Need For Quarterly MPS

Unfulfilled remain the MPS objectives, Quarterly MPS for timely directives.

The Monetary Policy Statement (MPS) for January-June 2026 is about to expire in June. Most of its goals remain unfulfilled. First take a look at its key objectives. The objectives are "to anchor inflation expectations, guide inflation toward BB's target, address the unacceptably elevated NPLs, and restore public confidence in the banking system through improved governance and close coordination with fiscal and other relevant authorities" (see Monetary Policy, Bangladesh Bank,https://www.bb.org.bd/en/index.php/monetaryactivity/monetarypolicy).

Restoring public confidence in banking system hit a dead end when govt passed mutilated Bank Resolution Act 2025,allowing wrongdoers to regain control of the bank. The Deposit Protection Ordinance 2025 further signals that govt will be obliged to pay each depositor a maximum of Tk 2 lac in case of any bank goes bankrupt,further thickening suspicion of closure of troubled banks.

The abrupt dismissal of previous governor is no sign "improved governance" and further makes hole into public confidence in the banking system.

War in the Middle East came as unforeseen shock. Amid shortfall of revenue and rising oil prices in the international market, govt raised fuel prices at home. It will have an upward pressure on kitchen commodity prices. Inflation already rose to 9.04% in April from 8.71% in March. High oil prices in international market also provoked higher inflation in major economies ,including our key export and import markets. Uncertainties stemming from war and rising inflation make a dent in consumer activity in our export destinations. In addition, imported goods will be costlier because of rising price levels in importing countries. Notwithstanding inflation easing expectations in the MPS, inflation as well as general inflation expectation is set to rise.

Contrary to MPS optimism about policy rate cuts across the globe, many central banks shelved their plans of policy rate cuts in the wake of war,fearing inflationary pressure. Delay in policy rate cut delays investment projects and business expansion ,further shrinking consumer activity. Against this backdrop, foreign financing gets costlier. So govt depends more on banks for financing the budget ,leaving little to the private sector. The MPS keeps the policy rate (10%) same but it has lowered Standing Deposit Facility (SDF) from 8% to 7.5% in a bid to generate more credit to private sector. But Bangladesh Bank's own finding reveals that private sector credit growth rate in January and in February was 6.05% ,lowest in 23 years( see "Rin e 23 Bochhorer Moddhey Sorbo Nimno Probriddhi(Lowest private sector credit growth in 23 years)", Daily Prothom Alo,May 21,2026).

The lowering of SDF did not help much. Rather banks find it safe and lucrative to lend money to govt and to buy govt securities. Let us see how the private sector credit behaves in the remaining four months.

The MPS acknowledges that the NPL reached 36% of total loans in September 2025. Given the dull economic situation and less commitment to financial reform, the NPL is likely to rise. However , govt reiterates its commitment to true auditing of businesses.

Despite pressure for lowering the policy rate, the central bank cannot slash it as inflation rate is still hovering above 9%. In the last quarter(April-June) of this fiscal year, there is little chance that inflation will reach the BB's desired 7% level. Now it is interesting to see how the govt reviews its reform commitment and addresses the pending issues in its future policies.

If the MPS were published quarterly,then it would review the policy objectives and fine tune the goals in light of emerging realities. Six months is a long time for such adjustment. Four MPSs in a given year will be more appropriate in this fast changing world.

La Semaine Dernière A Mes Yeux

(16 mai --- 22 mai)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
16	Pain,Œuf	Riz,Poulet,Sec crevette avec aubergine et noix de jaque,Soupe aux lentilles	---	Toast biscuit,Riz gonflé
17	Pain,Œuf,Yaourt	Riz,Poulet,Feuilles de taro	---	Sucreries
18	Pain,Yard long beans	Riz,Ruhi,Sec crevette avec aubergine et noix de jaque,Soupe aux lentilles,Feuilles de taro	---	Sucreries,Riz gonflé
19	Pain,Œuf,Gourde serpent	Riz,Purée de pomme de terre,Petit poisson,Soupe aux vigna mungo	---	Singara
20	Pain,Œuf,Lait	Riz,Tige de Taro avev sec latya,Petit poisson	---	Riz gonflé,Pois chiches,Mangue
21	Pain,Papaye	Riz,Aïr poisson,Épinard d'eau	---	Riz gonflé,Lait,Mangue,Litchi
22	Pain,Œuf,Tige de taro	Riz,Purée de pomme de terre,Aïr poisson,Tige de Taro avev sec latya	Riz,Latya,Poulet,Crevettes, Papaye	Gâteau,Mangue

Rating Agencies Downgrade Bangladesh

Dull economic condition & poor reform initiative Turn Fitch Ratings outlook negative.

Fitch Ratings keeps Bangladesh's rating same,B+,but downgrades outlook from stable to negative (see "Fitch revises down Bangladesh outlook to negative ",The Business Standard, May 14,2026,https://www.tbsnews.net/bangladesh/fitch-revises-bangladesh-outlook-negative-affirms-b-rating-1438136). It underscores challenges macroeconomic stability faces in the wake of rising external pressures like escalation of tensions in the Middle East,rise in fuel prices etc.

Such downgrading will make foreign credit more costly. Despite continuous swelling of forex reserve, Fitch notes that forex reserve condition may sharply deteriorate if the war in the Middle East turns worst.

This downgrading comes at a moment when BBS divulged that general inflation rose to 9.04% in April from 8.71% in March(see "Bangladesh Inflation Snapshot:2026",The Business Standard, May 11,2026,https://www.tbsnews.net/infograph/numbers/bangladesh-inflation-snapshot-april-2026-1436091). It is the non-food inflation that contributed greatly to the rise of inflation in April.

Recent fuel price hike is likely to raise non-food inflation further. Since there is an upward pressure on inflation, any slash in policy rate is highly unlikely in near future.

Inflation rate remains higher than central bank's desired 6% or 7% rate,Fitch report highlights.

Bangladesh's growing Non-Performing Loans (NPL),which is now 30% of total loan, is causing mayhem in the banking system,Fitch observes.

The IMF set a target to reduce NPL to 8%(see "IMF's Second Review on Credit Program",published here on June 27,2024,https://hoquestake.blogspot.com/2024/06/imfs-second-review-on-credit-program.html?m=0).There is no sign of NPL reduction; instead it grows day by day. The 8% target seems an uphill task right now.

We missed both the inflation and NPL reduction targets set by the IMF. In addition, abrupt dismissal of the past governor and allowing wrongdoers to regain control of the bank in the bank resolution act sent a wrong signal abroad about our commitment to genuine reforms.

Splitting NBR into policy and implementation departments is another IMF benchmark that remains unfulfilled. When there is suggestion for subsidy cut,govt plans to borrow heavily from domestic and foreign sources to finance the budget. Despite fuel price hike ,govt plans to borrow $2 billion for fuel import.

Govt also misses revenue target. To raise revenue, govt doubles source tax for key kitchen items including rice,edible oil,onion and pulses. It will fetch Tk 5 billion ,govt hopes. Not only that govt is mulling to tax motorbikes and e-rickshaws. Taxing the motorbikes will net another Tk 10 billion. Taxing the e-rickshaw is a good move to regulate their number.

There is no visible policy on how to tackle the NPL. No policy on how to fill the void created by NPL. And ordinary citizens are paying the price in the kitchen market and in the public transport.

Inflation, NPL,banking reform and revenue reform so far remain disappointing. And it is reflected in ratings made by agencies. Earlier, Moody's set the credit rating for Bangladesh at B2 with negative outlook. Standard & Poor's credit rating for Bangladesh set at B+ with stable outlook (see "Bangladesh-credit rating", Trading Economics,https://tradingeconomics.com/bangladesh/rating). I won't be surprised if Standard & Poor's outlook becomes negative following Fitch's outlook. In short, dilapidated economic conditions make foreign credit costlier.

La Semaine Dernière A Mes Yeux

(09 mai --- 15 mai)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
09	Pain,Œuf	Riz,Petit poisson,Sec latya avec haricot rouge,Soupe aux lentilles	Fried rice,Fried chicken,Thaï soupe	Toast biscuit,Sucreries, Gâteau
10	Pain,Œuf	Riz,Épinard d'eau,Petit poisson,Sec latya avec haricot rouge,	---	Toast biscuit,Riz gonflé,Pois chiches
11	Pain,Œuf	Riz,Poulet,Purée de Sésame,Courge amère,Soupe aux lentilles	---	Toast biscuit,Sucreries, Gâteau
12	Pain,Œuf	Riz,Poulet,Courge amère,Soupe aux lentilles	---	Toast biscuit,Riz gonflé,Pois chiches
13	Pain,Poulet	Riz,Ruhi,Purée de pomme de terre,Courge amère,Soupe aux lentilles	Riz gonflé,Courge amère avec haricot rouge	Toast biscuit,Gaja,Patate douce
14	Pain,Œuf,Yaourt	Riz,Yardlong beans,Courge amère avec haricot rouge	---	Pomme,Toast biscuit,Banane,Riz gonflé
15	Khichudi,Œuf	Riz,Gourde serpent,Petit poisson,Soupe aux lentilles	---	Toast biscuit,Ananas,Banane,Riz gonflé

Tariff Development Creates Unease

Recent tariff development creates some unease, Chance of buying J-10C does not appear to cease.

Fresh debate on Bangladesh-USA bilateral trade agreement erupts after nitty-gritty of the deal was disclosed by the Bengali press. Former editor of the communist [party] run daily laid bare the details of the agreement on the Bengali daily Prothom Alo(see "Bangladesh Ke Mante Hobe 131 Shorto,Juktorashtro Ke 6(Bangladesh has to comply 131 clauses while the US have to comply 6)", Shawkot Hossein Masum,Daily Prothom Alo,May 4,2026.https://www.prothomalo.com/bangladesh/fumaag6mec). Others followed suit. Since then, there has been a growing cry to nullify the agreement, signed during the tenure of interim govt.

Incumbent Foreign Minister Khalilur Rahman,back then defense advisor, backed the deal by saying that it is the best bilateral deal available when it is compared with other agreements.

Few matters I find interesting to highlight here. The deal allows American insurance company not to generate business any more for Bangladeshi state-run insurance company. Earlier American insurance company was obliged to generate such business for local companies.

The deal questions legitimacy of subsidy in fisheries sector. It also underscores Intellectual Property Right,securing Bangladeshi commitment to stringent measures in case of violation of such rights.

The deal says Bangladesh will abstain from introducing discriminatory policies and taxes targeting digital services originating in the USA. In addition, American tech companies will not disclose source code of their products to Bangladeshi authority in order to do business here. However, this condition can be relaxed for the sake of public procurement or matters related to court.

The deal also says Bangladesh will take stern actions against any foreign country dumping goods into American markets using Bangladeshi soil.

The deal spares existing nuclear commitments but put severe restrictions on future nuclear deal.

The deal obliges Bangladesh to share subsidy related information with the USA.

The deal also forces Bangladesh to implement and ensure trade unions in companies operating in the export processing zones(EPZ). Most of Bangladesh's FDI comes from South East Asian countries. And EPZs offer highest salary and benefits to the workers in Bangladesh. This matter of trade unions in EPZs make the foreign investors unease. Particularly the South Koreans as they have seen the anarchy such unions caused back home. So it may have leverage on future FDI decisions.

The bilateral deal already starts to show its effect. Bangladesh recently signed a deal with Boeing to procure 14 aircrafts in a bid to slash trade surplus it enjoys in American market(see "Bangladesh signs biggest ever plane deal for 14 Boeings", yahoo finance,May 01,2026,https://finance.yahoo.com/economy/policy/articles/bangladesh-signs-biggest-ever-plane-204858697.html ).

Earlier in this space I speculated Bangladesh might buy Boeing-made combat aircraft to cut the trade surplus. The completion of Boeing deal put an end to that prospect. But it brings to fore potential procurement of Chinese combat aircraft.

Though the THINK TWICE Act of 2025 penalises countries buying Chinese arms, Bangladesh may evade the Act as it concluded talks of J-10C purchase before the Act came into effect.

Given the purchasing ability of Bangladesh and geopolitical tensions it faces, Washington may allow exception for Bangladesh as it allowed buying of Russian oil from the vessels in the wake of Iran war.

There has been some unease among the business community,particularly the exporters, with the development of the bilateral agreement with USA. Former World Bank lead economist in Bangladesh Zahid Hussain echoed their concerns in an analytical opinion piece titled "Tariffs spread the pain, refunds kept the gain", published on the Business Standard on May 02,2026 (see "Tariffs spread the pain,refunds kept the gain" ,Zahid Hussain, The Business Standard,May 02,2026,https://www.tbsnews.net/analysis/tariffs-spread-pain-refunds-kept-gain-1427221).

He highlighted that the US authority is paying back billions of dollar worth of tariff to the importers as the US Supreme Court rendered the tariff stance of Trump administration useless. But that money is not shared with Bangladeshi exporters who absorbed part of the tariff and witnessed shrinking of their profit margin. Bangladeshi exporters are also worthy of getting back part of the tariff money,he underscores.

There has been mixed reactions about the bilateral trade agreement. It is too early to tell what kind of impact it will have. But it will influence future trade agreements and FDI for sure. Simmering tensions can be felt for disproportionate distribution of tariff refund. It is speculated that the purchase of Chinese arms by Bangladesh may not be targeted by the THINK TWICE Act.

La Semaine Dernière A Mes Yeux

(02 mai --- 08 mai)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
02	Pain,Œuf	Riz,Yard long beans,Courge amère,Ruhi,Soupe aux lentilles	Riz,Soupe aux lentilles,Poulet,Yard long beans	Laddu
03	Pain,Œuf	Riz,Poulet,Feuilles de Moringa	Riz,Petit poisson,Feuilles de Moringa	Pomme,Malta
04	Pain, Pomme de terre	Pilaf riz,Yard long beans,Poulet	Pilaf riz,Soupe aux lentilles,Poulet, Purée de pomme de terre	Sagu
05	Pain,Gourde serpent	Riz,Ruhi,Tige de taro avec crevette sec	---	Riz gonflé,Pois chiches
06	Pain,Œuf	Riz,Ruhi,Gourde serpent,Purée de pomme de terre,Soupe aux lentilles	---	Riz,Banane,Singara,Lait
07	Paratha,Œuf	Morog polao	Riz gonflé,Soupe aux vigna mungo,Pomme de terre bhaji	Ananas,Toast biscuit
08	Riz,Œuf,Pomme de terre bhaji,Jaque	Riz,Petit poisson,Feuilles de moringa	---	Toast biscuit,Jaque

Satellites For Containing Disaster

Use of satellites and pulse doppler rudder Save lives and minimize damage later.

Flash flood has caused great damage to the farmers of haor(low lying water bodies) areas. Unusual precipitation and water flows from the upstream inundate paddy fields. A large part of the winter crop has yet to be harvested. News paper reports put the damage toll as low as 10000 hectares to as high as 54000 hectares in Sunamganj and Bagerhat. Affected districts include Sunamganj,Moulovibazar,Sylhet,Comilla and Bagerhat.But the official estimate of the damage is much lower (See "Floodwaters swallo haor harvest in Sunamganj, leaving farmers counting losses", by Debashish Debu, Daily Business Standard, April 30,2026,https://www.tbsnews.net/bangladesh/floodwaters-swallow-haor-harvest-sunamganj-leaving-farmers-counting-losses-1425466).

This flash flood is not new to Bangladeshis in the April-June period. Bangladesh is pretty familiar with such flash floods.Recurrence of such calamities lays bare failure in preparation. The damage is not only to crops; hidden losses are also there.

Agricultural inputs like fertilizers, irrigation, labor were employed in the cultivation process. Fertilizers are heavily subsidized. Since winter crops depend on irrigation, subsidized electricity and diesel were also used in the Boro or winter paddy cultivation. Gone are the subsidized inputs with the winter crops.

Many farmers also borrowed heavily from relatives, money lenders and microfinance institutions. The lent money on the submerged crops now becomes bad. The money cannot be recuperated and it will affect credit distribution next year,curtailing the amount of credit for distribution and narrowing the scope of agriculture and nonagricultural activities in the rural area.

The flash flood also pushed many farmer below the poverty line. Govt now has to arrange resources for them to fight the poverty till the next harvest, sacrificing other priority areas. The incidence of urban bound migration is also likely to rise, worsening further the urban poverty.

There are means to contain the damages from flash flood. Pulse Doppler rudder and remote sensing electro optical satellite are some options. Employing Pulse Doppler rudder near mountainous region could give localize early warning,saving lives and crops. Bangladesh depends on foreign satellites for meteorological data. The data could take 24 hours or more time to reach, rendering the meteorological forecast useless. Having our own remote sensing satellites is the solution. Pakistan recently put into orbit three remote sensing satellites. The constellation is designed to “support disaster response, land management, agricultural monitoring, environmental security, and increasingly sophisticated national surveillance requirements"(see "Pakistan Launches PRSC EO3 Satellite From China,Strengthening Strategic ISR,Space Surveillance and National Security Power", Defence Security Asia,April 26,2026, https://defencesecurityasia.com/en/pakistan-prsc-eo3-satellite-launch-china-isr-space-surveillance-strategic-security/). As Bangladesh houses several flood plains and flash flood becomes regular phenomenon, having our own remote sensing electro-optical satellite has become a necessity. Pakistani SUPARCO designed and built the satellites at its Satellite Research and Development Center. In Bangladesh, Space Research and Remote Sensing Organization(SPARRSO ) could set up similar satellite manufacturing facility and spearhead building of remote sensing satellites. Timely data from such satellites will help building correct modeling, leading to accurate forecast and minimize the damage.

It is a pity we spend billions of Taka on roads and embankments meant to be washed away every year, but we never allocate a tiny fraction of those spendings for some homebuilt satellites. The 2024 and 2026 disasters call for immediate use of Pulse Doppler rudder and remote sensing satellites for early preparedness and damage minimization in the event of recurring natural calamities.