🇧🇩 Monitoring Bangladesh's Economy (4 Viewers)

[Saif]

Rooppur, Matarbari, metros to get highest ADP allocation

The government is set to increase budget allocation for quick completion of the Rooppur nuclear and Matarbari coal-fired power plant projects.

www.thedailystar.net

Rooppur, Matarbari, metros to get highest ADP allocation



The government is set to increase budget allocation for quick completion of the Rooppur nuclear and Matarbari coal-fired power plant projects.

Several metro rail projects are also going to get more funds.

The Tk 2,65,000 crore Annual Development Programme (ADP) will be placed at today's National Economic Council meeting where allocations will be finalised.

Planning ministry officials say the aforesaid projects may get Tk 34,043 crore, which is 12.84 percent of the ADP.

Six projects related to Rooppur Nuclear Power Plant are the top recipients of funds. The projects will get a total Tk 12,544 crore, up from the current fiscal year's Tk 11,621 crore.

The 2,400MW power plant, worth Tk 1,14,225 crore, is the biggest ever development project in Bangladesh. As of December last year Tk 68,248 crore has been spent. In the 2023-24 fiscal year, it got Tk 9,706 crore, while in the 2024-25 fiscal year it will get Tk 10,502 crore.

The government hopes to see it generate power by March 2025 or sooner.

Six transmission lines from the plant are being set up. Four of the lines are almost 90 percent complete, according to Power Grid Company of Bangladesh.

When the lines are set, a unit of the plant will start operation, officials said.

Setting up of lines across the Padma, which saw 40 percent progress, will be done by October, said Delwar Hossain, the project director.

There are five projects -- totaling Tk 88,492 crore -- related to the power plant in Matarbari, Cox's Bazar. In 2024-25, the projects will get Tk 14,962 crore, up from Tk 12,161 crore in 2023-24.

A unit of Matarbari 1200MW Ultra Super Critical Coal Fired Power Plant was formally inaugurated in November last year and it has been generating power without hiccups. The other unit is set to begin operation by July.

An official of the power division said a substation needed for the plant is being built.

Project Director Abul Kalam Azad told The Daily Star that the work related to power transmission will hopefully be complete by June.

"The existing lines are able to supply up to 900MW. When the work is done, it will be able to handle 1,200MW," he said.

As per the proposed ADP, construction of the power plant will get Tk 6,105 crore. The power transmission system costs Tk 1,024 crore, and Tk 656 crore of it has been spent.

Three projects related to Matarbari port are worth Tk 35,614 crore. In the next fiscal year, they will get Tk 8,758 crore, up from Tk 2,666 crore in 2023-24.

Three metro rail projects worth Tk 1,28,687 crore, are going to get Tk 6,537 crore.

The Uttara-Motijheel part of MRT line 6 is complete, and the ADP proposes Tk 1,975 crore to build the part from Motijheel to Kamalapur.

Two other metro rail projects -- MRT Line 1 (Airport-Purbachal-Kamalapur) and MRT Line 5 (Hemayatpur-Bhatara) -- are making progress. The initial activities are done. The main construction work will begin in the upcoming fiscal year.

The MRT-1 would cost Tk 53,977 crore, and MRT-5 Tk 41,238 crore. The proposed ADP allocates Tk 3,594 crore and Tk 968 crore for them respectively.​

 

[Saif]

Next budget will be challenging than previous years: Debapriya

High inflation, rising pressure on external account to slow down economy, the economist said

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Next budget will be challenging than previous years: Debapriya
High inflation, rising pressure on external account to slow down economy, the economist said



Preparing national budget for the next fiscal year will be more challenging than any previous years as the Bangladesh economy is passing through a tough time and the geopolitical developments are influencing the economy, Debapriya Bhattacharya, a distinguished fellow at the Center for Policy Dialogue (CPD), said today.

The economy is reeling from high inflation and rising pressure on the external account, he said, adding that economic activities are slowing down too.

"Under the circumstances, ensuring macroeconomic stability should be the topmost priority. It is like diabetes. If we cannot control it, it affects the rest of the organs of the body."

The economist made the comments at a discussion on the budget for 2024-25 fiscal year.

Private television channel NTV organised the programme at Pan Pacific Sonargaon Dhaka this evening.

Steps to control inflation will get priority in the upcoming national budget, Waseqa Ayesha Khan, state minister for finance, said at the event.

Along with this, there will be a system to ensure social security, she said, adding the fiscal measures will be designed to attain the commitments made in the Awami League's manifesto declared before the election.

She said the upcoming budget will incorporate the measures to reduce unemployment.

Mashiur Rahman, economic affairs adviser to the prime minister, said they will take measures to ensure socio-economic progress.

Moderated by Mahbubul Alam, president of the Federation of Bangladesh Chambers of Commerce and Industry; Saleh Uddin Ahmed, former governor of Bangladesh Bank; Mohammad Hatem, executive president of Bangladesh Knitwear Manufacturers and Exporters Association, and Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh, also spoke at the occasion.​

 

[Saif]

Bangladesh expands offshore banking in hunt for forex

Offshore banking is increasingly becoming a key window for banks in Bangladesh to facilitate investments and international trade by attracting deposits in foreign currencies.

www.thedailystar.net

Bangladesh expands offshore banking in hunt for forex



Offshore banking is increasingly becoming a key window for banks in Bangladesh to facilitate investments and international trade by attracting deposits in foreign currencies.

Industry people say offshore banking can even play a crucial role in mitigating the persisting foreign currency crisis in the country by extending liquidity support and stabilising the local currency.

"Deposits of offshore banking will be a major source for US dollars," said Mashrur Arefin, managing director and chief executive officer of City Bank, which has stepped up efforts to draw foreign deposits through offshore banking operations (OBOs).

It started its journey in 1985 as the central bank created financing opportunities for factories at the export processing zones – the estates set up to drive the country's export earnings – by providing banking service to importers, exporters, and financial institutions.

The segment received more attention in recent years, particularly after Bangladesh began to feel the pinch following a sharp depletion of foreign currency reserves.

In March this year, parliament passed the Offshore Banking Act 2024 to give a much-needed boost to the country's desperate efforts to improve the US dollar supply, which has squeezed in the past two years owing to higher outflows compared to inflows.

The BB has relaxed rules and policies to allow both Bangladeshis and foreign nationals to avail the service. It has permitted domestic commercial banks' OBOs to offer an interest or profit rate markup over a benchmark rate for term deposits in foreign currencies to eligible customers.

The customers include individuals and entities residing outside the country, non-resident Bangladeshis, persons of Bangladesh origin, foreign nationals, companies registered and operating abroad, and external institutional investors.

The central bank has allowed domestic banking units to receive funds from OBOs up to 40 percent of their regulatory capital to settle payment obligations.

OBOs can be executed in five currencies: the US dollar, the British pound, the euro, the yen, and the yuan.

Currently, about 40 banks have offshore units. At the end of September, the total outstanding loans of OBUs stood at Tk 83,826 crore.

Investors enjoy tax-free profit of up to 8.40 percent on fixed deposits in the USD or the euro for terms ranging from three months to five years. They are also able to transfer funds internationally without any restriction along with profit.

"The offshore banking system has become a new avenue for the dollar supply apart from exports and remittance. Offshore banks' fixed deposits can be used to cover the cost of imports," Arefin said, adding that the dollars obtained through OBOs are sold on the interbank foreign exchange market.

Currently, City Bank has deposits amounting to $23 million under its offshore banking unit. "Our target is to raise it to $1 billion," the noted banker said.

There are two ways to open offshore banking accounts: one is for those residing in Bangladesh and the other is for those who live abroad.

Any representative of expatriates, such as family members and relatives, or partner of a foreign investor residing in Bangladesh can open accounts. Similarly, expatriates and foreign investors can do the same.

"We call it international bank accounts. City Bank mobilised $29 lakh through the accounts opened from abroad," Arefin said.

City Bank is providing the facility to open dollar accounts for offshore deposits at its 175 branches.

Mohammad Ali, managing director and CEO of Pubali Bank, said the offshore banking has a huge potential in Bangladesh.

"Our reserves are small. If we can promote it properly, every bank can mobilise billions of dollars through the offshore banking."

Pubali Bank is developing software and a mobile app so that anyone can open accounts and do banking from abroad.

"We hope to complete all procedures by next two months."

Mohammad Ali said if Bangladeshi expatriates deposit money at OBOs, import obligations can be met with the funds as well as from remittance and export earnings.

"Then, the forex reserves will go up automatically."

Speaking about the prospect of offshore banking, both Arefin and Mohammad Ali gave the example of Mauritius, an Indian ocean island nation with only about 1.3 million population.

"This country has a balance of $800 billion under offshore banking," Arefin said.

"We have a huge economy with 17 crore population. If more people are informed about the advantages of this banking relationship, there is a possibility of bringing $50 billion under OBOs."​

 

[Saif]

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks

Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit. Highlighting the contributions of Bangladesh’s sixty thousand expatriates to the economies of bo

thefinancialexpress.com.bd

Hasan Mahmud invites Spanish investment in SEZs, Hi-tech parks
Published :
May 17, 2024 23:51
Updated :
May 17, 2024 23:53



Foreign Minister Hasan Mahmud has invited Spanish investment in special economic zones (SEZs) and hi-tech parks in Bangladesh availing various fiscal and non-fiscal incentives for mutual benefit.

Highlighting the contributions of Bangladesh's sixty thousand expatriates to the economies of both Bangladesh and Spain, the Foreign Minister suggested that the two countries may consider concluding a bilateral instrument for legal migration of professionals and skilled workers from Bangladesh to Spain.

Hasan also underscored the ample opportunity of emboldening cultural exchange and cooperation between the two friendly countries, according to a UNB report.

The issues were discussed when Ambassador of Spain to Bangladesh Gabriel Sistiaga Ochoa de Chinchetru had his maiden courtesy meeting with the Foreign Minister on Thursday.

Hasan congratulated Gabriel Chinchetru for his appointment as the Ambassador of Spain to Bangladesh and hoped that bilateral relations between our two friendly countries would be further strengthened during his tour of duty in Dhaka.

The Foreign Minister expressed satisfaction over the excellent bilateral relations between Bangladesh and Spain and thanked Spain for being the second largest destination of Bangladesh's merchandise exports as well as the second largest host of Bangladesh Diaspora in the European Union (EU).

The Spanish Ambassador stated that concluding a bilateral instrument on migration and mobility between Bangladesh and Spain in line with the spirit of EU's Pact on Migration and Asylum would be beneficial for both the countries.

He also assured to expand business and investment as well as cultural ties between the two countries, according to the Ministry of Foreign Affairs.

The Ambassador also met Foreign Secretary Masud Bin Momen.

They discussed the potential to broaden cooperation and harness mutual capacities in areas like bilateral commodity trade as well as orderly and skilled migration and mobility from Bangladesh to Spain.​

 

[Saif]

IMF satisfaction: Respite or disquiet for Bangladesh?

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment

en.prothomalo.com

IMF satisfaction: Respite or disquiet for Bangladesh?
Farid Khan
Published: 18 May 2024, 10: 14



The post-Covid global recession and spiralling costs of fuel import triggered by the Russia-Ukraine war, put considerable strain on Bangladesh's foreign currency reserves. Having no other alternative, Bangladesh turned to the International Monetary Fund (IMF), seeking a loan.

In January 2023 IMF pledged to lend Bangladesh USD 4.7 billion on certain conditions, including that subsidy on the energy sector be lifted.

IMF gave Bangladesh directives to increase the foreign currency reserves, to increase the tax-GDP ratio by 0.5 per cent within June 2023, and to move to a formula-based price adjustment mechanism by December 2023 to fix the cost of fuel oil.

Also, in its first review in December 2023, IMF advised Bangladesh to take up a contractionary monetary policy to control the prevailing high inflation rate in the country and to follow a flexible exchange rate policy.

With the January 2024 election ahead, the government refrained from fulfilling those conditions. However, in order to avail the next tranche of the loan, this month it has left the interest rate entirely to the market and so increased the policy interest rate by 50 basis points to 8.5 per cent.

After taking up a flexible exchange rate policy, the exchange rate of the dollar was hiked by Tk 7 to the highest the country has ever seen, at Tk 117, under the crawling peg exchange rate system.

Also, a formula-based energy price adjustment mechanism was implemented for petroleum products. The donor agency IMF is satisfied with these financial reforms carried out by the government.

And the end of the second review this month, the IMF mission chief Chris Papageorgiou apprised the media of its satisfaction, saying there needs to be more reforms in the banking sector and emphasis must be placed on tax and revenue collection. He also stressed the need on curbing subsidies in order for the economy to turn around.

The matter that must be given due consideration is how much respite will this satisfaction of IMF offer the country, and how must relief will these reforms give the people for whom the loan has been taken.

Ever since this loan was taken from the IMF, the country has seen one record after the other. There has been a record in the hike of energy prices, the dollar rate has hit a record high, the reserves have hit a record low. And above all, the people are floundering under the record hike in the prices of essentials. IMF's satisfaction has offered the people no respite. It has simply served to increase their distress further.

On the eve of receiving the loan, in January 2023 Bangladesh's central bank authorities said that fighting against inflation was Bangladesh Bank's top priority and that they aimed to bring down inflation to 6 per cent that year. That aim was not met. The prices of essential continue to increase in leaps and bounds.

Even by taking the path shown by IMF and following their prescription, the projected inflation rate could not be achieved. On the contrary, it has increased. They reason for this increase, the say, is the global contractionary financial policies, high commodity and food prices in the international market, and internal weaknesses.

Inflation is increasing steadily for these reasons and foreign currency reserves are dwindling. This is increasing pressure on the economy and macroeconomic challenges are growing more complex.

When the country's economy is unsteady amid the uncertain and tumultuous global circumstances, and the financial sector is fragile, it is certainly extremely daring to take up a new method of determining the exchange rate and deciding on formula-based energy price adjustment.

A handful of Latin American countries took up this strategy to determine exchange rates, but many of them later moved away from this system.

On one hand there is the post-pandemic weak economy and the war-hit global market. On the other hand there is forecast of economic recession and fear of an extreme food shortage. Under such circumstances, serious thought must be given to whether the unknown and uncertain path shown by IMF will lead the country's economy to happier climes or pose as a risk.

IMF has greeted this daring decision taken by the government for financial reforms. Liberalising the interest rates and taking up a contractionary monetary policy will help in relieving the pressure of inflation caused by reforming the exchange rate.

It is clear that there are all apprehensions that financial reforms will create new pressures, adding salt to the wound of the people squirming under the pressure inflation. Reforms in the exchange rate have pushed the price of the dollar up by 6 per cent, which in simple math translates directly into a 6 per cent rise in the prices of import-dependent. By the same formula, the import costs of fuel oil will increase proportionately, leading to increased import expenditure.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

The increase in dollar rates means costs on foreign loans will go up. This multidimensional effect of increased dollar rates will put added pressure on foreign exchange reserves, and these reforms will push inflation up further.

Also, in post-war times, the economic depression in western countries can have an effect on Bangladesh's export revenue in the coming days. Meanwhile, the Middle East is in a state of unrest due to the Israeli aggression in Palestine, which may have a negative impact on remittance. These factors may lead to a drastic drop in foreign exchange reserves and the writing is already on the wall.

At a juncture where the country's financial sector is already unstable and fragile, leaving the interest rate to the market may make this sector even more unstable.

If interest rates go up, loan expenditure in the private sector and investment costs will go up. This creates apprehensions that investments may decrease in the market. That may lead to increased capital flight, and many workers may lose their jobs.

There are strong misgivings that these multidimensional contractionary financial policies will ultimately dash to the ground all hopes of a fall in inflation and a durable foreign sector.

There is no doubt that we are bound to a larger extent to follow the IMF recommendations or directives for financial reforms. But there are questions regarding the logic in the timing selected to implement these reforms. This is questioning the capacity and sovereignty of our financial sector.

We are in a flurry to meet the IMF conditions, but are we able to uphold the interests of the people of Bangladesh? Past experience has left a bitter taste in our mouths.

In the past, IMF has never been able to be anyone's real friend or guardian. A study of Oxfam reveals that in countries that have been transformed into high debt-ridden countries due to IMF loans, it becomes impossible to repay the loans at the same as time as investing in the education, health, social welfare and development sectors.

The bottom line is, Bangladesh in undoubtedly facing challenging times. Attempting to salvage an economy in deep crisis by entangling it a web of reform conditions, is akin to trying to teach a drowning man to swim, rather than just pulling him out of the water. The results in both instances can be disastrous.

How can this challenge be tackled? That's a million dollar question. But if domestic revenue is increased, stern austerity measures are put in place, corruption is clamped down upon and good governance is established, it will at least put some wind in the sails.

* Farid Khan is a professor at the department of economics, Rajshahi University.​