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

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.

La Semaine Dernière A Mes Yeux

(25 avril --- 01 mai)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
25	Pain,Gourde serpent,Œuf	Riz,Purée de pomme de terre,Pama croaker,Soupe aux lentilles	Riz,Soupe aux lentilles,Petit poisson,Purée de pomme de terre,Purée de cumin,Purée de curcuma	Pomme,Puri
26	Pain,Œuf	Riz,Poulet,Soupe aux lentilles	Riz,Lait,Banane	Pomme,Pois chiches,Riz gonflé
27	Pain,Œuf,Yardlong beans	Riz,Sec ruban avec haricot rouge,Yardlong beans	Riz,Sec ruban avec haricot rouge,Yardlong beans	Pomme,Patate douce
28	Pain,Gourde serpent,Banane	Riz,Petit poissons,Gourde blanche	Riz,Sec ruban avec haricot rouge,Yardlong beans	Pomme,Sucreries
29	Pain,Œuf,Pomme de terre bhaji	Riz,Sec ruban avec haricot rouge,Petit poisson	Riz,Sec ruban avec haricot rouge	Pomme,Sucreries
30	Pain,Œuf	Khichudi,Épinard d'eau	Khichudi,Ruhi	Pomme,Patate douce
01	Pain,Œuf	Riz,Courge amère,Ruhi,Soupe aux lentilles	Riz,Ruhi,Poulet,Légumes, Petit poisson,Fish cutlet	Patate douce,Yaourt sucré,Sucreries

Containing The Power Outage

Fewer working days and work during day Lower peak demand and end political fray.

Power outage has become a chronic problem amid scorching summer heat. Situation is worst in the villages. Dhaka dwellers have not yet bear the brunt of 'load management'. In the rural areas, electricity supply does not match the demand, which is much higher in summer days. Rural Electrification Board (REB), the organization in charge of supplying electricity in rural areas, does not get as much electricity as it needed from public distribution bodies. According to a news report by Daily Prothom Alo, Mymensing got 48% ,Rongpur got 40% and Khulna got 39% less electricity than what they needed on Tuesday( see "Barchhey Loadshedding,Bhoganti Beshi Gram E(Outage On The Rise,Villages Suffer Most)" by Mohiuddin, Daily Prothom Alo ,p 1,April 23,2026).

Govt furnished data shows country's peak electricity demand is 16000 megawatts while electricity generation is 14126 megawatts(see "Dhaka to face 110MW load shedding on trial basis to ensure irrigation supply: State minister", The Business Standard,April 23,2026,https://www.tbsnews.net/bangladesh/energy/dhaka-face-110mw-load-shedding-trial-basis-ensure-irrigation-supply-state-minister). Summer days are not over. Meteorologists fear several heat waves during this summer season. That means electricity consumption will rise and so will the peak demand. Since generation faces hurdles, there will be more power outage. And rural areas face most of the crisis.

But the trouble free days of Dhaka dwellers are numbered. State minister Aninda Islam Amit at the Parliament said that Dhaka would face 110 megawatts load shedding on trial basis to ensure supply of electricity for irrigation in rural areas (see "Dhaka to face 110MW load shedding on trial basis to ensure irrigation supply: State minister", The Business Standard,April 23,2026). State minister sounded confident that the crisis would not prolong as govt has the fund to import fuel and one coal power plant will resume operation following maintenance. If there is truth in it, then this power crisis could have been avoided through innovative means. First take a look at the problems the outage created. The onset of the war in [the] Middle East and subsequent fuel crisis led to closure of many schools for more than a month. Now frequent power cuts in the villages hamper the learning of the students at home. Many SSC examinees cannot prepare themselves well for the ongoing exams. There is a measles outbreak in Bangladesh and frequent load shedding in the villages complicated the care and treatment of the infants at hospitals and at home. Apart from hampering irrigation, small businesses in the rural areas suffer tremendously, witnessing drop in the sales revenue.

Govt claims the suffering is temporary. This short spell of load shedding could be avoided. Day light saving time is not new to Bangladeshis. If office hours are between 8 am and 4 pm, then lot of electricity will be saved,discarding the need for power outage. If the number of working days [is] reduced to 4 days ,then it will also save a lot of electricity. It will also lower the number vehicles on the street during working days, saving lots of fuel. Sri Lanka is already pursuing this strategy. Last but not the least is to bring all the coal based and furnace oil based power plants into full power generation, improving the load shedding situation dramatically.

Total installed power generation capacity of the country is 27840 megawatts (source: Wikipedia.https://en.wikipedia.org/wiki/Electricity_sector_in_Bangladesh). Lack of natural gas and furnace oil render most of the power generation plants out of operation. Since govt is confident to procure more LNG and oil for power generation, it is anticipated that the power outage will not take a virulent form. Even if the power outage is necessary, the urban centers should bear the most of it ,sparing the villages and not perturbing the rural economy. Rearranging working hours or fewer working days could be thought of alternative to power cuts as they lower the peak demand for electricity. Point is there is no need for power outage when innovative means are available.