Bangladesh’s foreign exchange reserves continued to fall with the usable reserves standing now at USD $ 15.82 billion as per IMF guideline, according to banking sources familiar with the development on Tuesday (November 28, 2023). During the period of the COVID-19 pandemic two years ago, the reserves had soared to $48 billion, thanks to greater inflow of remittances amid reduced import demand. The reserves started decreasing since the eased import restrictions and impact of the Russia-Ukraine war. Also read: Forex reserves below $20 billion after paying ACU The latest foreign exchange report of Bangladesh Bank (BB) revealed that the country's reserves on 23 November stood at $19.52 billion based on the IMF formula (Balance of Payments and International Investment Position Manual) or BPM6. As per the formula, the net reserves will be $3.7 billion less than the total reserve amount, the BB sources said. The BB spokesperson Mezbaul Haque in this regard told UNB that foreign exchange from reserves is spent and deposited every day. Also read: IMF relaxes forex reserve and revenue targets for $4.70 billion loan It is a continuous process of a country, he said advising common people not to panic at the news of decreasing foreign exchange. In July, Bangladesh started calculating its foreign reserves according to a formula suggested by the International Monetary Fund – BPM6. Following the new calculation, Bangladesh's gross foreign exchange reserves that time dropped by $26.44bn to $23.56bn. Also read: Bangladesh stands on the edge of deep ditch before the polls: Dr Debapriya
Despite demand being nearly half of electricity generation capacity, the government of Bangladesh continues to extend the tenure of costly rental power plants. The latest decision for extension of contract for a gas-based rental power plant was made in the Cabinet Committee on Government Purchase on November 8. As per the decision, a 55 MW gas-based rental power plant of Precision Energy Ltd. will get an extension of 5 years to their existing contract with the state-owned Bangladesh Power Development Board (BPDB). Under the Power Purchase Agreement (PPA), the BPDB will buy electricity from the plant at a tariff rate of US Cent 5.7 (equivalent to about Tk 6) per kilowatt hour while it has been buying electricity from base-load plants at around half the price. Read: Despite surplus electricity, contracts of 10 rental power plants extended in four months For instance, the government has been purchasing electricity from Summit-GE's Bibiyana 450 MW gas-fired power project at US 3.32 cents per kilowatt-hour, with a contract for a period of 22 years. The government approved a PPA in October 2021 under which Consortium of (1) Edra Power Holdings Sdn Bhd, Malaysia and (2) Winnievision Power Ltd, Bangladesh, will set up the 660 MW base-load combined cycle plant and the BPDB will purchase electricity from the plant over a contract period of 22 years at a levelised power tariff of US 3.679 Cents (equivalent to Tk 2.94) per kilowatt hour to be run by local gas. The move for continuing the extension of rental and quick rental power plants' contracts raised the eyebrows of the energy experts. Many experts and power industry insiders believe that such a move to continue entertaining the costly rental power plants will increase the burden on the government for more subsidies, at a time when the sector has already been facing huge capacity payments' obligation with surplus capacity of electricity generation reaching about 50 percent. Read: Power flow set up from Payra plant to Rampal sub-station Last year, the government extended the contracts of at least 10 rental power plants with a new provision of “No Electricity, No Payment” but kept a fund allocation of Tk 6,564.08 crore to pay the owners of the rental power plants. This time also Tk 1205.40 crore was kept as allocation while approving the latest extension proposal of Precision Energy's 55 MW Ashuganj gas-fired rental power plant which will be paid in in next 5 years. According to the Power Division’s official statistics, as of September 13, 2023, the country's power generation capacity was 27,834 MW including off-grid renewable and captive power, while the highest generated in a day was 15,648 MW. The BPDB official data shows the country generated 14,021 MW on September 26, while covering the excess demand by resorting to load shedding of 113 MW. Read: 5 rental power plants with 457 MW get 2-year extension The demand was decreasing with the coming winter and the country's power demand was recorded to be 10,954 MW on November 8 while on-grid installed capacity was showing 25,339 MW meaning that the surplus capacity was more than double at 14,385 MW. State Minister for Power, Energy and Mineral Resources Nasrul Hamid, however, defended the extension of the rental power plants’ contracts saying that the deals were extended for “emergency necessity” to tackle the current situation when last year 10 rental power plants' contracts were extended. “As there is a gas shortage, we have to run liquid-fuel based rental and quick rental power plants on full capacity to meet the demands," he had told UNB. He also said these plants don’t oblige the government to make 'capacity payment' - i.e. payment for unused electricity, that was the case with some earlier contracts. “As a result, the cost of electricity from these extended rental power plants came down by 30-40 percent from the original cost," Nasrul Hamid said. The government documents show that of the approved 5 plants in March last year, three belong to Summit Group, one belongs to Dutch-Bangla Group and one to Orion Group. 'Admit the mistake first' About the country's growing surplus electricity and extension of rental power plants, vice president of Consumer Association of Bangladesh (CAB) Prof M Shamsul Alam said: “There will be a big indiscipline in the power sector as pressure for private sector’s capacity payment will continue to go up while import of primary fuel will be increasing. Finally, it will lead to energy insecurity." Read: Deal period with rental, quick rental power plant owners can’t be extended: BPDB Chairman In such a situation, he said, the only way-out is that the government has to admit first it has done a mistake by giving permission to the private sector for excessive power generation without consideration of the demand and then change the current policy and strategy. Otherwise, the situation will be more difficult to manage as pressure from the International Monetary Fund (IMF) is coming to raise electricity tariff again. If so, it will further push up inflation, he added.
The International Monetary Fund (IMF) has relaxed several targets including foreign exchange reserves, revenue collection, automatic price adjustment of fuel for the $4.70 billion loan package for Bangladesh. At the beginning of this year, the IMF had set forex reserves target at $25.34 billion by September and $26.81 billion by June next year as conditions for the loan package. According to BPM6 – reserve calculation method – Bangladesh’s forex reserves stand at $21.15 billion. Bangladesh urged IMF to downsize required reserves to $20 billion for next loan instalment, says official On a net basis, this amount has further decreased to below $18 billion. In this situation, the Finance Division officials requested the IMF to relax the target for forex reserves. Considering the request, the IMF has relaxed the target. Bangladesh has committed to keep the reserves at $18.4 billion at the end of December this year, and at $20 billion at the end of June next year. IMF delegation meets BGMEA President to discuss challenges and prospects of RMG sector Last Tuesday and Wednesday, the visiting IMF delegation discussed the issues with the relevant officials of the Finance Division of the Ministry of Finance. Sources in the Finance Division said that after discussion, IMF agreed on being flexible on some conditions. Finance Secretary Md. Khairuzzaman Majumder led the meeting on behalf of the government. The IMF mission was led by Rahul Anand, head of the IMF’s Asia-Pacific division. IMF team holds meeting with Power Division, discusses subsidy
Bangladesh urged IMF to downsize required reserves to $20 billion for next loan instalment, says official
Bangladesh has now requested the International Monetary Fund to lower the requirement of foreign exchange reserves at $20 billion as a condition of releasing the second installment of the $4.7 billion loans, an official of Bangladesh Bank confirmed this on Monday (October 16, 2023). The request was made to the visiting IMF delegation that reviewed with the officials the progress in meeting its conditions. Read: Myanmar ambassador meets with FBCCI, keen to start direct flight Despite different measures taken by including cutting unnecessary and luxury goods imports, in the last three months, gross reserves declined by $2.58 billion. Two main sources of foreign exchange earnings –inward remittances flow saw a record decline to $1.34 billion in September and export earnings failed to achieve the target. Considering the situation the central bank proposed to the IMF mission led by Rahul Anand to revise the reserves down to $20 billion. Under the terms of the $4.7 billion IMF loan, the actual reserves were supposed to be maintained at $24.46 billion last June and $25.30 billion in September. At the end of December, Bangladesh must maintain at least $26.81 billion in net reserves. Read: PGCB, GIZ set up lab to advance country’s clean energy transition The net forex reserves are now less than $18 billion, according to the calculations of Dr Zahid Hussain, a former lead economist of the World Bank's Dhaka office. However, the IMF also suggested that BB fix the exchange rate of US dollars on competitive market price, which is now being set by the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) in the concentration of the BB. The central bank earlier relaxed the exchange rate of the US dollar gradually and now the official exchange rate is Tk112 per dollar. Economist Dr Ahsan H Mansur said that Bangladesh has to maintain strict monitoring of trade-based money laundering along with cutting unnecessary imports to check the downslide. Read: IMF lowers growth forecast for current fiscal to 6 percent
After the World Bank did it last week, the International Monetary Fund (IMF) today (October 11, 2023) revised downward its growth forecast for the Bangladesh economy in the 2023-24 fiscal. The IMF lowered its projection to 6.0 percent from 6.5 percent. The World Bank last week projected its new growth figure for the Bangladesh economy in 2023-24 as 5.6 percent, down from its previous projection of 6.2 percent. IMF outlook worsens for a 'limping' world economy. Mideast war poses new uncertainty The IMF also said Bangladesh's economy grew 6 percent in the 2022-23 fiscal, in its flagship World Economic Outlook publication, released globally on Tuesday. The global lender revised upward its projections for Bangladesh's growth to 6 percent for the fiscal year 2022-23 from its previous forecast of 5.5 percent. IMF satisfied with BBS for efforts to meet conditions: Official
The government of Bangladesh is hoping to return the economy to its pre-COVID growth momentum by the end of the current fiscal (2023-24), although that presents a significant challenge in the face of a clutch of economic headwinds. The government’s vision for economic recovery is outlined in the "Medium Term Macroeconomic Policy Statement 2023-24 to 2025-26," prepared by the Macroeconomy Wing of the Finance Division, under the Finance Ministry. It maintains that with the onset of the pandemic in 2020, the economy was knocked off its fast-paced growth trajectory for large parts of the last three years. The first confirmed cases of Covid-19 in Bangladesh were reported in March 2020, less than three months after the outbreak in Wuhan. Recently published quarterly GDP data (in keeping with a condition set by the IMF) bears this out. It reveals that the economy contracted by a massive 7.86 percent in the last quarter of the 2019-20 fiscal (April to June 2020), as the virus spread throughout the globe. Read more: Financing, technology and innovation needed for just transition to greener economy: Shahriar Alam According to the quarterly data released retrospectively by the Bureau of Statistics (BBS) last month, GDP had grown by between 6.5 to 8 percent in the first three quarters of 2019-20. That reflects the extent to which the wind was knocked out of the economy by the negative growth (contraction) in the fourth quarter. The slump induced by Covid would keep economic performance depressed through the first two quarters of the next fiscal (2020-21). It wasn’t until the 3Q (January to March, 2021) that the first signs of a recovery would become visible. As the 2021-22 fiscal kicked in, Bangladesh looked ready to put Covid-19 behind it, having implemented a successful vaccination programme and lifted lockdown restrictions. The economy rallied robustly, and GDP growth touched 10 percent in the third quarter (January to March 2022). Yet even as the recovery was underway, the seeds for it to stumble were sown halfway across the globe, with Russia going to war in Ukraine in February 2022. The resulting volatility in international energy markets and supply chain disruptions would knock the momentum out again, of the country’s post-Covid recovery. Read more: World Bank forecasts Sri Lankan economy to grow by 1.7% in 2024 Although there was nothing like the contraction precipitated by Covid-19, the economy did experience a severe slowdown in the last quarter of FY22, slipping to just 2.6 percent from the previous quarter’s high of 10 percent. “Bangladesh also braced for impacts on its economy. However, actual data shows that Bangladesh did impressively even during the height of the Covid-19 outbreak and is expected to return to pre-Covid growth trajectory by the end of FY 2023-24,” the statement surmises. If everything goes according to plan and ‘assumptions hold’, it says that 8 percent GDP growth rate can be attained again in 2025-26. “Therefore, the deviation of the actual from the planned growth envisaged in the 8th FYP (Five Year Plan) remained small,” it said. Read more: Bangladesh economy hit hard by Ukraine war The Macroeconomic Policy Statement mentions capital accumulation is key for development and hence the government aims to foster private investment along with public investment towards fulfilment of its goals.. Total investment in FY 2021-22 stood at 32 percent of GDP in which the contribution of the private and the public sectors were 24.5 and 7.5 percent, respectively. To achieve the long and medium-term growth targets, the level of investment will need to be increased further. The statement points out that there is room to increase the implementation rate of public investment. If the pace of implementation of development projects can be increased, the required level of investment can be attained. “Recognising this, the government has taken steps to bring about some structural changes in both project design and implementation levels,” it says in the statement. Read more: BGMEA-Circle Economy ink MoU to accelerate garment, textile sector’s transition towards circular economy The Finance Division document said that the Russia-Ukraine war has put global energy supplies at risk. Russia is a major global supplier of energy and hence when the war broke out, commodity prices spiked fast. Bangladesh started to suffer from this like almost all other countries. By December 2022, point-to-point inflation rose to 8.7 percent and then further rose to 9.3 percent by March 2023. However, global commodity prices are already falling, and central banks have raised policy rates and because of this it is expected that inflation will come down in the coming months. The IMF has projected that the measures taken by the governments will help reduce inflation in the medium-term. The Finance Division has projected that average inflation will fall significantly to 6.0 percent in 2023-24, although there has been no indication of it through the first quarter (July to September). Read more: Bangladesh Budget 2023-24 passed in parliament In order to tame inflation and protect the incomes of the poor, the government has emphasised increasing the domestic production of essential items, while gradually tightening monetary policy. The document says that food inflation hurts the poor the most. Keeping this in mind, the government through various measures, including subsidies and incentives, encouraged the growth of agricultural output. To support the agriculture sector, disbursement of credit to the sector has been increased. By the end of February 2023, the disbursement of agricultural credit and non-farm rural credit amounted to Tk. 210.66 billion in the first 8 months of the last fiscal, which was almost 14 percent higher, year on year. Read more: Why inflation persists at a higher level in Bangladesh With the help of supportive policies of the government, the general index of industrial production (medium and large-scale manufacturing) has been on the rise, reflecting expanded industrial production. Dr Masrur Reaz, a prominent economist and public policy analyst, believes it would be very challenging to regain the pre-Covid momentum within the current fiscal, since a number of macroeconomic indicators have become unstable. Talking to UNB, he suggested the government focus on stabilising the macroeconomic situation first, which would make the economy more sustainable in the long run. Dr Reaz pointed out that high inflation, severe foreign exchange/dollar crisis preventing, among other things, opening of LCs, and the fluctuating value of domestic currency taka, should be resolved first. Read more: Businesses should get opportunities to turn around before wholesale declaration of loan defaulters: FBCCI President “To bring the economy back to its pre-Covid growth rate, these issues should be resolved first, which itself would be very challenging and difficult in a short time,” he opined. Explaining further, Dr Reaz said: “The time is to stabilise the economy rather than focus on growth. In the long run, the economy will grow through reducing the high rate of non-performing loans, keeping inflation within reasonable limits and achieving exchange rate stability.”
Inflation continues to persist at a high level in Bangladesh, affecting the lifestyles of common people severely as they struggle to survive on limited earnings in the aftermath of the Covid-19 pandemic. Figures released on Sunday showed general inflation remained virtually unchanged at 9.69 percent on a point-to-point basis for the month of July, having been 9.74 percent in June, said the Bangladesh Bureau of Statistics (BBS). The Ministry of Finance and Bangladesh Bank (BB) have blamed the external factors for inflation while they failed to adopt the right fiscal and monetary policy measures, said economists. Read: General inflation virtually unchanged at 9.69 percent in July Talking with UNB former governor of the Bangladesh Bank Dr Atiur Rahman said Bangladesh could not go for adequate tightening of the monetary policy in time to rein in inflation while the US Federal Reserve continues to raise policy rates persistently. He said, the Reserve Bank of India (RBI) has also been raising policy rates consistently, while agriculture production rising consistently to strengthen the supply side. The market imperfections caused by growth curtail the root cause of higher food inflation and other necessities. The depreciation of the Taka had also been raising imported inflation at these times. The rent-seeking on the roads by some quarters besides higher transport prices due to readjusted fuel prices may have also been fuelling inflation from the supply side, Dr Atiur said. Read: Bangladesh Bank working to normalise inflation and dollar crisis despite geopolitical challenges He suggested the ways out may be to further tighten monetary policy and reduce public expenditure to reduce public borrowing from the central bank to align fiscal policy along with tighter monetary policy. The competition commission and Consumer Protection Authority must wake up to break the curtails. The roads should also be made rent-free to facilitate smooth flows of goods and daily necessities. The exchange rate must be stabilized at a single rate and hurdles for small entrepreneurs in opening letters of credit with adequate dollar support could ensure smooth supplies of imported goods for consumption and raw materials for continued production of goods and services could also help stabilize the prices of the same. Read: Ex-governors optimistic MPS can claw back inflation, implementation the key The regulators should keep on communicating well in anchoring the inflation expectations so that inflation does not get embedded in consumer psychology. Dr Zahid Hussain, the former lead economist of the World Bank's Dhaka office, told UNB that no measure has been taken to rein the inflation so far. He said the reigning repo rate is not affecting the market, and the increase of 1.0 percent in interest rate from July is not making any impact on the money market. He pointed out that printing currency to meet government expenditures is also fuelling inflation. Read: CPD dismisses budget's projections on growth, inflation, revenue collection Dr Zahid said there is no control over pricing of essentials products in the market, and businesses are making hefty profits showing supply-side uncertainty in the wake of the foreign exchange crisis. Dr Ahsan H Mansur, former economist of IMF and executive director of Policy Research Institute (PRI), told UNB that the BB printed more currency (taka) in a single year than it had in the last 50 years, which brought additional inflationary pressure. Denying the BB claim of printing money as a regular matter that has no impact on inflation, Mansur said printing money against the US dollar, which commercial banks sold to the central bank is a different issue. Explaining the situation, Dr Mansur said despite the dollar crisis, the printing of high-speed money (printing currency) is continuing, which obviously brings impact on higher inflation, resulting in Bangladesh’s inflation rising while Sri Lanka and other Asian countries’ inflation is falling.
UN steps up criticism of IMF and World Bank, the other pillars of the post-World War II global order
From the ashes of World War II, three institutions were created as linchpins of a new global order. Now, in an unusual move, the top official in one — the secretary-general of the United Nations — is pressing for major changes in the other two. Antonio Guterres says the International Monetary Fund has benefited rich countries instead of poor ones. And he describes the IMF and World Bank 's response to the COVID-19 pandemic as a "glaring failure" that left dozens of countries deeply indebted. Also Read: Budget not based on IMF conditions: Finance Minister Guterres' criticism, in a recent paper, isn't the first time he's called for overhauling global financial institutions. But it is his most in-depth analysis of their problems, cast in light of their response to the pandemic, which he called a "stress test" for the organizations. His comments were issued ahead of meetings called by French President Emmanuel Macron in Paris on Thursday and Friday to address reforms of the multilateral development banks and other issues. Neither the IMF nor the World Bank would comment directly on the secretary-general's criticisms and proposals. But Guterres' comments echo those of outside critics, who see the IMF and World Bank's leadership limited by the powerful nations that control them — a situation similar to that of the United Nations, which has faced its own calls for reform. Also Read: Bangladesh faces external pressures, requires careful macroeconomic management: World Bank Maurice Kugler, a professor of public policy at George Mason University, told The Associated Press that the institutions' failure to help the neediest countries "reflects the persistence of a top-down approach in which the World Bank president is a U.S. national appointed by the U.S. president and the IMF managing director is a European Union national appointed by the European Commission." Richard Gowan, the International Crisis Group's U.N. director, said there is a lot of frustration with the U.S. and its European allies dominating decision-making, leaving African countries with only "a sliver of voting rights." Developing countries also complain that the bank's lending rules are weighted against them, he said. "In fairness, the bank has been trying to update its funding procedures to address these concerns, but it has not gone far enough to satisfy countries in the Global South," Gowan said. Guterres said it's time for the boards of the IMF and the World Bank to right what he called the historic wrongs and "bias and injustice built into the current international financial architecture." Also Read: Bangladesh receives $858 mln World Bank fund for agriculture growth, road safety That "architecture" was established when many developing countries were still under colonial rule. The IMF and what is now known as the World Bank Group were created at a conference in Bretton Woods, New Hampshire, in July 1944 to be key institutions of a postwar international monetary system. The IMF was to monitor exchange rates and lend reserve currencies to countries with balance of payment deficits. The World Bank would provide financial assistance for postwar reconstruction and for building the economies of less developed countries. Guterres said the institutions haven't kept pace with global growth. He said the World Bank has $22 billion in paid capital, the money used for low-interest loans and grants for government development programs. As a percentage of global GDP, that's less than one-fifth of the 1960 funding level. At the same time, many developing countries are in a deep financial crisis, exacerbated by inflation, rising interest rates and a standstill in debt relief. "Some governments are being forced to choose between making debt repayments or defaulting in order to pay public sector workers — possibly ruining their credit rating for years to come," Guterres said, adding that "Africa now spends more on debt service costs than on health care." The IMF's rules unfairly favor wealthy nations, he said. During the pandemic, the wealthy Group of Seven nations, with a population of 772 million, received the equivalent of $280 billion from the IMF while the least developed countries, with a population of 1.1 billion, were allocated just over $8 billion. "This was done according to the rules," Guterres said. This is "morally wrong." He called for major reforms that would strengthen the representation of developing countries on the boards of the IMF and World Bank, help countries restructure debts, change IMF quotas, and revamp the use of IMF funds. He also called for scaling up financing for economic development and tackling the impact of climate change. IMF spokesperson Julie Kozack, asked about Guterres' proposals at a June 8 news conference, said "I'm not in a position to comment on any of the specifics." She added that a review of IMF quotas is a priority and is expected to be completed by Dec. 15. In a written response to a query from the AP, the IMF said it has mounted "an unprecedented" response to the largest-ever request from countries for help dealing with recent shocks. After the pandemic hit, the IMF approved $306 billion in financing for 96 countries, including below-market rate loans to 57 low-income countries. It also increased interest-free lending fourfold to $24 billion and provided around $964 million in grants to 31 of its most vulnerable nations between April 2020 and 2022 so they could service their debts. The World Bank Group said in January that its shareholders have initiated a process "to better address the scale of development." The bank's development committee said in a March report that the bank "must evolve in response to the unprecedented confluence of global crises that has upended development progress and threatens people and the planet." Guterres' push for reforming the IMF and World Bank comes as the United Nations also faces demands for an overhaul of its structure, which still reflects the post-World War II global order. Gowan said many U.N. ambassadors think it might be "marginally easier" and more helpful to developing countries to overhaul the IMF and World Bank than to reform the U.N. Security Council, which has been debated for more than 40 years. While Guterres and U.N. ambassadors talk about reforming the financial institutions, any changes are up to their boards. Gowan noted that when the Obama administration engineered a reform of IMF voting rights in 2010, "Congress took five years to ratify the deal — and Congress is even more divided and dysfunctional now." "But Western governments are aware that China is an increasingly dominant lender in many developing countries," Gowan said, "so they have an interest in reforming the IMF and World Bank in ways that keep poorer states from relying on Beijing for loans." Beyond the Paris meeting, the debate over IMF and World Bank reforms will continue in September at a summit of leaders of the Group of 20 in New Delhi, and at the annual gathering of world leaders at the United Nations. U.S. climate chief John Kerry said in an Associated Press interview Wednesday that he will be attending the Paris summit along with IMF and World Bank officials. "Hopefully, new avenues of finance will be more defined than they have been," he said. "I think it's really important."
Bangladesh's Finance Minister AHM Mustafa Kamal has said that the national budget for the fiscal year (FY) 2023-24 was not based on the conditions of the International Monetary Fund (IMF). "Like in different countries, the IMF has come to Bangladesh and made some recommendations to help the economy. We took their prescriptions as per our needs, but did not follow them all in preparing the budget," he said while addressing a post-budget press conference at the Bangabandhu International Conference Centre (BICC) in the city on Friday (June 2, 2023). He said the IMF is not helping the countries only by providing money, they also monitor the economy. This is good for the economy. Responding to a repeated number of questions on inflation and commodity price hike, the finance minister said the government is concerned about the rising trend in inflation. Read more: Unrealistic budget won’t help overcome economic crisis: Fakhrul "We're apprehensive about inflation, but it is not beyond our control. We cannot stop feeding the people," he said. He said the government is approaching in a flexible way to contain inflation. Through social safety-net programmes, the government has been providing food to poor people. "We're trying to identify the reasons for inflation and address those. If we need to give any concession, we will do that," he said. Agriculture Minister Abdur Razzaque, LGRD Minister Tajul Islam, Education Minister Dipu Moni, Commerce Minister Tipu Munshi, Finance Secretary Fatima Yasmin, Bangladesh Bank Governor Abdur Rouf Talukder, and National Board of Revenue (NBR) Chairman Abu Hena Rahmatul Munim were among others also addressed on the occasion. Read more: CPD dismisses budget's projections on growth, inflation, revenue collection The Finance Minister claimed that the new budget was mainly focused on benefiting the poor people. "We have expanded our tax net so that more taxes could be collected. Everybody has to pay tax," he said, adding that like other budgets in the past this was also prepared targeting both the next election and the people. "We cannot separate the people or the election from our goal of the budget," he said. Responding to another question, he said that all the projections made in the previous budgets were implemented. Kamal said Bangladesh has been well placed in remittance earnings among the countries in the region. Read more: Budget 2023-24: Govt allocates Tk88,162 crore in education sector, up 8.2% After a downward trend, remittance earning is again increasing and we can meet five months of our import bill through our reserve. He said after some measures taken by the government, the inflow of remittance will gradually go up. At the press conference, with the request of the Finance Minister, Bangladesh Governor Abdur Rouf Talukder responded to a good number of questions, specially, on inflation, remittance and banking sector. He said that Bangladesh Bank will announce its monetary policy on June 19 where it will lay out the plan on containing inflation, and increasing remittance and reserve. He claimed that though the government's loan from the banking system is increasing, it will not push up inflation as the central bank is withdrawing more money from the market through selling dollars. Read more: Budget sets 7.5 percent annual economic growth, inflation at 6 percent
Bangladesh's upcoming national budget for FY23-24 should focus on macroeconomic challenges such as taming inflation, better revenue collection, rein in growing defaulted loans and IMF-suggested reforms. This was stated by Dr Atiur Rahman, former governor of Bangladesh Bank in conversion with UNB on the expectations from the budget to be placed in parliament on June 1. Dr Atiur said budget will certainly have to address a number of macroeconomic challenges. The foremost is, of course, the inflation which is still running high at more than nine percent. “Bringing this down to 6.5 percent in the next fiscal year may not be easy unless we go fast towards market-based solutions of major macroeconomic challenges arising out of administratively controlled indicators like rate of interest and foreign exchange rates,” he said. Read more: Tk337.60 crore budget for FY2023-24 approved for placing in Parliament Thanks to the IMF programme, the budget may encourage regulatory authorities to go for an ‘interest rate corridor’ and a ‘single exchange rate’ that are long overdue. If we could have followed this time- tested path of market-driven macroeconomic management many of the ongoing challenges would have been addressed by now, said the development economist. “Yet, it is better late than never,” he said adding “Of course, some sectors like agriculture, export and remittances would still need fiscal support and they must continue to get it.” This, he said, will be desired support to the real economy which can contribute towards easing supply-side constraints to reduce inflation to some extent. However, constraining demand pressure by raising interest rates still remains a major move to reduce inflation. “I hope the macroeconomic managers would like to take this prudent path in the next fiscal year without any hesitation.” Read more: Curbing inflation without destabilising macroeconomic situation presents challenge for budget: Selim Raihan He said the rich are currently enjoying huge advantages of negative rate of interest when adjusted against inflation rate may raise political economic hurdles against such a move. But the gains of long-term macroeconomic stability must guide the policy makers to overcome such pressures, said Dr. Atiur. “I think one must not look at IMF conditionalities negatively as the budget makers have also been flagging such reforms for quite some years. The local economists in general have also been arguing for a more balanced budget with manageable deficits,” he said. Bangladesh, of course, has done pretty well in maintaining budget deficits around five percent. This year it may go above five percent (5.3%) which is not that bad. “To maintain this level of budget deficit we need to raise our domestic resources by reforming our tax administration system through higher levels of digitalization and a more efficient tax system,” Dr Atiur said. Read more: Tk 75,000cr revenue shortfall to widen current fiscal’s budget deficit: CPD The banking system has been well digitised in the meantime. Why should the NBR not take advantage of this modernisation of the money market and replicate a fully digital revenue administration system?, he questioned. Since the inflation remains very high, the fiscal measures for higher levels of social security for the extreme poor and lower income groups in terms of higher food subsidies and support for agriculture must continue in the upcoming budget as well. Strategic support for digital infrastructures for making the economy smarter must also be the cornerstone of the next budget, he pointed out. “Simultaneously, we must keep our budget as cautious as possible to restrain the inflationary outlook,” he noted. Read more: Inflation, revenue shortfall, dollar crisis the major challenges for economy ahead of election-year budget