A Recipe To Keep Economy On Steroids

A recipe to keep economy on steroids, Policies contradict as inflation deteriorates.

Bangladesh Bank has decided to publish Monetary Policy Statement (MPS) quarterly. It is indeed a good move. It will allow govt to correct monetary policy measures quickly instead of half yearly. It will also help to monitor the impact of its monetary policies quarterly, facilitating corrective decisions at the earliest possible time.

The latest MPS (Oct-Dec 2027) keeps the policy rate same at 9.50%. It is due to inflation easing at 8.26% in August. However, inflation soared to 8.34% in September. And the fuel price hike and pay hike in general cause pressure on inflation. MPS acknowledges that the recent pay hike, which will annually cost govt additional $8.5 billion, is likely to worsen inflation. In its latest world economic outlook, the IMF projects that inflation in Bangladesh will hover around 10.9% in 2027. This provides strong context for increasing the policy rate and pursuing a tight monetary policy in the Jan-Mar 2027 period.

The MPS reveals that in the first two months of FY 27, there was deficit in overall balance due to deficit in financial account. This highlights that govt did not manage enough foreign credit and aid to finance budget deficit. If this trend continues, then govt has to borrow more from the banking sector to finance budget deficit. This will further curtail credit to private sector, which registered 4.75% growth in August.

Weak revenue generation also makes borrowing from the banks inevitable. Banking sector on the other hand is overwhelmed by swelling of Non Performing Loans(NPLs), which is more than 34% of total outstanding loan.

Meanwhile, the central bank governor Mostaqur Rahman said the govt would require Tk 60000 crore for at least 5 years(see "Banking sector recovery requires Tk 60000 crore for 5-8 years: Governor", The Business Standard, October 10,2026 ,https://www.tbsnews.net/economy/banking/banking-sector-recovery-requires-tk60000cr-annually-5-8-years-governor-1568051). The govt said the money would come from the budget. For a moment, think a bunch of thugs plundered Tk 100 from your banking system and got away with the money. The govt could not recover the money but inject Tk 100 more into the banking system. This money either would come from the taxpayers or from govt's money printing machine. This literally means taxpayers are paying for the crime of bank plunderers. If money stems from printing the required sum, then this means more money is in circulation in the system and govt is literally paying for the crime. In this situation, inflation will deteriorate, further complicating the economic recovery.

If you look at the total figure govt intends to inject into the banking system, you will be stunned as the figure stands at Tk 3 trillion ($ 24.39 billion). If govt is really serious about this, I do not think it will solely depend on taxpayers' money. Why? The revenue mobilization is weak and downgraded growth forecast and subdued economic activity do not provide room for optimism that govt will generate enough revenue to meet its expenses. This means support to the banks will partly come from the taxpayers' money and partly come from printing money. Money printing will account for a large part of this banking support. This means Bangladesh's economy will largely be on steroids! And both the taxpayers and govt are likely to pay for the crimes of bank looters if govt really goes ahead with its banking support plan.

This line of thinking also lays bare contradictory policies govt is pursuing. The pay hike will require additional $8.5 billion every year. The bank support will require further $4.8 billion annually. Together the two will make the additional cost $13.3 billion per year. Even if the one-third ($4.3 billion)of this extra cost comes from the taxpayers' money, the rest will either come from printing money or from foreign borrowing. Since commitment of foreign assistance is drying up, there is greater likelihood of money printing to finance the rest ($8.86 billion) of the additional cost.

This approach is clearly monetary expansion while the central bank is pursuing a contractionary monetary policy. This is where policy credibility of the central bank is called into question. Central bank's monetary policy focuses on fighting inflation, tilting towards tight monetary policy. Meanwhile, the governor hints at an annual bank support program, lacking clear financing policy and indicating money printing measures. What signal does the market get? Govt should focus on containing inflation and discard the bank support program. Bailing out some others' mistakes/ crimes is not job of taxpayers and govt. Inflation penalizes people and govt, raises borrowing cost and subdues the economy. It is not the interest rate that is to blame. So inflation-fuelling measures should be stopped and efforts should be doubled to contain the inflation.

La Semaine Dernière A Mes Yeux

(10 octobre --- 16 octobre )

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
10	Pain,Poulet,Œuf	Riz,Petit poisson	Pain,Soupe au poulet,Pita	Pomme,Saboo
11	Pain,Œuf,Soupe au poulet	Riz, Poulet	Pain,Lait	Pomme,Saboo
12	Pain,Soupe aux lentilles,Œuf	Riz,Ruhi,Purée de banane verte,Soupe aux lentilles	Pain,Soupe aux lentilles	Pomme,Payesh
13	Pain,Œuf,Soupe aux lentilles	Riz, Poulet,Soupe aux lentilles	Pain,Poulet	Pomme
14	Paratha,Pomme de terre,Œuf	Riz,Ruhi,Aïr,Épinard d'eau,Soupe aux lentilles	Riz,Ruhi,Soupe aux lentilles	Pomme,Hog plum
15	Pain,Œuf,Pomme de terre	Riz, Poulet,Soupe aux lentilles,Citrouille	Sticky rice,Lait,Banane	Pomme,Sweets,Banane,Hog plum
16	Pain,Yard long beans,Œuf	Riz,Bata poisson,Pomme d'éléphant, Épinard d'eau,Yard long beans	Sticky rice,Bata poisson,Radis	Goyave,Hog plum,Banane

Consider Greater Good

Import of eggs in summer season, Consider it for welfare reason.

Rising prices of egg give a good amount of trouble to the consumers. Being cheapest source of protein, any price hike in egg causes serous trouble in protein consumption of urban consumers. A dozen is being traded at Tk 165. Such exorbitant prices of egg evidently slash the consumption of egg.

It is pretty common that egg prices soar during summer season. Big poultry farmers claim that Chickens drink lots of water and eat less feed in this time. It results in drop in egg production, causing rise in egg prices. Prices of eggs stabilize in the winter season. Despite this recurrent phenomenon, we see little intervention from the government.

Govt could easily allow import of eggs in the summer season, when egg production dips. Imported eggs could meet up the shortfall in production, stabilizing the price in egg market. Allowing more people to import egg in this 4/5 months greatly address the crisis in the egg market. For some reasons, govt is not in favor of widespread import of eggs. If govt limits import of eggs to urban areas, that will do a great help bringing down the prices of eggs in the summer season.

Since diesel price increased by Tk 20/liter, there is widespread apprehension that prices of essentials will go up,worsening inflation. In this backdrop, eggs and poultry products may witness elevated price in winter season too. Furthermore, Bangladesh imports key ingredients of poultry feed. Corn and soya account for 85% of poultry feed. And poultry feed accounts for 70% of the cost. Any external shock has the potential to increase the import cost of key ingredients of poultry feed, leading to hike the prices of poultry products.

It is reported that chick production is concentrated into the hands of big private Breeders and Hatchers. Govt can intervene here by setting up hatcheries and facilities for poultry feed across the country. Marginalized poultry farmers will avail chicks and poultry feeds at affordable prices. This ,in the end,will help maintain a stable price for poultry products.

Keeping prices of egg and poultry products low is crucial for continuing protein consumption and keeping inflation in check. This is why addressing the soaring egg prices during the summer season is important. Greater welfare is achieved by serving a wide range of consumers. For this reason, widespread import of eggs for 4/5 months of a given year should be considered for greater welfare.

La Semaine Dernière A Mes Yeux

(03 octobre --- 09 octobre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
03	Pain,Banane,Datte	Riz,Poulet,Taro,Gombo	Sticky rice,Banane Lait	Pomme,Goyave,Hog plum
04	Pain, Pomme de terre, Œuf	Riz,Poulet	Banane	Goyave,Hog plum
05	Pain,Banane,Riz gonflé,Œuf	Riz,Purée de Banane verte,Pomme d'éléphant	Lait,Pois chiches	Goyave,Hog plume,Jambura
06	Pain, Raisin, Œuf	Riz,Soupe au Poulet	Pain,Banane	Goyave,Lait, Payesh
07	Pain,Soupe au poulet	Riz,Soupe au poulet,Radis	Saboo,Mangue	Goyave,Lait,Pomme
08	Paratha,Lait, Œuf	Khichudi, Poulet	Khichudi, Poulet	Goyave,Lait, Pomme,Saboo
09	Pain,Œuf, poulet	Riz,Petit poisson	Soupe au poulet,Pitha	Pomme

La Semaine Dernière A Mes Yeux

(26 septembre --- 02 octobre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
26	Pain,Œuf	Riz,Ruhi,Yardlong beans,Soupe aux lentilles	Riz gonflé, Yaourt	---
27	Sticky rice,Yaourt,Banane	Riz, Ruhi,Courge amère avec haricot rouge,Purée de pomme de terre	Riz gonflé	Tang,Kalojam
28	Pain,Papaye,Œuf	Riz,Piranha,Taro	Riz gonflé, Pois chiches	--
29	Pain,Yardlong jeans,Egg,Courge amère	Riz, Ruhi, Taro,Purée de pomme de terre	Riz gonflé,Pois chiches	--
30	Pain,Pomme de terre,Banane	Riz,Poulet,Gombo,Taro	Sticky rice,Banane,Lait	--
01	Bread,Yardlong beans	Riz, Ruhi,Gombo,Soupe aux lentilles, Yardlong beans,Feuilles de citrouille	Sticky rice,Banane, Lait	---
02	Pain,Banane, Lait	Sticky rice,Poulet, Pois blanc	Sticky rice,Banane, Lait	--

Address Market Imperfections

Few firms with dominant market position, Consumers need regular BCC intervention.

For some strange reasons, we seem more concerned about monopoly as main source of market imperfections. Other more pressing market imperfections issues like price fixing, bid-rigging, tie-in sales,market allocation, creating entry barriers etc often go unnoticed. Two or more firms fixing prices, firms in collusion [letting] a firm win a bid, firm selling different product with its main product and firms dividing the market among themselves deeply influence competition and profitability. Reduced competition, in turn,let few firms gain more market share.

Regulatory intervention is therefore needed to stem concentration of market share into the hands of few firms. True reporting of the sales figure by firms in their annual report often leads to determine market share of a firm in a particular industry. Unfortunately this information is not available as many firms do not publish regularly annual report or audit report. However, regulatory bodies have means to determine size of a market in a particular industry and market share of each individual firm in that industry. If this is the case, then they know the way to eradicate the market imperfections that are detrimental to both consumer welfare and competition.

Determining true market share of a firm is important for another reason. Nowadays, revenue shortfall has become a recurring phenomenon for the govt. This year govt revenue collection target is Tk 7 trillion, which many believe quite impossible to achieve. Extra revenue may come from unearthing the true market share of a firm. Often significant market share allows a firm to abuse its dominant position in an industry. This is when intervention of regulatory body is needed. We have examples too in this country.

Bangladesh Telecom Regulatory Commission (BTRC) introduced significant market player clause that allows it to impose restrictive measures to curb influence of a dominant market player. The matter created widespread debate when BTRC slapped punitive tariffs on two leading mobile operators for hiding information on new subscribers.

Drawing this lesson from BTRC, Bangladesh Competition Commission (BCC) may introduce and apply significant market player clause for other markets too.Firms having significant market share caught abusing their dominant position in the market through malpractices like price fixing, collusive bidding, market allocation can be subject to punitive/corrective tariffs.

Determining true market share of a firm in an industry can lead to potential new investment in that industry. Removing the entry barrier is a precondition to attain that reality. In some markets even 50% market share of a firm may not be a significant market share if entry is free and arrival of new entrants drive price lower to competitive market. So prevailing markets have new business opportunities due to concentration of market share into the hands of few firms. This is particularly true for kitchen market.

So determining the market share of a firm has become vital from the point of view of competition, revenue, consumer welfare and investment.

Share of the market is an indirect measure of market power, which is the ability of the firm to set price above market level. So it is the job of BCC to determine what should be called the dominant market power in an industry, scrutinizing nature of that industry. For some industry, 25% or 30% market share can be considered dominant if huge capital investment is not required.

Concentration of market share is not bad when quality output is produced efficiently at a much lower price and consumer can get it cheaply than before. If the opposite happens, then regulatory body should step in for the sake of consumer welfare and competition.

Antitrust issues are least concerned matters from the perspective of our policymakers. That is why market imperfections are so prevalent here. In various markets,we see markets are dominated by few firms. There are rooms for new entrants in these markets. What is missing is the regular intervention of BCC. As we have laws and institutions to check market imperfections, it will be a good thing to make good use of them.

Alternate Financing For Future Liability?

Hike in public spending tests NBR's ability, Issue of foreign bonds increases govt liability.

Govt seems determined to issue sovereign dollar bond by December this year. The size of the debt will be between $500 million and $1 billion. Government's alternative financing committee is working on the size and terms of the issuance. The initiative to explore foreign capital market for raising funds will come into reality within two to three months.The govt also has plans to issue Panda bond in China. The size of the Panda Bond will be initially $50 million. In addition, govt is also contemplating samurai,sukuk,infrastructure and diaspora bond as alternative financing means.

Leaning towards issuing foreign currency bonds underscores govt's desire to diversify financing sources to meet the budget deficits. Growing non performing loans (NPLs) in the banking sector, low private sector credit due to high public borrowing from banks and less access to soft credit after LDC graduation induce govt to explore foreign capital market.

Meanwhile, Moody's latest revision of credit rating outlook for Bangladesh from "Negative" to "Stable" may help Bangladesh in the endeavor of exploring the foreign capital market. The consistent growth of foreign exchange reserve and remittances inflow contributed to this revision. However, Moody's credit rating for Bangladesh remains B2, which was downgraded from B1 in 2025.

Earlier, S&P Global Ratings had revised Bangladesh's outlook on long-term sovereign credit rating from stable to negative. The agency attributed reasons for the revision to weak banking sector, poor revenue collection, external factors and high likelihood of delayed recovery.

The agency observed that non performing loan in the banking sector reached about 40% of total loans, govt revenue collection accounts for 8%-9% of GDP and interest payments represent 30% of govt revenue.

That means revenue collection is still inadequate and more than a quarter of that revenue goes for paying up the the interest of government debt. In this backdrop, the government is pondering to draw money from foreign debt market.

Government is not increasing the pace of domestic revenue collection to meet the existing debt servicing obligation but embarking on issuing bonds that will require more revenue money to pay the interest/ coupon.

Moody's revision for Bangladesh's credit outlook will have a positive impact on future revision of outlook by other credit rating agencies. But fiscal and governance challenges remain and have the risks to worsen economy.

Foreign investors are often more [concerned] about the fiscal policy, monetary policy and how the money raised through bonds is being spent. I highlighted the issue in the piece "Foreign Currency Bond: The Cart Before The Horse" published here on July 28,2026 (see https://hoquestake.blogspot.com/2026/07/la-semaine-derniere-mes-yeux_01602077096.html?m=1).

Govt recently implemented wage hike for public officials. The decision will cost the govt Tk 1.05 trillion annually. This is a permanent increase in govt spending. Besides, the decision will also hike the minimum urban wage for the private sector. Together the wage hikes will increase the inflationary pressure.

In addition, govt has to increase its revenue collection, which fails to meet the desired target, to finance the added increase in public spending. Is it realistic to expect that NBR will add $8.53 billion worth of extra revenue to govt coffer in the next couple of years? This indicates that govt will borrow more from domestic and foreign sources.

Moreover, recent fuel price hike may further aggravate the inflationary pressure. Particularly increase in diesel price by Tk 20 will push up the prices everywhere. But good thing is that it will either slash the subsidy on fuel prices or remain it same.

If inflation deteriorates due to wage hike and fuel price hike , then central bank will augment the policy rate. As a consequence, government spending on interest will rise. Instead of tight fiscal discipline, what we are seeing is [rising public spending and govt borrowing]. At the same time interest spending is rising with growing govt borrowing. And future increase in revenue collection will go for meeting such spending.

Foreign investors prefer that budget deficits remain at a low level so that it will not have impact on their return on investment.Many countries legally keep budget deficits low. Indonesia after the 1997 financial disaster passed a law requiring govt keep budget deficits below 3% of GDP. Such fiscal prudence made foreign investors confident in investing in Indonesia, including its foreign bonds.

In our [country], transparency of our institutions and projects is not impressive. Newspapers are replete with reports on how infrastructure projects are marred with corruption, inflated costs and cost overrun. Question remains about return on such spending. Apart from that nitty-gritty of the activities (like earning, spending) [is] not regularly published in annual report. Many institutions do not publish regularly annual report or audit report. For instance, few years ago an NBR investigation revealed that BPC made huge profits by depositing money meant to pay as VAT into several bank accounts while leaving NBR in [the] dark. Had there been regular annual reports of BPC ,this thing would never have happened.

Regular reporting of projects,institutions gives investors an idea about the projects, risks and future returns. It also exposes management and return issues. And to make regular reporting credible ,independent and objective auditing is a must.

Issuing of foreign currency bond is being considered. But true foreign investors will observe alignment of fiscal and monetary [policies],reform in the banking sector, transparency in public institutions and projects, regular reporting on performances, independent auditing, distinct role for distinct entities and well defined investment policies from govt while buying those bonds. Without improving governance, without checking the public spending, issuing foreign currency bond will not attract genuine foreign investor and will only increase liability of the govt.