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Bangladesh’s forex reserves now $36.90 billion
Bangladesh’s forex reserves are now down to USD 36.90 billion, despite the central bank’s move of curbing imports, and currency diversification in foreign trade.
According to the data of Bangladesh Bank, forex reserves on Wednesday (September 21, 2022) stood at USD 36.90 billion, which was USD 37.08 billion last Monday.
In the first week of this month, the reserves fell to USD 37.06 billion as the Asian Clearing Union (ACU) cleared its July-August arrears of USD 1.74 billion. As of August 25 last year, the reserves were USD 48.60 billion. According to that, the reserve has decreased by USD 11.5 billion in one year.
This is happening due to the selling pressure of US dollars for import LCs and the surge of individual demand to meet travel, medical treatment, and tuition fees for foreign universities.
On September 1, 2022, the forex reserves of Bangladesh were USD 39.05 billion.
Bangladesh Bank has been selling dollars from the reserves in continuation of last fiscal year to bring 'stability' to the forex market. In total, the central bank has sold USD 2.57 billion from reserves in two months (July-August) and of the current FY 2022-23.
Former Bangladesh Bank governor Atiur Rahman said that despite the increase in remittance, the forex reserve fell due to the continued sale of dollars.
"There is no problem even if the reserves fall to USD 38 billion in the current global context. Because, with this reserve, it is possible to meet the import expenses of more than six months,” he added.
Also read: Forex reserves below $38 billion despite tightened imports
Bangladesh, Japan, IFAD partner to bring smallholder farmers closer to international markets
The United Nations International Fund for Agricultural Development (IFAD) and Grameen Euglena, a joint venture between Japan's Euglena Co Ltd and Bangladesh's Grameen Krishi Foundation, are collaborating on an initiative that supports smallholder farmers to cultivate mung beans.
This high-value crop will help them to increase their income and tap into international markets.
The collaboration was launched on Wednesday in Dhaka with a letter of intent signed by both parties.
The partnership aims to strengthen public-private partnerships with IFAD’s implementing partners in Bangladesh.
It will enable farmers supported by IFAD-financed projects to access international markets, while Grameen Euglena will also have access to good quality mung beans produced in large volumes by Bangladeshi farmers.
As part of this initiative, coastal farmers will be trained in technology used in Japan and given technical assistance to access international mung bean value chains.
“IFAD values collaborative initiatives. This renewed partnership will spur engagement with the private sector in Bangladesh. If interests are aligned and the proposed activities improve rural farmers’ conditions, we will endeavour to engage in more collaborations like this,” said Arnoud Hameleers, IFAD Country Director, Bangladesh.
During the six-year partnership from 2022 to 2028, IFAD and Euglena will work together to ensure availability of good quality agricultural inputs at an affordable price, and train farmers to efficiently use inputs for safe, nutritious and diversified production.
“Grameen Euglena is eager to eliminate the poverty and malnutrition of the farmers in rural areas. A key factor to achieve this goal is to generate synergies between the public and private sectors. The collaboration between IFAD and Grameen Euglena will help both organizations achieve their respective goals. We are convinced that it will become an innovative model for new forms of international cooperation,” said Yukoh Satake, Co-Chief Executive Officer, Grameen Euglena.
The joint initiative will focus on facilitating market access for producers in climate-vulnerable coastal regions, especially women and smallholders, and support farmers to meet quality standards and gain access to the export market.
Emphasizing the value that IFAD brings to these partnerships, Hameleers noted that IFAD supports working with partners towards joint solutions that use IFAD expertise in extension and micro-finance to help smallholder farmers achieve their full potential.
"The overarching goal is to build a resilient, diversified and inclusive food system.”
IFAD investments are implemented by partner ministries in the government and IFAD collaborates with other UN organisations and international financial institutions to implement projects.
IFAD has been investing in poor rural women and men in Bangladesh for over 40 years through 35 projects aimed at enabling rural people to better adapt their livelihoods to climate change; help small-scale producers and entrepreneurs benefit from improved value chains and greater market access; and empower marginalized groups, especially poor rural women.
So far, IFAD has invested US $973.5 million, reaching 11.7 million households.
Bangladesh’s GDP likely to grow by 6.6% in FY 2023: ADB
Bangladesh’s gross domestic product (GDP) is expected to grow by 6.6% in fiscal year (FY) 2023, according to the latest Asian Development Bank (ADB) report, Asian Development Outlook (ADO) 2022 Update, released on Wednesday.
The moderately lower growth forecast reflects slower domestic demand and weaker export prospects due to slower growth in advanced economies.
Read: ADB provides assurances of $2 billion in budget support
Inflation is projected to rise from 6.2% in FY2022 to 6.7% in FY2023. The current account deficit is expected to narrow from 4.1% of GDP in FY2022 to 3.6% of GDP in FY2023 as imports slacken and remittances increase.
The main risk to this growth projection is a slowdown in exports caused by global uncertainty over the prolonged war in Ukraine.
“The government is navigating the prolonged external economic uncertainties relatively well and has implemented appropriate policies to reduce the external imbalance, said Country Director Edimon Ginting.
But turbulent times like these are also a good time to accelerate reforms that would improve the country’s growth prospects in the medium term, he said.
These reforms include improving domestic resource mobilization, deepening the financial market, and enhancing competitiveness to promote the creation of productive jobs in the private sector, Ginting said.
Read: ADB, govt agree to complete projects timely to boost economic recovery
Uncertainties in the international energy market provide a good momentum to accelerate reforms to achieve the country’s climate change goals and expand domestic renewable energy supply to reduce dependence on fossil fuels, he added.
The ADO 2022 Update states that private investment growth will be lower due to global uncertainty and energy shortages.
With slower revenue growth and higher import costs, public investment growth will also be slower as a result of government austerity measures.
Inflation is expected to accelerate from 6.2% in FY2022 to 6.7% in FY2023 as price pressures increase due to the upward adjustment of domestic administered prices for all types of fuel and rising global commodity prices.
TCB to procure 1.65 cr litres of edible oil from local suppliers again
Cabinet Committee on Government Purchase approved some 10 proposals including procurement of edible oil by the TCB, and fertliser by BADC and BCIC.
Trading Corporation of Bangladesh (TCB) will again purchase a total of 1.65 crore (16.5 million) litres of edible oil from three local companies to run its open marketing sale (OMS) programme.
The state marketing agency TCB, a subordinate body of the Commerce Ministry, last week received a nod for procuring 2.25 crore (22.5 million) litres of soybean oil and 15,000 metric tons of lentils from local suppliers for the same purpose.
Cabinet Committee on Government Purchase (CCGP) in its meeting on Wednesday approved three new separate proposals, placed by the Commerce Ministry on behalf of TCB in this regard.
Finance Minister AHM Mustafa Kamal presided over the virtual meeting.
As per the decision of the CCGP meeting, the TCB will procure 55 lakh (5.5 million) litres of soybean oil from each of the three companies—Super Oil Refinery Ltd., City Edible Oil Ltd and Meghna Edible Oil Refinery of Dhaka. Each litre will cost Tk 185 and each of the companies will supply the edible oils through two-llitre bottles as per condition of the contract.
The entire consignment will cost Tk 305.25 crore as the TCB will pay Tk101.75 crore to each of the three companies.
The Cabinet body also approved three separate proposals to import a total of 90,000 metric tons of fertiliser from two countries in three lots under G2G deals.
Read: TCB to procure 2.25 litres of soybean oil, 15,000 mts of lentil for OMS
Of these, Bangladesh Agriculture Development Corporation (BADC) under the Ministry of Agriculture will import 30,000 MT of TSP fertiliser in a single lot from OCP, SA of Morocco while Bangladesh Chemical Industries Corporation (BCIC) will 90,000 MT of urea fertiliser Muntajat of Qatar and Kafco of Bangladesh in three separate lots.
The 30,000 MT fertiliser from Morocco will cost Tk 221.53 crore while each metric ton will cost $687.25 against the previous rate of $ 914.50.
Under the BCIC proposals, the Muntajat will supply a lot of 30,000 MT of bagged prilled urea fertiliser at a cost of Tk 206.59 crore. Each MT of fertiliser will cost724.50 against the previous rate of $563.33.
The Mutajat will supply another lot of 30,000 MT bulk granuller urea at Tk 209.10 crore. Each metric ton will cost $733.33 MT against a previous rate $ 630.83.
The Committee also approved a proposal of the National Curriculum and Textbook Board (NCTB) to award contracts for printing, binding and supplying of 11.20 lakh textbooks for the students from class I to VII for the 2023 session-year at Tk 489.25 crore.
The contracts will be awarded to 83 companies in 182 lots, said Abdul Barik, additional secretary of the Cabinet Division while briefing reporters.
A proposal of the Public Works Department under the Housing and Public Works Ministry received a nod to award a Tk 41.86 crore contract to Mazid Sons Constructions Ltd for external electrification works of 2 buildings at Rooppur Green City Housing Complex.
Meanwhile, the Cabinet Committee on Economic Affairs in principle approved two separate proposals to award contracts through direct purchase method.
Of these, Bangladesh Army will execute dredging and river bank protection works at Majhirchar of Dohar area and elevation of ground level of army installations, wave protection and arrow defense works at Army Establishment in Mithamoin Upazila of Kishorganj District.
Explainer: What it means to let taka float
We are in the middle of the first full working week since Bangladesh’s declared adoption of a floating exchange rate for taka against the US dollar, paving the way for the forces of demand and supply - in a word, the market - to determine the rate going forward.
Bangladeshi officials however, have a history of such utterances, without the necessary follow up actions. Most famously perhaps, there is even a formal commitment from 2003 (Bangladesh Bank. Exchange Rate Circular No. 01, 2003 – still available on the BB website), that the central bank subsequently abandoned.
As a result, for almost its entire existence as a sovereign currency, taka’s value has been artificially set by the country’s monetary authority, i.e. Bangladesh Bank, and then allowed to float within a certain band - the so-called managed or ‘dirty’ floating exchange rate.
Read: Banks reschedule loans worth nearly Tk 6000 crore, waive Tk 2800 crore in interest in first 6 months of 2022
In order to maintain the rate at or near its preferred level, the central bank would intervene in the currency markets to buy or sell dollars as the intervention currency. Maintaining an artificially overvalued rate in comparison to the market value, as Bangladesh Bank has almost always done, necessitates selling dollars from its foreign exchange reserves.
Why now?
But the “strongest dollar in a generation”, witnessed over the last year or so and likely to persist well into the foreseeable future, was starting to make the dirty floating system very expensive to maintain for Shapla Chattor, rapidly depleting its reserve of dollars.
In the 2021-22 fiscal, that ended on June 30, Bangladesh Bank spent $7.62 billion from the country’s foreign exchange reserves as it scrambled to slow down taka’s slide against what some are calling “the hideous strength of the dollar.” In the first two months of the current fiscal, July-August, that coincided with a period in which even the government was forced to recognise the impacts of a range of worrying signs for the economy, it escalated dangerously.
Read: Bangladesh received over $1 billion remittance in Sep 1-15
During this period, the central bank spent a further $2.85 billion on shoring up its preferred, overvalued rate, or rates, as it kept stretching to hold on, for taka against the dollar. If you annualise that, you’re looking at spending over $15 billion over the course of the fiscal. Probably more, with all the signs being that US Federal Reserve policies are likely to strengthen the greenback further over the foreseeable future.
At a time when the quite rapid depletion of the forex reserves from its peak of $48.1 billion in August 2021 to some $37 billion at the moment has become a matter of concern (and the IMF
credibly contending that effectively it is a further $7 billion less), the central bank has been forced to realise it is unsustainably costly to hold on. It has to let taka float.
Read Uniform rate: Tk 108/dollar max for remittance, Tk 99/dollar for export income from tomorrow
Does it mean BB will not sell dollars again?
What that basically means is to adopt a hands-off approach. To refrain from using its intervention tools. Importantly though, it doesn’t give up its authority to do so. It may become interventionist again, at any point - unless it gets to a point where you are charged as a ‘currency manipulator’, as the US did with China in 2019, there is nothing really to give you pause even, once you decide to do it. There is nothing to bind you to ‘letting it float’.
And central banks can be clingy. There are no purely floating currencies, it’s all a bit relative. Canada has had a floating exchange rate for longer than any other country. The Canadian national bank has not interfered with its dollar’s price since 1998. The US dollar is a close second. By contrast, Japan and the UK intervene to a greater extent, and India has medium-range intervention by its national bank, the Reserve Bank of India.
What kind of exchange rate regime a country maintains over a given period is actually a call that can only truly be made after the event, when you have the data to tell you to what extent there may or may not have been intervention. It’s a bit like assessing whether you’ve been faithful in a relationship or not - you cannot have it up front. You have to look back.
Read ABB, BAFEDA will meet tomorrow to set uniform dollar rate for banks
But a commitment can be important, and the closest thing resembling such a commitment for Bangladesh Bank that suggests it is preparing to go further this time than it has gone before to letting the currency float came last week: for the first time, Shapla Chattor appeared to accept a suggested rate from the market, along with a mechanism for determining it on a regular basis going forward.
What is the market rate?
The task for coming up with the market-determined exchange rate had been left to the Bangladesh Foreign Exchange Dealers' Association (Bafeda), in consultation with the Association of Bankers Bangladesh (ABB). After months of meetings between the three parties, last week (September 11), the rate put forward by them, along with a mechanism - a weighted average based on actual transactions over the previous 5 working days - was accepted by Bangladesh Bank in a meeting, and subsequently announced.
Since September 13, this rate has been published on the BB website as the nominal rate for the dollar, along with the following note: “Exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks, based on demand-supply interaction and indicative rates suggested by Bangladesh Foreign Exchange Dealers' Association. Bangladesh Bank is not in the market on a day-to-day basis, and undertakes USD purchase or sale transactions with dealer banks only as and when needed to maintain orderly market conditions.”
Read Foreign exchange rate stable after Bangladesh Bank tightens spending
Note the phrase "as and when needed" - it tells you that should the need arise (most likely if the government perceives taka has depreciated too much), the central bank still reserves the right to intervene and effectively override what it has committed to.
There will be teething issues - reports suggest Bangladesh Bank is still selling dollars, but if it stays the road, this will taper down. There are criticisms of the agreement entered into with BAFEDA, in particular how it creates three different dollar rates - one for exporters, one for remitters and one for importers. And leaving the exchange rate to the market while holding on to a fixed interest rate regime (interest rate on lending is currently capped at 9%) goes against conventional wisdom in economics. These are issues we will get to explore in future.
Explainers related to the economy are vetted by economists.
Read BB eases outward remittance rules for foreigners
BGMEA, GarmentTechBD to collaborate in improving supply chain management skills
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Academy of Garments Technology Bangladesh (GarmentTechBD) have signed a memorandum of understanding (MoU) to collaborate in providing training to mid-level management in the RMG industry to improve their knowledge and skills in supply chain management and other self-improvement fields.
Faruque Hassan, President of BGMEA, and Zhuang Lifeng, founding President of Overseas Chinese Association in Bangladesh (OCAIB) and Managing Director of Academy of Garments Technology Bangladesh inked the agreement on behalf of their respective organizations on Tuesday.
As per the understanding, BGMEA and GarmentTechBD will collaborate in conducting survey and study in garment factories to assess training needs and design training courses accordingly.
Read: Bangladesh to stay safe, sustainable apparel sourcing destination: BGMEA
GarmentTechBD will provide training to mid-level management employees in supply chain management and other skills development.
SM Mannan (Kochi), Senior Vice President of BGMEA; Md. Faizur Rahman, Secretary General of BGMEA; Abdus Salam, Adviser; Md. Panna Rahman, Project Leader; Jahangir Alam Joy, Head of HR, Admin and Compliance; and Mohammad Hasan Imam, Senior General Manager of GarmentTechBD were also present at the MoU signing ceremony held at BGMEA Complex.
BGMEA stresses on harmonious relations for greater interest of RMG industry
BGMEA President Faruque Hassan urged workers and entrepreneurs to remain united and work together for the greater interests of the RMG industry.
He also underscored the importance of maintaining harmonious industrial relations by building bridges between workers and factory management.
“Maintaining sound relations between workers and employers will help the RMG industry to sustain its growth. Development of the industry will benefit both sides. Considering the importance, BGMEA has an arbitration-cum-conciliation committee that provides alternative dispute resolution services to workers at free of cost to resolve cases of disputes and grievances” he said.
Faruque Hassan made the remarks while addressing a meeting between leaders of BGMEA and IndustriALL Bangladesh Council (IBC) held at BGMEA Complex in Dhaka on September 20.
He said the RMG industry of Bangladesh is now at crossroads – both opportunities and challenges lie ahead.
Just as the industry has recovered from one crisis -- the Covid-19 pandemic, the Russia-Ukraine war has badly affected the global economy, impacting the apparel industry, he said.
“Moreover, the industry needs to prepare to successfully face the challenges of LDC graduation in Bangladesh. The industry also needs to enhance its capability through product diversification, innovation, technology upgradation and skills development,” said the BGMEA President.
“We have to work together to address all the challenges and continue the growth momentum of the industry,” he added.
Both BGMEA and IBC leaders expressed their desire to continue collaboration for the betterment of the garment industry and its workers.
BGMEA Director Haroon Ar Rashid, Chair of BGMEA Standing Committee on ILO and Labour Affairs A.N.M Saifuddin and Chair of BGMEA Standing Committee on Labour Arbitration Cell-1 Md. Rafiqul Islam were present the meeting.
President of IndustriALL Bangladesh Council (IBC) Mir Abul Kalam Azad, Secretary General of IBC Rashedul Alam Raju, President of National Garments Workers Federation Amirul Haque Amin, President of Bangladesh Textile & Garment Workers League Z M Kamrul Anam, President of Bangladesh Apparel Worker Federation Towhidur Rahman, President of Bangladesh Garments, Textiles and Leather Workers Federation Kutubuddin Ahmed, Secretary General of Bangladesh Jatiya Sramik Kormochari Porishad Hedayetul Islam, General Secretary of Bangladesh Garments and Industrial Worker Federation Babul Akhtar, BMCGTWF President Md. Shahidullah Badal, General Secretary of the Federation of Garments Workers (FGW) China Rahman, Secretary General of United Federation of Garments Workers Nurul Islam, Secretary General of AGWF Kamrul Hasan, and General Secretary of BAWF Tahmina Rahman were also present at the meeting.
ADB provides assurances of $2 billion in budget support
The country director of the Asian Development Bank (ADB) Edimon Ginting said the lender will continue to support the country's rural and urban development and encourage investment in climate-resilient development.
In line with the development goals of the government, about USD $2 billion loan assistance is lined up for this fiscal (2022-23) under different development projects. He said that ADB has strong relations with Bangladesh and that ADB will stand by to support the country’s people in their needs.
Edimon Ginting said this when he paid a courtesy call to Finance Minister AHM Mustafa Kamal at the latter's office in the Secretariat on Tuesday.
Kamal praised AND’s assistance to Bangladesh during the crisis of the Covid-19 pandemic.
In response, the ADB country director, said that Bangladesh has set one of the best examples in dealing with the situation of the Covid-19 pandemic.
They also discussed the 50th-anniversary celebrations of Bangladesh and ADB in 2023. Ginting also appreciated the government's activities for the social and economic development of Bangladesh.
Kamal said ADB is one of the main development partners of Bangladesh. ADB has so far disbursed $27.55 billion in loan assistance to Bangladesh.
The finance minister thanked ADB for providing assistance to Bangladesh in order to overcome the possible economic impact of the Coronavirus outbreak.
He requested ADB to provide more development assistance, especially to meet the challenges of transition after LDC graduation.
Ginting said ADB has been supporting Bangladesh from the beginning to restore the social and economic security of the people to overcome this pandemic and ADB will always be on Bangladesh's side in the future.
Banks reschedule loans worth nearly Tk 6000 crore, waive Tk 2800 crore in interest in first 6 months of 2022
Despite reduced instalment facilities in term loans, banks have rescheduled loans worth Tk5960 crore and waived interest amounting to Tk2816 crore of interest waived in 6 months (January-June), revealed latest data of Bangladesh Bank (BB).
According to the BB data, state-owned banks rescheduled loans worth Tk 1,300 crore, while private banks Tk 4,150 crore. The remaining Tk 779 crore has been rescheduled by specialized banks.
The BB introduced a loan moratorium and reduced instalment facility during the Covid pandemic to avert huge defaults as the businesses were affected by the adverse impact of the Covid-19 pandemic.
Read: Default bank loans surge to record Tk 1.25 lakh crore in Bangladesh: BB
Despite those moves, the accumulated default loans rose to Tk1.25 lakh crore till June this year. The banks had to reschedule around Tk5960 crore, posing a challenge to the sector.
Bankers said many small and big businesses have been affected due to the pandemic. Many have halted regular loan repayments, raising the issue of the pandemic. Some banks are not able to collect the loan repayments due to irregularities and corruption.
As a result, the default loan volume is increasing, and now stands at around 9 per cent of the country’s total disbursement of loans.
Innovation Center: Paramount Group keen to collaborate with BGMEA
Paramount Group, an India-based textile testing and quality control instruments manufacturer, has expressed its interest in collaborating with BGMEA to strengthen the capability of the Center of Innovation Efficiency and OSH.
Manjit Singh Saini, CEO and Technical Director of Paramount Group, showed the interest when he paid a visit to Faruque Hassan, President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) at the BGMEA Complex in Dhaka on Tuesday.
They discussed the scope of collaboration, especially how Paramount Group could provide support to the Center with technologies and technical knowledge about testing and quality control machines and services.
During their discussion, Faruque Hassan gave an overview of the innovation center established by BGMEA to support Bangladesh’s RMG industry with knowledge, skills and technical know-how to face the future challenges and enhance its competitiveness in the long run.
He said the center aims to disseminate technical expertise and knowledge about state-of-the-art technologies and production processes in the industry to enable garment factories to enhance their productivity and competitiveness.
Chief Innovation Officer Manoj K Srivastava, New Business Development Manager Shresht Singh and Assistant Manager Shubham Jha were also present at the meeting.