[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Local currency near-competitive with dollar in foreign trade

A price correction in March brings the Bangladesh currency to a more competitive level in foreign trade, after having stayed significantly overvalued against the US dollar in January and February. The real effective exchange rate (REER) index dropped to 101.90 in March 2025, implying that th

thefinancialexpress.com.bd

Local currency near-competitive with dollar in foreign trade
Jasim Uddin Haroon
Published :
Apr 19, 2025 00:16
Updated :
Apr 19, 2025 00:16

A price correction in March brings the Bangladesh currency to a more competitive level in foreign trade, after having stayed significantly overvalued against the US dollar in January and February.

The real effective exchange rate (REER) index dropped to 101.90 in March 2025, implying that the taka is now overvalued just by Tk 2.30 against the greenback in currency exchange.

In its latest report the central bank says the decline in the REER index reflects a marginal improvement in the competitiveness of the taka in international trade, driven by favourable price differentials between Bangladesh and its trading partners.

The Bangladesh Bank regularly reports to the government on the nominal, nominal-effective and real-effective exchange rates of the taka against a basket of 18 currencies. This basket covers more than 85 per cent of the country's trade.

In economic terms, a REER value of 100 signifies balanced trade- competitiveness. A value above 100 means the currency is overvalued, which can hurt exports by making them more expensive in global markets.

Officials at the central bank told the FE that a slight easing in domestic inflation helped reduce the REER. "We're working to bring the REER closer to 100," says one official familiar with the developments on the foreign-exchange front.

Inflation fell to 9.35 per cent in March on a point-to-point basis, while the taka depreciated 3.28 per cent during July-March period compared to the same period a year earlier.

The exchange rate of the taka against the US dollar depreciated by 3.28 per cent during July-March FY25, compared to a 1.49-percent depreciation in the same period of FY24.

Bangladesh's inflation remains higher than that of its major trading partners, which continues to contribute to the currency's overvaluation. The 12-month average inflation was 10.26 per cent as of March.

During the tenure of the previous central-bank governor, Abdur Rouf Talukder, the taka was overvalued as much as by Tk 6.0 to Tk 7.0.

Dr Zahid Hussain, an independent economist, says Bangladesh's persistently high inflation compared to its trading partners is a key reason for the taka overvaluation against the US dollar.

"Although inflation has slightly eased, there's concern it may rise again due to increases in the prices of essential items like soybean oil and some varieties of rice," he notes.

Bangladesh's two largest trading partners, China and India, are experiencing relatively much lower inflation.

China is currently facing deflationary pressure and its inflation stood at 0.7 per cent in March, while India's inflation stood at 3.34 per cent. Together, these two countries account for over 40 per cent of Bangladesh's total imports.

Inflation was also lower in other key trading areas - 3.6 per cent in India and 2.2 per cent in the Eurozone in March.

Dr M. Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, has highlighted that an overvalued currency erodes trade- competitiveness, particularly affecting export performance.

He notes that Bangladesh's exports have been increasing and might increase in the coming months, too, as trade war between the USA and China might give dividend in favour of Bangladesh.

Exports increased by over 3.0 per cent in February, fetching $3.673 billion, according to Export Promotion Bureau (EPB).

However, as an import-dependent economy, Bangladesh also relies heavily on foreign goods for both consumption and production. To modernise its exchange rate and monetary policy, the Bangladesh Bank introduced a series of reforms on December 31, 2024 following the regime change.

It now publishes a daily reference rate based on the weighted average of freely quoted exchange rates from market transactions which on 17 April 2025 (Operation till 05:00 PM) was recorded at 121.8949.

In May 2024, the central bank implemented a Crawling Peg Exchange Rate System for spot dollar transactions, introducing a Crawling Peg Mid Rate (CPMR) of Tk 117.00 per USD.​

 

[Saif]

BEPZA to start allocating plots in Jashore EPZ in 2026

Bangladesh Export Processing Zones Authority (BEPZA) is expected to start allocating plots for investors in Jashore Export Processing Zone (EPZ) by the end of 2026. “The land development works of Jashore EPZ will start soon after completing the tender process. Despite the low land of the EPZ

thefinancialexpress.com.bd

BEPZA to start allocating plots in Jashore EPZ in 2026
BSS
Published :
Apr 18, 2025 17:48
Updated :
Apr 18, 2025 17:48

Bangladesh Export Processing Zones Authority (BEPZA) is expected to start allocating plots for investors in Jashore Export Processing Zone (EPZ) by the end of 2026.

“The land development works of Jashore EPZ will start soon after completing the tender process. Despite the low land of the EPZ area, I think, we can start allocating plots for investors from the end of 2026. Factory construction work and land development will continue simultaneously,” said BEPZA Executive Chairman Major General Abul Kalam Mohammad Ziaur Rahman.

In a recent interview with BSS, Ziaur Rahman said the government has taken the initiative to establish the EPZ in Jashore to attract US$2 billion in foreign direct investment and achieve $2.4 billion in annual exports.

Once fully operational, the EPZ, is being set up on an area spanning around 503 acres of land in Abhaynagar upazila, which will create direct employment opportunities for 1.5 lakh local people and indirect employment for another three lakh people, he added.

He said around 400 industrial plots will be developed in the EPZ.

Ziaur Rahman, however, said BEPZA is establishing the EPZ in Jashore for the socio-economic development of the southwestern region of the country.

Establishing EPZs in the southwest of the country and making use of the Padma Bridge will contribute to the balanced development of the country, he added.

The Executive Committee of the National Economic Council (ECNEC) approved the Taka 1,642.73 crore projects in November 2023.

BEPZA is a government body empowered and responsible for the creation, development, operation and management of industrial zone like Export Processing Zones as well as the promoting investment in Bangladesh.

Over the past four decades, BEPZA has established a remarkable track record attracting investment from 38 countries to its nine zones consistently generating 18-20 percent of the country’s annual exports.

The nine zones are Chattogram EPZ, Dhaka EPZ, Mongla EPZ, Uttara EPZ, Ishwardi EPZ, Cumilla EPZ, Adamjee EPZ, Karnaphuli EPZ and BEPZA EZ.

At present, investments in 448 industries in these EPZs amount to more than $6.96 billion. These zones produce export goods worth $116.30 billion.

Around 5.30 lakh skilled workers in the country’s EPZs are manufacturing multi-variety products for world-famous brands.​

 

[Saif]

Bangladesh and its future economy: addressing the challenges

Despite facing political challenges, Bangladesh has shown remarkable economic resilience with an impressive economic growth. However, structural weaknesses persist. Bangladesh's low rankings on global indices, such as 108th in the International Property Rights Index and 127th in the Economic Freedo

thefinancialexpress.com.bd

Bangladesh and its future economy: addressing the challenges
Shahriar Kabir, Mahfuz Kabir and Carmelo Ferlito
Published :
Apr 19, 2025 22:34
Updated :
Apr 19, 2025 22:34

Despite facing political challenges, Bangladesh has shown remarkable economic resilience with an impressive economic growth. However, structural weaknesses persist. Bangladesh's low rankings on global indices, such as 108th in the International Property Rights Index and 127th in the Economic Freedom of the World Index, reflect a poor state requiring urgent battention. Furthermore, the country's tax-to-GDP ratio remains merely around 8 per cent, which is one of the lowest in South Asia, significantly below the Asia-Pacific average of 19.3 per cent and the OECD average of 34 per cent highlighting the limitations of its fiscal policy.

Since its independence, labour migration has been crucial for increasing household incomes, reducing poverty, and fostering micro-enterprises in Bangladesh. Additionally, remittances have become a primary source of foreign currency for the country. The steady growth of remittance inflows over the years has not only bolstered Bangladesh's economy but also improved its social indicators and helped rebuild the forex reserve from a vulnerable level.

Remittances play a vital role in strengthening the country's GDP and maintaining the balance of payments (BoP), helping to partially offset the trade deficit. Second, the social impact of remittances is significant, contributing to income stabilisation, reducing vulnerability, and improving living standards at the household level. However, the impact largely depends on individual consumption, saving, and investment behaviours. Overall, remittances have led to improvements in rural education, healthcare, and financial inclusion.

While migration and remittance growth are essential for Bangladesh's future income generation and unemployment reduction, several challenges remain. High processing costs, debt burdens, information gaps, exploitation, and informal migration practices are major barriers to the growth of overseas employment of Bangladeshi workers through formal channel. To address these challenges, stronger monitoring of the migration process, improved policy collaboration with foreign governments in potential destination countries, and a reduction in bureaucratic obstacles can help foster manpower export.

Furthermore, skilled migration is becoming increasingly important for future growth, though most Bangladeshi migrations still fall within the low-skilled category. Proper policy formulation is needed to facilitate the country's participation in skilled migration. Such policies should focus on reforming basic education to develop character, ethics, and foundational skills, language of the host country, while higher education should emphasise practical knowledge and adaptive skills. A public-private partnership is essential for driving nationwide educational reform and preparing the future workforce to compete effectively in the global job market.

The Ready-Made Garment (RMG) sector has long been a cornerstone of Bangladesh's economy, accounting for about 85 per cent of merchandised export earnings. The sector has provided over 4 million jobs, with about 70 per cent of the workforce being women. Since 1980s, the RMG sector has been playing a crucial role in poverty reduction and women's empowerment. Additionally, the sector benefits from globally competitive low wages, high adaptability, and policy support, including bonded warehouses and tax exemptions.

However, the RMG sector in Bangladesh faces significant challenges. One of the primary concerns is the gradual erosion of its competitive and comparative advantage, especially in the face of increasing global competition. Key factors contributing to this decline include low productivity, labour unrest, inadequate diversification and overwhelming dependence on low and medium-range products. Recent imposition of reciprocal tariff by the United States, with a breathing period for three months, has added a new dimension into its ongoing challenges.

The risk of losing comparative advantage in the RMG sector is largely cultural and traditional. For generations, Bangladeshi women, motivated by cultural factors, have developed sewing skills from childhood. This long-standing tradition has given Bangladesh a strong competitive edge in the global RMG market. However, this tradition of early skill development has started to diminish in both urban and rural areas in recent years, potentially leading to a skill gap in the workforce in the long term. To mitigate this risk, a focus on automation and innovation is essential.

Labor productivity, skill development and human capital formation significantly depend on health policy, public expenditure on healthcare and nutrition. Since its independence, Bangladesh's healthcare sector has struggled to receive the necessary and effective policy attention. Some notable successes in healthcare include reductions in child and maternal mortality, improvements in life expectancy, and wide vaccination coverage, which have largely been driven by international development agencies, NGOs, and private sector involvement. However, the sector remains hindered by a lack of proper infrastructure, a shortage of skilled professionals and modern medical technologies, and inefficient governance, all of which severely limit its growth.

Moreover, about 1 per cent of real GDP is allocated to healthcare, while about two-thirds of medical expenses are paid out-of-pocket by patients. This creates significant inequities in access to healthcare, with many people (particularly those who can afford it) opting to seek critical treatments at foreign hospitals. This trend places additional pressure on the foreign exchange market.

Overall, Bangladesh's healthcare sector requires stronger policy focus and improved governance in line with the report of the reform commission on health sector formed by the current interim government. Collaboration with internationally renowned hospital management groups to enhance the governance of public hospitals, attracting foreign investment, and introducing universal health coverage are crucial steps toward building a robust healthcare system in the country.

Bangladesh has significant potential to build a strong and sustainable economy in the future, although the path ahead will be challenging. The success of this endeavour hinges on political will, national unity, inclusiveness, and the implementation of progressive, strategic policies-both for domestic development and foreign relations.

Dr. Shahriar Kabir, Professor, Department of Economics, Independent University Bangladesh (IUB)

Dr. Mahfuz Kabir Research Director, Bangladesh Institute of International Strategic Studies (BIISS)

Dr Carmelo Ferlito CEO - Centre for Market Education, Malaysia, International Senior Fellow - Tholos Foundation, USA.​

 

[Bilal9]

Bilal bhai, we have to diversify our export products and also our export markets. What do you say?

Absolutely bhai - but policy support is needed right now.

Hasina the Indian stooge had listened to her Indian work masters and never worked to provide incentives for this diverisification. I believe we should look at three sectors:

1. Footwear,
2. Pharma,
3. Plastic items like Toys and Household items.

to start with. Asia's tiger economies did all this, but not Pharma, that is a unique benefit just for us as a large populous country.

Don't know if I forgot anything. later down the line, shipbuilding will need a boost as well.

 

[Saif]

Absolutely bhai - but policy support is needed right now.

Hasina the Indian stooge had listened to her Indian work masters and never worked to provide incentives for this diverisification. I believe we should look at three sectors:

1. Footwear,
2. Pharma,
3. Plastic items like Toys and Household items.

to start with. Asia's tiger economies did all this, but not Pharma, that is a unique benefit just for us as a large populous country.

Don't know if I forgot anything. later down the line, shipbuilding will need a boost as well.

We should include light engineering in the list also. It is a promising industry which can turn itself into another apparel industry for Bangladesh if policy and financial supports are given.