Formalizing Festival Economy

Formalizing our festival economy Boost sales and lower revenue agony.

Eids have always been great drivers of augmenting domestic sales. This Eid is no different. Despite slow improvement in law & order, Eid economy is doing well according to some news reports. There has been no formal study of the size of Eid economy. Platform of shop owners claims it would be around Tk 3 trillion. It maybe an exaggerated figure. Unfortunately we do not have any market research institution that could corroborate the claim. Such institution could initiate a study and come up with the [approximate] size of Eid economy.

This kind of study helps policy intervention. So that govt incentives fall into the right hands. Policy makers will also have an idea about flow of money and links between key sectors. Now only news reports are key sources of this information. Govt can help float this kind of market research institution through public private partnership.

Undocumented transaction in many shops is an obstacle estimating true figure of festival economy. Currently there are 2.6 million shops across the country according to the platform of shop owners. But many do not have business identification number (BIN), which is required for paying VAT(see "Subdued Festival Economy" published here on March 23,2025.https://hoquestake.blogspot.com/2025/03/subdued-festival-economy.html?m=1). So govt does not get enough revenue from transactions take place during the festivals. Till March, revenue shortfall reached Tk 714 billion. If the shops were BIN registered , govt would get enough revenue just from the shop owners.

Moreover, revenue shortfall indicates govt may further borrow from the banks ,lowering the share of private credit. Squeezed private credit stalls expansion/growth of businesses ahead of major festivals. If funds like Equity And Entrepreneurship Fund (EEF),which remains unused throughout the year, of the central bank becomes available for shop owners during key festivals, then it will have major impact on the growth of these shops.

Another thing I notice is that govt provides bonuses to public servants during festivals of Eid and Bengali new year. This policy also influences private sector to give bonuses during the two major events. Altogether the policy boosts sales in the festival seasons. Similar kind of incentives given six months later may also increase sales later period of the year,which usually see dull period in sales revenue. Celebrating Autumn, Winter may be the occasions to choose for.

Informal nature of our festivals fails the govt to tap the potentials from them. They are great drivers of generating sales demand and growth of SME businesses. Bringing them into a formal structure will help govt to keep a close tab on the flow of money and augment the tax revenue.

La Semaine Dernière A Mes Yeux

(21 mars --- 27 mars)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
21	Paratha,Poulet	Pilaf,Poulet,Gourde bouteille	Pilaf,Poulet	Vermicelles,Egg jorda,Jorda,Payesh,Tchana Tchat,Custard
22	Khichuri,Œuf	Riz,Poulet,Ruhi,Egg jorda,Gourde bouteille,Courge amère,Chicken kofteh,Yaourt sucré,Jorda,Gulabjamun	Riz,Poulet,Courge amère	---
23	Paratha,Légumes	Riz,Courge amère,Soupe aux lentilles	---	Jhalmuri(Riz gonflé avec tchana et tchanatchur),Vermicelles
24	Paratha,Poulet	Riz,Petit poisson,Aubergine,Gourde serpent	Riz,Petit poisson,Gourde serpent,Œuf,Pianju	Jhalmuri,Tchira

Will Taka Remain Stable?

War leads to further rise in inflation, Policy rate cut may cause depreciation.

Last week exchange rate of Taka reached 123.30 against US dollar. Now the rate settled at Tk 122.75 per USD. The ongoing war in the Middle East cast a shadow over remittance inflow and supply of energy through the strait of Hormuz. Moreover, govt changed Bangladesh Bank governor abruptly and the new governor hinted to lower the policy rate while inflation rate increased further and hovering around 9.13% in February. In January ,it was 8.58%. In this backdrop, serious question raised over continuity of regulatory discipline.

Throughout the fasting month of Ramzan ,key kitchen items registered higher prices. A new war in the Middle East risks worsening the inflation by causing supply problems [for] energy and spiking the fuel price. Despite govt assurance of no fuel crisis at home, the long queue of motorbikes and cars in front of petrol pumps is a testament to panic prevailing at the ground. Central banks of major economies already shelve their plans to lower policy rate while ours one walks on a different direction. Furthermore, abrupt dismissal of governor sent a wrong signal abroad about commitment to reforms. It may delay improvement of our credit ratings, causing troubles to get foreign credit for private sector.

Taking a look at major macroeconomic indicators tells that time is indeed not right for a policy rate slash. During July-January period of 2025-26, export declined to $26.09 billion from $26.36 billion in 2024-25. Trade deficit increased to $13.79 billion in 2025-26(July-January) from $11.74 billion in 2024-25(July-January). Current account deficit declined to $381 million in 2025-26(July-January) million from $1.31 billion in in 2024-25(July-January),riding on growth of remittance. Remittance rose to $19.43 billion in 2025-26(July-January) from $15.96 billion in 2025-26(July-January)(See https://www.bb.org.bd/en/index.php/econdata/bop). Despite improvement in current account deficit, situation is not right for discarding the tight momentary policy. [Particularly] when the war may derail the growth of remittance. At one hand trade deficit is growing ,on the other rising import and uncertainty over remittance put overall macroeconomic situation at a precarious position. In this situation, lowering the policy rate will increase the depreciation pressure on Taka against other currencies. Any wild fall of Taka worsens inflationary situation through pass-through effect of the new exchange rate.

Moreover, further worsening of war will spike fuel prices and deteriorate inflation in advanced economies, where most of our exportable items go. This will cut the purchasing power of their nationals and lower overall consumption. Declining trend of export will further cause depreciation pressure on Taka. When exchange rate and inflation rate will both rise ,real effective exchange rate will fall further given denominator part of the formula remains same(look at the formula).

REER at period t= (Exchange rate index of a country x Inflation rate of the country)x 100÷(Average of trading partners' exchange rate index x weight x Average of inflation rates in partner countries)

Exchange Rate Index at t= (Exchange rate of a county's currency at t)÷(Exchange rate of a county's currency at base period)

So far US dollar appreciated against other currencies following the start of the war. Since we do trade with other partners in USD ,a stronger USD translates into depreciation of real exchange rate of Taka given other things remain same. However, inflation is likely to rise amid escalating war . When average of inflation rates in partner countries is higher than exchange rate of Taka and inflation at home,then Taka will appreciate in real term (see the formula).

Stability of Taka depends on many things. But so far the development indicates Taka is likely to depreciate further if the war turns out to be a protracted one. We coped with 40% depreciation of Taka all these years. Similar or more depreciation will be unbearable for us. So cautious monetary policy ,which implies a tighter one, will be good for us. Does the central bank have courage and commitment to do so?

La Semaine Dernière A Mes Yeux

(14 mars --- 20 mars)

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Ma Semaine Gastronomique

Date	Petit déjeuner/Début de jeûne	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures/Fin de jeûne
14	Riz,Courge amère, Ruhi,Banane,Lait	----	Patate douce	Pois chiches, Tchira(Riz battu avec lait),Pomme,Carotte,Tehari,Poulet,Vermicelles
15	Riz,Soupe aux lentilles,Poulet	---	---	Pois chiches,Riz gonflé,Tchira,Pianju,Tchop,Halim,Naan rôti,Jilapi,Datte,Pomme,Carotte
16	Riz, Ruhi avec moringa	----	---	Pois chiches, Tchira(Riz battu avec lait),Pomme,Datte,Carotte,Tchop,Jilapi,Pianju
17	Riz,Poulet	---	---	Pois chiches,Riz gonflé,Datte,Pomme,Carotte,Vermicelles
18	Riz,Lait,Banane	---	---	Pois chiches,Beguni,Vermicelles,Pomme,Carotte,Khichuri,Œuf,Moringa avec tige de taro
19	Riz,Moringa avec sec ruban et tige de taro	---	Pilaf,Poulet,Œuf	Pois chiches,Beguni,Pianju,Meat ball,Riz gonflé, Jilapi
20	Riz,Lait,Banane	---	Riz,Shoal,Goutde bouteille,Œuf	Pois chiches,Beguni,Vermicelles,Pomme,Carotte

E-rickshaw: Bane Or Boon?

Dhaka streets dominated by e-rickshaw, Missing bill lays bare the objective flaw.

Recently, a news report divulged that electric [rickshaws] in Dhaka city cost the govt Tk 40 billion as missing electricity bill. Over 1 million e-rickshaw[s] now ply over Dhaka city. Sympathy stemming from popularity of e-rickshaw led the authority to allow more than 3000 charging points across Dhaka. But in reality the number of charging points surpassed 50000 long ago. These points clandestinely charge e-rickshaw everyday, resulting in annual loss of electricity bill worth Tk 40 billion(See"Bangla Tesla Boom Drains Nearly Tk 4000 Crore Power Theft A Year In Dhaka",Jahidul Islam,The Business Standard, December 03,2025)

Energy efficient, pollution free,employment opportunities at the city maybe the reasons for allowing e-rickshaw on the streets of Dhaka. However, closer scrutiny laid bare hollowness of the [arguments]. The loss of Tk 40 billion nailed the argument of energy efficiency. Fossil fuel used to produce that electricity will not get back to govt coffer. Moreover, govt has to spend more to recuperate the loss. The growing number of e-rickshaw means more import of LNG and furnace oil to produce electricity to charge the e-rickshaw! More import of fossil fuel increases pollution. Higher earning prospect lured many rural laborers to Dhaka ,worsening urban density and public health at cramped accommodation places. It further increases the risk of fire incidents, organized criminal activity. At the same time, at individual level, it is subject of closer scrutiny that it really reduces transportation cost. Reality is that it is no longer cheaper. In some cases, it is worsening traffic system, deteriorating law and order situation. In a span of two years, we saw e-rickshaw pullers attacked traffic police booth and Metro station in Dhaka.

Nowadays, electric vehicles are becoming popular mode of transportation as growing sign of ditching fossil fuel fed vehicles. Bangladesh is no exception, overwhelming presence of e-rickshaw in the streets of Dhaka is the manifestation. Could we really get rid of fossil fuel or half its consumption? Economist William Stanley Jevons observed that efficient use of an energy source ,caused by technological advancement, led to more consumption of that energy source instead of lowering its consumption later. It is known as Jevons paradox. Energy efficiency is supposed to lower consumption of a particular energy source. But opposite is happening! Jevons watched that Watt's steam engine,a brand new thing back then and more efficient than other engines, consumed less coal but total coal consumption increased because of widespread use of this new energy-efficient engine. What is worrying the consumption of that energy source is more when the good/service is more responsive to price changes (price elastic demand). Use of electricity instead of petrol/diesel made transportation/ travel cheaper and thereby increase the demand for transportation/travel. More people travel than before. Subsequent study of Jevons paradox shows that increased energy efficiency leads to increase [in] income and economic growth,causing [overall ndemand to rise](See Jevons Paradox,Wikipedia) . Clearly, key motivation behind allowing e-rickshaw is backfiring! Undoubtedly, rickshaw puller's income augmented manifold from switching paddle rickshaw to electric version. It drew more people to this vocation and increased the number of this vehicle. Now look at the cost. Govt allotted Tk 90 billion for LNG subsidy and Tk 200 billion for power subsidy in this year's budget. Moreover, it abolished 15% VAT on LNG import, risking its revenue collection target. LNG is the main source of electricity generation in this country,followed by furnace oil and coal. Missing bill of Tk 40 billion is a mockery to that subsidy run by taxpayer's money. There is clearly a loss in revenue. In addition ,more public spending in the next year for meeting need for even greater number of e-rickshaw. Nowadays, price of electric scooter drops. An e-scooter costs around Tk 30000 or Tk 40000. This allows students,women [and other income group] to have an e-scooter ,increasing the total number of bike riders in the capital. Use of electricity instead of fuel brought down per kilometer cost of transportation. But it also increases the number of vehicles and commuters. Consequently, to run those vehicles, we need more electricity. And more electricity generation means more fossil fuel. Not only that electricity from solar power plant ,nuclear power plant also needs backup. So in the end we need more fossil fuel run power plants not just to produce increased demand for electricity but to back up the electricity from renewable energy. That means we have to continue with the quick rental power plants,which we are trying to ditch, for quite some time.

It is indeed interesting that eco friendly and energy efficient arguments set the context for allowing e-rickshaw on Dhaka streets. But it is resulting in electricity loss,inefficient resource allocation, abuse of subsidy, and more fossil fuel consumption. A totally different outcome what the policymakers envisaged at the initial stage. It is time to revisit the policy objective of allowing e-rickshaw in Dhaka and to chalk out some course corrective measures.

La Semaine Dernière A Mes Yeux

(06 décembre --- 12 décembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
06	Pain,Lait poudre	Riz,Soupe aux lentilles	Riz gonflé(depuis marché),Pois chiches(depuis marché)	---
07	Pain,Lait poudre	Riz,Soupe aux lentilles,Pois chiches(depuis marché)	Riz gonflé(depuis marché),Pois chiches(depuis marché)	--
08	Pain,Pois chiches(depuis marché),Œuf	Riz,Soupe aux lentilles,Navet,Radis,Petit poisson	Riz gonflé(depuis marché),Pois chiches(depuis marché)	---
09	Pain,Œuf,Petit poisson	Riz,Tête de chèvre (depuis marché),Pois blanc	Pain,Tête de chèvre (depuis marché),Pois blanc	--
10	Pain,Tête de chèvre (depuis marché),Pois blanc	Riz,Taro,Épinard malabar,Tête de chèvre (depuis marché),Pois blanc	---	---
11	---	---	---	--

La Semaine Dernière A Mes Yeux

(29 novembre --- 05 décembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
29	Khichuri,Œuf	---	Riz,Soupe aux lentilles,Épinard d'eau(depuis marché),Pianju(depuis marché)	---
30	Riz,Soupe aux lentilles,Épinard d'eau(depuis marché),Chou fleur,Œuf	Singara(depuis marché)	Pois chiches,Pianju(depuis marché)	--
01	Pain,Chou fleur,Œuf	Singara(depuis marché)	Bread toast(from market)	---
02	Pain,Œuf	Singara(depuis marché)	Pois chiches(depuis marché)	--
03	Pain,Œuf	Singara(depuis marché)	Pain,Chou fleur	---
04	Pain,Chou fleur	Riz,Chou fleur,Soupe aux lentilles	Riz,Chou fleur,Soupe aux lentilles	--
05	Singara(depuis marché),Riz gonflé(depuis marché)	Riz gonflé,Pois chiches(depuis marché)	Riz gonflé,Pois chiches(depuis marché)	---