to 3.8 per cent for the current 2024-25 financial year from 4.5 per cent due to output losses caused by the public uprising, floods and tighter policies.

The IMF said that inflation would remain about 11 per cent on average in FY25 before declining to 5 per cent in FY26, supported by tighter policies and easing supply pressures.

It is, however, is expected to rebound to 6.7 per cent in FY26 as policies relax, it said.

The IMF said that Bangladesh’s low tax-to-GDP ratio needed to be improved with urgent reforms by rationalising exemptions, improving compliance and separating tax policy from the administration.​

 

[Saif]

Bangladesh, World Bank ink deal worth $500m loan

A financing agreement was signed on Sunday between the Bangladesh government and the International Development Association (IDA) of the World Bank Group for a loan equivalent to US$ 500 million to implement the "Second Bangladesh Green and Climate Resilient DPC Programme." The main objective of th

thefinancialexpress.com.bd

Bangladesh, World Bank ink deal worth $500m loan
Published :
Dec 22, 2024 17:27
Updated :
Dec 22, 2024 18:21

A financing agreement was signed on Sunday between the Bangladesh government and the International Development Association (IDA) of the World Bank Group for a loan equivalent to US$ 500 million to implement the "Second Bangladesh Green and Climate Resilient DPC Programme."

The main objective of the stated programme is to strengthen fiscal and financial sector policies to sustain growth and enhance resilience to future shocks, including climate change, BSS reported, citing a press release on Sunday.

The Finance Division is the main implementing agency of this programme. Other implementing ministries or divisions include the Local Government Division, Bangladesh Bank, Ministry of Planning, Ministry of Environment, Forest and Climate Change, Ministry of Power, Energy and Mineral Resources, Ministry of Science and Technology, Health Services Division, and the National Board of Revenue.

Md Shahriar Kader Siddiky, Secretary of the Economic Relations Division, and Abdoulaye Seck, Country Director of the World Bank, signed the financing agreement on behalf of their respective sides.

Of the $500 million, $250 million is being taken as a loan from the World Bank’s IDA-Regular loan. This loan is repayable over 30 years with a 5-year grace period. The interest rate is 1.25 percent, the commitment fee is 0.50 percent, and the service charge is 0.25 percent.

However, the World Bank waives the commitment fee every year.

The remaining $250 million is being taken from the IDA-Shorter Maturity Loan (SUW-SML). This loan is repayable over 12 years with a 6-year grace period.

This loan has no interest, service, or other charges. There is only a 0.50 percent commitment fee, which is typically waived by the World Bank.

The World Bank is the largest development partner of Bangladesh. The World Bank has committed more than USD 43.00 billion to Bangladesh since its independence. Currently, the World Bank is financing around $17 billion for 52 ongoing projects that cover economic and social development, institutional, health, infrastructure, power, environment, and other important sectors.​

 

[Saif]

The country facing an economic imbroglio

The country's economic growth projection measured in terms of Gross Domestic Product (GDP) in the current fiscal year has been revised downwards to 3.8 per cent by the global lender, the International Monetary Fund (IMF). A review mission of the multilateral lending agency in a statement during its

thefinancialexpress.com.bd

The country facing an economic imbroglio
SYED FATTAHUL ALIM
Published :
Dec 22, 2024 22:12
Updated :
Dec 22, 2024 22:12

The country's economic growth projection measured in terms of Gross Domestic Product (GDP) in the current fiscal year has been revised downwards to 3.8 per cent by the global lender, the International Monetary Fund (IMF). A review mission of the multilateral lending agency in a statement during its visit last week came up with the revised GDP growth projection. This is the country's lowest growth projection since FY (2019-20), the pandemic year, when the GDP growth was 3.4 per cent. Notably, in October, IMF projected that the nation's economic growth would be 4.5 per cent, which was a reduction by 2.1 percentage points from June's projection at 6.6 per cent.

The reasons cited this time for the low growth were similar to those pointed out by the IMF delegation during its October visit that include political instability, high inflation, unrest in industries, floods that struck the country in the third week of August this year, etc. However, another major contributor to the economy's lack of growth is the central bank's raised policy rate (the rate of interest at which the BB lends money to the commercial banks). In consequence, the commercial banks have increased lending rate which is impacting business negatively. The objective of the BB's increasing policy rate is to rein in inflation at the advice of the IMF which made borrowing costlier resulting in less money circulating in the market. Termed contractionary monetary policy, the measure has been taken as a condition of the loan amounting to US$4.7 billion that the multilateral lender approved for Bangladesh in January 2023.

The IMF loan aims to bring macroeconomic stability in the economy in the long run. However, in the short run, it is dampening investment and business. Understandably, the business community is blaming the IMF's various conditions against the loan it (IMF) advanced and suggestions made to the government for its woes. Especially, the multilateral lender's suggestion of adjusting gas and fuel oil prices with those in the international market, which businesses think will render business costlier. Also, they fear, the IMF's idea of leaving the exchange rate of US dollar entirely to the mercy of the market would turn it volatile as black market operators and speculators might take undue advantage of the decision. Ultimately, that would seriously affect external trade, they believe. These are definitely genuine concerns of business people. But what needs also to be taken into account is that even before receiving the IMF loan, the business activities had already been under stress due to the restrictions on import that the previous government had opted for as part of its austerity policy. Obviously, that affected the import of raw materials, capital goods and other inputs for business and the industry. One cannot be oblivious of the fact that the austerity policy was adopted to save the foreign exchange reserve from depleting faster and avoid facing the Sri Lanka syndrome. In 2022 Sri Lanka experienced an economic meltdown in which the country's foreign exchange reserve hit rock bottom for various reasons including overdependence on debt, weak export, impact of Covid-19 on tourism, a mainstay of its foreign exchange earning and so on. Definitely, that caused business to suffer immensely. Against this backdrop, the previous government sought the IMF loan to stabilise the economy, knowing full well that it would be a bitter pill to swallow, if only for the greater good of the ailing economy. One may recall that at that time the economy was in a shambles, thanks to the overall mismanagement of the economy, fragility of the financial sector due to rampant looting of the banks and other financial institutions, unrestrained rise in bad loans in the banks with the connivance of the banking regulator (the BB) and the powers that be.

So, to restore some semblance of discipline in the financial sector and assure prospective investors from abroad that it was yet not all over with Bangladesh's economy the IMF loan was asked for. It is this legacy that the deposed government has left for the interim government to grapple with. As a result, it is not only the business community, the common people, who are the overwhelming majority are suffering. Food inflation rate in November was 13.80 per cent, while the inflation at 11.38 per cent in November is a record four-month high. The international lender said the inflation would remain around 11 per cent throughout the rest of the current fiscal year with the hope that it would come down to 5.0 per cent in FY 2026. The lender believes it would be due to tight monetary policy and easing of supply pressures. But still uncertainties would remain. Clearly, Bangladesh economy is in a fix. What is the way out? Return to the earlier state of free fall or continue the IMF-prescribed policy? True, there are critiques of IMF's loan conditionalities that put restrictions on the recipient country's fiscal and monetary policies leading to shrinking of public and private investments. Decline in private investment means rise in unemployment. But when a national currency's, or for that matter, economy's, worth is measured in US dollar as reserve currency, weak economies like Bangladesh face such a dilemma. Even so, the government could still negotiate with the IMF authorities on issues like if the exchange rate of USD against Taka should be left entirely to the market or the existing limits in line with the crawling peg system should continue. Also, the IMF-prescribed classification and labelling of the Non-Performing Loan (NPL) is also an issue. Notably, now a loan will be considered a default one, if the borrower fails to clear the debt within 90 days of its last date of repayment.

The government will be required to address these urgent issues through talks with the IMF so that some stringent conditions could be, where possible, relaxed for the sake of the businesses affected by the rules.​

 

[Saif]

Bangladesh’s forex reserve surges by $1.5b in 22 days

Bangladesh’s gross foreign exchange reserves, calculated following the International Monetary Fund’s guidelines, have risen by $1.5 billion in 22 days.

www.newagebd.net

Bangladesh’s forex reserve surges by $1.5b in 22 days
Staff Correspondent 23 December, 2024, 18:25

A file photo shows a man counting dollar notes in the capital Dhaka. | New Age photo

Bangladesh’s gross foreign exchange reserves, calculated following the International Monetary Fund’s guidelines, have risen by $1.5 billion in 22 days.

As per Bangladesh Bank data, the reserves stood at $20.16 billion on December 22, up from $18.55 billion on December 1.

Such increase is attributed to the central bank’s strategy of refraining from selling dollars to commercial banks while purchasing dollars from them.

These measures were aimed at artificially boosting reserve balances to meet the IMF’s conditions.

However, these actions have added pressure to the exchange market, pushing the dollar price to Tk 128 from Tk 120 in just 13 days.

In response to concerns about potential exploitation of the situation, Bangladesh Bank has sought explanations from 13 banks suspected of purchasing dollars at unusually high rates.

Officials suspect some banks might have manipulated dollar prices to benefit from the volatility.

Earlier, reserves experienced a sharp decline, dropping to $18.46 billion on November 10 from over $20 billion on November 7.

This drop followed a $1.5 billion payment to the Asian Clearing Union (ACU) for import bills covering September and October, a routine settlement made bi-monthly.

With the next ACU payment for November and December due in early January, reserves could potentially dip to a similar level once again.

According to conventional valuation by the Bangladesh Bank, the foreign exchange reserve reached $24.84 billion.

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

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

However, high overdue and current import payments have hindered reserve growth even though remittance inflows and export earnings have risen. Banks have had to use dollars for these payments.

The BB stopped selling dollars directly from its reserve to banks and has sourced dollars from the interbank market to meet government obligations.

This means banks must cover all import payments with their own foreign currency, preventing reserve accumulation.

The Bangladesh Bank adheres to the IMF’s Balance of Payments and International Investment Position Manual, 6th edition (BPM6), for calculating both the gross international reserve and the net international reserve.

The exchange rate per dollar was Tk 84.81 in June 2021, Tk 93.45 in June 2022 and Tk 106 in June 2023.

This ongoing dollar crisis has significantly impacted banks’ ability to settle import payments and open letters of credit, creating challenges for businesses.​