Rising Debt Says It All

In the wake of rising external debt, Govt to make interest payment great. Economy is not in dire strait, But firms facing dollar crisis great.

Recently a news report says that Facebook’s Bangladeshi public relation firm decided to limit its operation of collecting ads for Facebook. In a letter addressed to its clients, the firm put the blame on acute dollar crisis and obstacles in repatriating the ad revenue to the USA.

This is not the first incident of dollar crisis faced by private firm. Earlier, news report also surfaced claiming private companies who had borrowed from foreign institutions face uphill task to pay back instalment and interest as most banks refused to sell dollar crossing some limit. At the end of December 2022,commercial borrowing stood at around $8 billion and total credit stood at around $92.7 billion¹.

Both the public and private external debts are rising. This year alone govt has to pay Taka 1 trillion as interest payment to respect its debt obligation. It will evidently put some pressure on dollar demand and will divert resources from other development and social security programs.

Govt's macroeconomic management is very sloppy. It is running a huge budget deficit while its revenue earning missed the target. Back in July last year,I penned a piece titled “Woe Called External Debt”²,sharing parts of it again.

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On one hand, govt borrowed heavily to finance its ambitious budget. On the other hand,external debt has grown rapidly since it assumed power. The external debt has doubled in the last five years. It would be interesting to take a look at the size of external debt at the time a regime takes power and at the time of its departure,starting from 1991.In 1991 when BNP assumed power, external debt was $13 billion. In 1996,when it left the power,the external debt was $15 billion.In 1996,the time when AL came to power,external debt stood at $15 billion. In 2001,the time it stepped down,the debt rose to $17 billion. Then BNP again came to power. In 2006,when BNP left the office,external debt became $20 billion. In 2009,when AL formed the govt debt stock was still $20 billion. In 2014,at the end of third term of AL,it rose to $24.3 billion. At the end of 2018, after the completion of AL's fourth term ,debt stock became $38.5 billion.And in 2022(Feb) it became $55.6 billion³.Bangladesh Bank stats put the figures very high. According to Bangladesh Bank,debt stock in 2022 is $89 billion.The debt has almost doubled in the last 5 years. And the last two terms of Awami League do not fall into the category of representative regime. And what we see here is that external debt stock rises rapidly under regime that is not truly representative of most of the people. One cannot be blamed if one can make statement that non-representative regime spends unwisely and borrows heavily as it has little or no accountability.

Regimes & External Debt Stock Since 1991

Regime	Starting Year	Debt At The Start($Billion)	Ending/Current* Year	Ending/Current Debt($Billion)
BNP	1991	13	1996	15
AL	1996	15	2001	17
BNP	2001	17	2006	20
AL	2009	20	2014	24.3
AL	2014	24.3	2019	38.5
AL	2019	38.5	2022*	55.6

(Source: Bangladesh Economic Review 2019,2022)

External Debt(In Billion US Dollar)

	2015-16	2016-17	2017-18	2018-19	2019-20	2020-21
External Debt	41.17	45.81	56.01	62.63	68.59	81.57

Source:Bangladesh Bank

Many here dislike drawing comparison between Sri Lanka and Bangladesh. Swollen Forex reserve is the source of their confidence. Now this latest round of negotiation amid growing current deficit will make their argument sounds hollow.The kind of economic management in Bangladesh we are seeing forewarns us that things as usual may lead us to catastrophe.

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Sri Lanka showed much prudence by postponing the local election ,which would cost the govt around $2 billion. Government could do the same here. Instead, it decided to go ahead with the local election amid the measures of austerity. It has to remember that it is financing the deficit with credit, which we have to pay back later. It will put lots of stress on the economy, increasing our tax and debt obligation. Loan commitment from abroad gives an impression that we have avoided the catastrophe.But nonchalance stance and being complacent about the current economic condition may lead us to a disaster.

Notes And References

1. Bangladesh Bank
2. "Woe Called External Debt",Rezaul Hoque, https://hoquestake.blogspot.com,July 01,2022.For more read at https://hoquestake.blogspot.com/2022/07/woe-called-external-debt.html?m=1
3. Bangladesh Economic Review 2022

La Semaine Dernière A Mes Yeux

(22 avril --- 28 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
22	Riz,Poisson chat à Moustache longue,Courge amère,Nouilles	Paratha(fait par moi),Poulet	Riz,Purée de pomme de terre,Poulet	---
23	Paratha(fait par moi),Poulet	Riz,Purée de pomme de terre et papaye,Omelette	Paratha(fait par moi),Jaggery, Riz,Purée de pomme de terre et papaye,Ruhi	---
24	Paratha(fait par moi),Jaggery	Riz,Purée de pomme de terre,Ruhi	Riz,Pomme de terre,Ruhi	---
25	Pain tchapati(fait par moi),Jaggery	Riz,Gobie charmante, Haricot vert	Riz,Gobie charmante,Haricot vert	Tchotpotie(Pois blanc dans l'eau tamarin)
26	Pain tchapati(fait par moi),Haricot vert	Riz,Pois chiches,Ruhi,Gombo	Riz,Pois chiches,Ruhi,Gombo	Lait
27	Pain tchapati,Omelette, Mangue verte	Riz,Haricot vert,Ruhi	Riz,Haricot vert,Poulet	Lait
28	Riz rassis,Poulet	Riz,Soupe aux lentilles, Gourde blanche, Poulet	Riz,Gourde blanche, Ruhi	Lait,Pois chiches

Could There Be A Stable Grain Market?

Bad weather augurs ill for crop yield, Making holes in the poor's food shield. Rice grower may become major importer, Making food inflation a serious matter.

After heatwaves flash flood poses challenges to Boro harvest, which has already been started in the haor areas and will take some time to be completed. Heavy downpour could submerge the Boro crop,which accounts large part of our rice production. This year Boro harvest is crucial for Bangladesh as this part of the world is witnessing fury of the climate and El Niño is yet to arrive.

This year government has set a production target for 4.27 million tons.Last year Bangladesh produced 3.92 million tons of rice. Both the import and public procurement of grain declined compared to last year. Food grain stock has also decreased this year,only 1.8 million tons of grains available at govt storage facilities¹. But at the domestic market food inflation shows no sign to abate. A good Boro harvest could give great relief.

Harsh climatic conditions cast shadow over crop production in major producing countries. China is major producer of both rice and wheat. But rice production took a hit due to high temperatures there. El Niño may also make an impact on India's rice production. In addition, grain deal between Russia and Ukraine may discontinue if both the countries do not reach a consensus. In that case, wheat prices in the international market may go up again.

Luckily, both Thailand and Vietnam, two major producers and exporters, have good news in terms of rice production^{2 & 3}. Bangladesh in the past imported rice from these two countries. If they have a good harvest this year, then Bangladesh will import rice from them again. But as China will import grain from these countries because of bad harvest, price may again go up in the international market.

Worrying thing is higher grain prices in international market may worsen the food inflation at home. Govt's monetary policy is not working as inflation is still hovering around double digit figures. Grain price hike will only make the matter worse. Despite good harvest at home,it will increase the social security spending. Government has to increase rice import to check the food price inflation.

I think the best measure is to go for early negotiation with the exporting countries. Securing early commitment from few of these countries at one hand will stabilize the local grain market and will ensure food security for the vulnerable population on the other.

Notes And References

1. ”Major Economic Indicators: Monthly Update”,March 2023.Bangladesh Bank.
2. ”Vietnam’s Rice Export Forecast To Enjoy Another Successful Year”,Vietnam Plus,February 03,2023. For more read at https://en.vietnamplus.vn/vietnams-rice-export-forecast-to-enjoy-another-successful-year/247796.vnp
3. ”Thai Rice Output To Reach Five-Year High”,www.world-grain.com,March 21,2023.For more read https://www.world-grain.com/articles/18264-thai-rice-output-to-reach-five-year-high

La Semaine Dernière A Mes Yeux

(15 avril --- 21 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner/Début de jeûne	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures/Fin de jeûne
15	Riz rassis, Haricot vert,Purée de pomme de terre	---	---	Riz,Pois chiches, Soupe aux haricots mungo,Gourde épineuse,Œuf dur,Tomate,Glace,Jaggery
16	Riz rassis,Soupe aux haricots mungo,Gourde épineuse,Purée de pomme de terre	---	---	Riz rassis,Purée de pomme de terre,Tomate,Pois chiches, Œuf dur
17	Riz rassis,Purée de pomme de terre,Soupe aux haricots mungo	---	---	Riz rassis,Pois chiches,Jaggery,Tomate,Haricots vert,Crevettes, Jus de Tamarin
18	Riz rassis,Jus de Tamarin,Purée de pomme de terre,Crevettes,Œuf dur	---	Riz,Poisson chat à moustache longue,Pomme de terre	Riz rassis,Pois chiches,Poisson chat à moustache longue,Tomate,Jaggery
19	Riz,Œuf dur,Purée de pomme de terre,Œuf dur,Poisson chat à moustache longue	---	Riz,Poulet	Pois chiches,Riz rassis,Poulet,Nouilles,Tomate
20	Riz,Pomme de terre,Œuf dur,Gombo,Poulet	---	Riz,Pomme de terre,Haricot vert,Gobie charmante	Riz rassis,Pomme de terre,Œuf dur,Haricot vert,Pois chiches, Tomate,Jaggery
21	Riz,Pomme de terre,Gobie charmante,Haricot vert	---	Riz,Pomme de terre,Gobie charmante	Riz rassis,Pois chiches,Poulet,Haricot vert,Purée de pomme de terre,Tomate

Inflation Woes Remain

Inflation shows no sign to tame, Mocking the measures of austerity. Pumping money for sake of people’s name Deepens the problem's severity.

Govt in an unprecedented move increased all kinds of fertilizer prices by Taka 5. Despite falling prices in the international market,govt has little alternative to raising the prices in the wake of Tk 460 billion fertilizer subsidy. Depreciation of Taka more than 20% in the unofficial market following the Ukraine war and double-digit inflation set the ground for such rise. One minister even acknowledged the move may further drive up the price levels.

Nine months after its introduction, govt's contractionary policy failed to curb inflation. In fact, govt acknowledged that inflation reached 9.33% at the end of March this year. Back in July 2022,it was 7.48%¹. However, import registered a decline. More smaller increases in policy rate hike are anticipated at measured intervals in future. Still large part of the money lies outside the banking system. Since July last year several factors have been contribute to rise in price levels. In November last year, while an IMF team was in an official visit to Bangladesh, a little known Nabil Group swindled around Tk 90 billion from several Islamic banks².Till date,whereabouts of the money is not known.This plundering shook depositors' confidence so much that many were prompted to withdraw their money,leading to a liquidity crisis in the Islamic Banks. To address the crisis, central bank provided Tk 147.90 billion credit to the troubled Islamic banks through promissory demand note³.Govt literally printed the money and injected it into the ailing banks. Most of this Taka 237.90 billion is being circulated outside the banking system. Even if a large part may find safe sanctuary abroad through clandestine channels, hoondi partners may transfer the Taka to local counterparts ,adding the inflationary pressure at home.

In addition,govt created a new Export Assistance Fund(EAF)of Tk 100 billion to assist the local exporters. Earlier IMF suggested to downsize the Export Development Fund as it hinges heavily on forex reserve money. The newly created EAF so far doled out Tk 20 billion in local currency as export assistance to exporters. Interestingly, selective clients of the troubled Islamic banks got most of the assistance. A news report says $1 billion worth of export proceeds have not arrived. So promising export growth does not tell the whole story.Central bank’s injection to the economy now stands at Taka 257.90 billion. There is more!

This year government increased dearness allowance of public servants by 20%. A daily has revealed that since 2015, govt has been pursuing a policy of 5% increment in salary of public servants instead of indexing the salary like the Western countries⁴. This adds further Tk 40 billion into the economy. So central bank pumps a total of Taka 297.90 billion into the economy in the nine months of this fiscal year alone. Say half of the money stays outside the banking system, that is Taka 148.95 billion. This money mixing with the undocumented money in the economy causes huge upward pressure at price levels.

As this is ahead of election year,many are shy to bring their money into the banking system. Despite increase in deposit rates, many prefer not to deposit their money. Moreover, rule like obligatory tax return certificate for purchase of National Savings Certificate worth more than Taka 500,000 discourages households to bring their money into the system.

One group alone robbed $840 million from the banking system while the central bank were negotiating with IMF to grab $476.27 million as first instalment of credit package. But the austerity measures and contractionary policy have turned into a mockery when the central bank printed Taka 147.90 billion and injected into the system. This one single act rendered the whole policy of the central bank useless. Depositors' confidence at the banking system under current regime is at all time low. Pumping money to restore confidence in this case was a redundant move. So govt has to take fair share of the responsibility for the rise in inflation amid measures of austerity.

Notes And References

1. "Major Economic Indicators: Monthly Update,March 2023",Bangladesh Bank.
2. "’Nasty November' For Islamic Bank",Sanaullah Sakib,Daily Prothom Alo, November 24,2022.
3. "Receding Trust In Banks",Rezaul Hoque, https://hoquestake.blogspot.com,January 13,2023.For more read at https://hoquestake.blogspot.com/2023/01/receding-trust-in-banks.html?m=1
4. "Agami Budget e Sarkari Chakurijibidr Bhata Barchhey(Dearness Allowance of Govt Officials Likely To Increase In Next Budget)",The Business Standard,April 12,2023.For more watch https://m.youtube.com/watch?v=n3paeAzIvV4
   Also read " No New Payscale,20% Dearness Allowance Proposed For FY 24", Abul Kashem,The Business Standard, April 13,2023.
   For more https://www.tbsnews.net/economy/budget/no-new-pay-scale-20-dearness-allowance-proposed-fy24-615058

La Semaine Dernière A Mes Yeux

(07 avril --- 13 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner/Début de jeûne	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures/Fin de jeûne
07	Riz,Courge amère, Ruhi,Purée de pomme de terre	---	Riz,Épinard d'eau,Gobie charmante	Paratha,Jaggery,Omelette, Pois chiches, Tomate
08	Riz,Gobie charmante	----	---	Pois chiches, Paratha(fait par moi),Jaggery,Tomate,Riz,Haricot vert
09	Riz,Haricot vert	---	---	Pois chiches, Tomate,Fritures de Pomme de terre et Œuf(«Dim Tchop»),Riz,Épinard d'eau,Gobie charmante
10	Riz,Gobie charmante,Gombo	---	---	Pois chiches,Riz,Concombre, Puntio barbe,Tomate
11	Riz,Œuf dur,Concombre curry,Puntio barbe	---	---	Paratha(fait par moi),Jaggery,Pois chiches, Riz,Ruhi avec pomme de terre,Tomates,Œuf poché
12	Riz,Ruhi avec pomme de terre,Gourde serpent	---	---	Pois chiches, Riz,Poulet,Œuf dur,Purée de pomme de terre et papaye
13	Riz,Gombo,Poulet,Purée de pomme de terre et papaye	---	---	Riz,Pois chiches, Nouilles,Crevettes, Haricots vert,Tomate,Jilebi
14	Riz,Crevettes, Haricots vert	---	---	Riz rassis,Pois chiches, Purée de pomme de terre,Puntio barbe,Œuf dur,Tomate

Food Security Under Scanner

El Niño casts shadow over crop production Worsening further the awful inflation.

Last week Bangladesh Bank divulged that inflation reached 9.33% at the end of March. At the end of December last year, inflation was 8.72%. Clearly, inflationary situation has worsened since the start of this year. Ordinary consumers know this well and everyday they feel the hit of skyrocketing prices of foods and other commodities.

Govt is running a rationing program for the poor through family card targeting 5 million families. Long queue before Trade Corporation of Bangladesh trucks captures the awful condition lower income group endures at the ground.

RMG exports fell short of anticipated target in the last two months and fetched less forex than the corresponding two months of the previous year. This is a bad sign while economy is under IMF prescription. Import has reduced significantly following the contractionary monetary policy.

Moreover, National Board of Revenue has to augment its revenue target as per IMF conditions.Next year it has to achieve Tk 30,000 crore more revenue. But grim situation in export and stalled growth in private sector make it harder to attain. Govt may print more money to meet the revenue shortfall.

On the other hand,The National Ocean and Atmospheric Administration (NOAA) has predicted that this year El Niño may arrive in India by July-August,affecting the rainfall and the Kharif crop in India¹. India is a major rice producer. If El Niño conditions seriously hamper rice production,then rice price will hike in the international market. Though Bangladesh has gradually increased its crop production many times for the last one decade,it hinges heavily on grain import to meet the mismatch in demand and supply and to ensure food security. A crisis in grain supply may lead to increase its spending on food security. Since foreign fund is in short supply ,govt may opt for printing money to meet the extra spending.

Another thing I have recently noticed that this year alone govt has to pay Taka 1 trillion as interest payments. This means it has to compromise spending on other sectors or to print money to meet the debt obligation. As this is an election year,govt may also embark upon politically motivated development projects to unite the loyalists. Often the money may stem from printing more money. This will push up the price level further, depreciating Taka further and increasing the woes of consumers. Officially, govt is following gradual contractionary policy. But three quarters after its introduction ,we have witnessed further rise in price levels. Like hiding of true figure of forex reserve,govt may hide its action of printing and injecting more money into the economy. That will be indeed a disastrous thing.

Notes And References

1. "El Niño Likely To Arrive In India By July-August 2023”,Down To Earth,March 13,2023. For more read at https://m.youtube.com/watch?v=klaPGvfJkJQ&t=14s

La Semaine Dernière A Mes Yeux

(01 avril --- 06 avril)

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Ma Semaine Gastronomique

Date	Petit déjeuner/Début de jeûne	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures/Fin de jeûne
01	Riz,Haricot vert,Ompok Pabda	---	---	Riz,Pois chiches,Soupe aux haricots mungo,Poulet,Tomate
02	Riz,Soupe aux haricots mungo,Haricot vert	---	Purée de Pomme de terre,Soupe aux haricots mungo,Riz	Pois chiches, Tomate,Nouilles
03	Riz,Gombo,Pomme de terre,Soupe aux lentilles	---	Paratha (fait par moi),Jaggery	Pois chiches,Riz,Gobie charmante, Papaye-Haricot vert
04	Riz,Gobie charmante,Papaye-Haricot vert,Pomme de terre	---	Riz,Omelette, Gourde pointue avec pomme de terre,Épinard de buffle	Paratha,Pois chiches,Jaggery,Tomate
05	Riz,Gourde pointue avec pomme de terre,Gobie charmante	---	---	Paratha(fait par moi),Jaggery,Pois chiches,Riz,Ruhi,Purée de pomme de terre,Tomate
06	Riz,Purée de pomme de terre,Ruhi	---	Riz,Friture des lentilles et oignons, Courge amère	Pois chiches,Nouilles, Paratha(fait par moi),Jaggery
07	Riz,Courge amère, Ruhi,Purée de pomme de terre	---	Riz,Gobie charmante,Épinard d'eau	Paratha,Pois chiches, Jaggery,Omelette, Tomate