[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Private sector struggling under mounting pressure

The private sector is facing increasing uncertainty as stubbornly high inflation, stagnant investments and inconsistent energy supplies continue to weigh on businesses, according to industry leaders.

www.thedailystar.net

Private sector struggling under mounting pressure
Businesses say at seminar

The private sector is facing increasing uncertainty as stubbornly high inflation, stagnant investments and inconsistent energy supplies continue to weigh on businesses, according to industry leaders.

"In recent months, business sentiment has been significantly affected by inflationary pressures, high borrowing costs and exchange rate volatility," said Taskeen Ahmed, president of the Dhaka Chamber of Commerce & Industry (DCCI), at an event in Dhaka yesterday.

He called for policy stability and structural reforms to restore business confidence.

Red-hot prices remain a key concern for both individuals and businesses, with inflation hovering at over 9 percent since March 2023. Making things worse, Bangladesh's foreign exchange reserves have been under strain for nearly three years, leading to a depreciation of the local currency against the US dollar.

For manufacturers, rising commodity prices usually result in reduced demand, while a weaker taka increases operational costs. Besides, authorities have raised interest rates to battle inflation, further pushing up borrowing costs for businesses.

In his keynote address at the event, titled "Bi-Annual Economic State and Future Outlook of Bangladesh Economy – Private Sector Perspective," the DCCI president said that industries are already under pressure due to inconsistent energy supplies, which they fear will worsen during the upcoming summer.

"Industries are struggling with frequent power shortages and an unpredictable energy supply. The cost of gas has increased, yet supply is inconsistent," Ahmed said.

"If this continues, businesses will find it difficult to remain competitive."

The DCCI president mentioned that private investment has stagnated at 24 percent of GDP almost since the pandemic, while foreign direct investment (FDI) has dropped to a six-year low.

"Without urgent interventions, sustaining economic momentum will be challenging."

Regarding the financial sector, Ahmed pointed to the growing liquidity crisis, especially its impact on businesses.

"The central bank hiking the policy rate to 10 percent has made credit inaccessible for small and medium enterprises. Private sector credit growth fell to 7.28 percent in December 2024, well below the target of 9.8 percent for the fiscal year 2024-25. The high cost of borrowing is discouraging investment."

Ahmed called for policy consistency, tax reforms and investment in infrastructure to support private sector growth.

"The private sector is ready to drive economic expansion, but we need clear and stable policies. If inflation, energy crises and financial instability drag on, businesses will struggle to sustain operations," he mentioned.

M Masrur Reaz, chief executive officer of the Policy Exchange Bangladesh, said the country's macroeconomic situation has been in a fragile state since 2022 due to high inflationary pressures.

He believes macroeconomic stability will remain elusive if the foreign exchange reserves do not increase by $7 to $8 billion by the end of this year. As such, the economist requested the government to secure $5 to $6 billion from multilateral lenders by June to stabilise forex reserves.

Reaz also advocated a stable and sufficient energy supply.

Sayera Younus, executive director (research) of Bangladesh Bank, said inflation would decline to around 6 percent by the end of the current fiscal year.

She hoped that the foreign exchange reserves would increase by at least $5 billion by the end of June, driven by growing exports and remittance inflows.

Mohammad Abu Eusuf, a professor of development studies at the University of Dhaka, said financing a deficit by borrowing from the banking sector would hurt private sector credit flow.

Mohammad Yunus, research director at the Bangladesh Institute of Development Studies, highlighted the potential for FDI and joint ventures, especially in the leather and pharmaceutical sectors.

Md Abdur Rahim Khan, additional secretary (export) of the commerce ministry, said export diversification remains a significant challenge, with garments accounting for more than 85 percent of export earnings.

Khan, who is currently the secretary of the commerce ministry, said the local light engineering sector holds immense potential, though exports in this sector declined in the last fiscal year.

Regarding Bangladesh's graduation from least developed country (LDC) status, which is scheduled in 2026, he said that despite the phasing out of subsidies and incentives, reducing business costs by 10–15 percent could enhance global competitiveness.

However, he pointed out that access to financing poses a challenge for entrepreneurs. Besides, it is important to attract foreign investment to build a diversified economy.

Referring to the current tax-to-GDP ratio of 8 percent, Khan said, "$40 billion in revenue collection for a $450 billion economy is completely unacceptable."

He also expressed concerns over the lack of full automation of government services and the inadequate implementation of the National Single Window system.​

 

[Saif]

Bangladesh on the path to recovery, says Finance Adviser

Finance Adviser Dr Salehuddin Ahmed on Saturday stressed collective efforts to move Bangladesh forward, aiming to provide a better and more dignified life for all citizens. "We want to ensure a quality life for all," he said at an event unveiling the second edition cover of his book, "Go

thefinancialexpress.com.bd

Bangladesh on the path to recovery, says Finance Adviser
UNB
Published :
Feb 22, 2025 22:02
Updated :
Feb 22, 2025 22:02

Finance Adviser Dr Salehuddin Ahmed

Finance Adviser Dr Salehuddin Ahmed on Saturday stressed collective efforts to move Bangladesh forward, aiming to provide a better and more dignified life for all citizens.

"We want to ensure a quality life for all," he said at an event unveiling the second edition cover of his book, "Govornorer Smritikotha", followed by a discussion meeting at the Institute of Chartered Accountants of Bangladesh (ICAB) Auditorium in Dhaka. The book's first edition was published in 2019.

Dr Salehuddin recalled that the country had nearly plunged into a severe crisis during the previous regime. "Bangladesh was almost on the brink of falling into a ditch," he noted, "but now it's turning around, thanks to the sincere efforts of the government and support from all stakeholders."

Emphasising responsibility over mere power acquisition, Dr. Salehuddin remarked, "We did not just assume power; we took responsibility. You cannot imagine the state Bangladesh was in previously; only those involved closely knew the depth of our troubles."

Reflecting on his experiences, the Finance Adviser described the background behind writing his memoir, which sheds light on critical periods in Bangladesh's banking sector and economy. He emphasized that he never compromised his principles during his tenure as Governor of Bangladesh Bank and earlier as a public servant.

Dr Salehuddin called for enhanced honesty, integrity, and skill development among human resources to drive the nation forward. "Now more than ever, we need honesty, integrity, and competent human resources," he urged.

He added that Bangladesh enjoys a positive impression internationally. "We should all strive to uphold our country's dignity and self-respect."

Encouraging constructive criticism, Dr Salehuddin cautioned citizens to remain vigilant against forces that may exploit criticism to harm national interests.

Highlighting the importance of balanced growth, the Finance Adviser emphasized, "We hope to rapidly move the country forward by ensuring quality life. High growth and income alone won't suffice; quality education and health care are equally crucial. We are relentlessly trying in this direction."

Dr Salehuddin further called upon everyone, irrespective of class or creed, to support the interim government in swiftly addressing the nation's pressing challenges.

Speaking at the event, distinguished guests, including Editor and Publisher of the daily Bonik Barta Dewan Hanif Mahmud, CPD Distinguished Fellow Dr Mustafizur Rahman, Dhaka University Professors Dr Kazi Marufur Rahman and Dr Rashed Al Mahmud Titumir, former NBR Chairman Abdul Majid, Professor Dr Mahbubullah, and writer Faruk Saifuddin, emphasized the need for the interim government to guide the economy towards recovery from near collapse.

They expressed cautious optimism, saying it would be unrealistic to expect full recovery within six months but emphasised the current leaders' potential to pave the way forward. They also underscored the pressing need to establish a society rooted in non-discrimination, equality, and justice.

Dr Salehuddin hinted that his forthcoming third edition would expand beyond his memoirs as the former Governor. "I want to write about diverse contemporary experiences. Since I have taken an oath, I cannot divulge much now," he said.​

 

[Saif]

Growth to remain sluggish for a while

Bangladesh's economy is likely to witness another year of low growth and high inflation, thanks to the revolutionary change in the political arena half a year ago. The student-led mass uprising, which forced the autocratic regime of Sheikh Hasina to fall on August 5 last year, led to a critical tra

thefinancialexpress.com.bd

Growth to remain sluggish for a while
Asjadul Kibria
Published :
Feb 22, 2025 22:43
Updated :
Feb 22, 2025 22:43

Bangladesh's economy is likely to witness another year of low growth and high inflation, thanks to the revolutionary change in the political arena half a year ago. The student-led mass uprising, which forced the autocratic regime of Sheikh Hasina to fall on August 5 last year, led to a critical transition in the country's power structure. This mass movement also significantly disrupted economic activities, leading to a bearish quarterly growth of 1.81 per cent against 3.91 per cent in the last quarter of FY24. However, economic activities rebounded modestly in the second quarter of the current fiscal year, as reflected in several proxy indicators.

Nevertheless, there is little scope to be optimistic that the economic growth in the second half of the current fiscal year would see a mighty comeback. The latest half-yearly Monetary Policy Statement (MPS), released by Bangladesh Bank in the third week of last month, made it clear. "The growth outlook for the second half of FY25 for Bangladesh does not appear optimistic due to the existing challenges," said the central bank in the MPS announced for the January-June period of 2025. "It will be hard to regain growth momentum in the near term since the government is focusing on improving fiscal discipline, and the central bank is working to control inflation," it added.

The central bank projected that economic growth might remain sluggish at around the 4.0-5.0 per cent range in the current fiscal year. In other words, the growth in FY25 will be similar to FY24, when output expanded by 4.22 per cent in the final count. The growth rate was 5.78 per cent in FY23.

Looking back, the country's annual economic growth came down to the lowest level in FY20 due to the Covid-19 pandemic-driven contraction of economic activities. GDP registered a modest 3.45 per cent in FY20, which was lowest in the last decade. In the later years, GDP bounced back, registering 6.94 per cent and 7.10 per cent in FY21 and FY22, respectively. The robust pace of growth could not be sustained in the later years. The previous regime blamed external factors, such as the negative fallout of the Russia-Ukraine war, to be precise.

Though the external factors played a role, economic mismanagement and extensive corruption of the Hasina regime, coupled with the manipulation of growth statistics, made things worse. During the last decade, several economists and experts raised some questions about the growth figures, but the autocratic regime did not pay any heed. Instead, it became gradually difficult to question the authenticity of growth, and anyone who expressed apprehension was at risk of backlash. Constructive debate on growth, as well as different economic indicators, was not welcomed. The fallen regime and its loyalists rather used to tag any such debate or discussion as a move to undermine the country's persistent development. The regime became unaccountable and set a trend of not responding to questions raised by experts and media. So, getting access to information from national statistical agency or the central bank was complex. It also continued its manipulative effort to manufacture economic growth to show that the country is moving ahead at a rapid rate. Nevertheless, growth started to fall, and the downward trend continued for three consecutive years, showing the systematic weakness of the economy.

Against the backdrop, it is clear that the size of Bangladesh's economy has not grown as high as recorded in the last decade. The expansion or the growth rate of the economy, as estimated by the Bangladesh Bureau of Statistics (BBS), requires careful examination and should not be taken at face value. For instance, in FY21, GDP at the current market price was recorded at US$416 billion, which increased to $450 billion in FY24. Economists and experts who have tried to estimate the GDP alternatively observed that the official figure is around $50 billion more than the real GDP. The previous regime used the inflated GDP figure to create an artificially colourful picture of development and push the country's graduation from the Least Developed Country (LDC) status without adequate preparation.

It is crucial to re-estimate or re-calculate the GDP figures to determine the actual size of Bangladesh's formal economy. This task, though daunting, is necessary for the national statistical agency. Nevertheless, BBS needs to do so for at least two or three years and provide a more authentic picture of GDP, as some corrective steps have already been taken. The modest growth in FY24 reflects that.

In the current year, the central bank's projection of GDP growth rate between 4 to 5 per cent range seems realistic. After a significant disruption in economic activities, followed by a slow pace of recovery, there is no scope of registering a high growth of 6 per cent or more. That's why the MPS said: "Despite the modest slowdown in economic activity, the projected growth should be viewed as remarkable, given the numerous challenges facing the economy."

The major challenges include curbing inflation, stabilising the exchange rate, rebuilding the foreign exchange reserves, and most importantly, restoring public confidence in the banking system. Due to a series of irregularities patronised by the ousted regime, the country's banking sector became vulnerable, which is reflected in the high amount of default loans. Depletion of foreign exchange reserves was driven by higher payments of imports and debt servicing against lower earnings in exports and a modest inflow of foreign investment. Again, despite some manipulation to keep the inflation rate low, it was impossible to suppress the real situation at one stage. Double-digit inflation continues to erode real income, and the central bank has been struggling to bring it down for the last six months.

In the latest MPS, the central bank rightly stressed containment of inflation without worrying much about growth. Keeping the higher policy rates unchanged is a step in that direction.

Sacrificing growth may not be desirable, though it is necessary for the time being to tame the excessive pressure of inflation.​