Be Unpredictable

Be unpredictable in making monetary decision To get rid of forex market speculation.

The central bank and some key banks decided not to trade USD beyond Tk 123/USD. The decision came in the wake of USD being sold at Tk127/USD. Though some local exchange houses are blamed for unusual hike,there may be other reasons. Corruption allegations against some groups which are supposed to be major importers are brought to surface. Some owners of these groups become foreign resident and threat the government to face legal consequences if government continues to freeze their assets at home. In this melee, fate of the loan they took from banks become uncertain. So govt has either to pump money into the trouble ridden banks, which already drew criticism even from the IMF, or to shut down few banks,which never happened in Bangladesh. When the Trump administration will assume power ,it will definitely take tough stance on foreign aid. In addition, FDI has yet to come in big numbers. Govt even signalled the market that it will not release USD from forex reserve. These factors to some extent contribute to the depreciation of Taka.

However, there is argument that some exchange houses unreasonably put the USD rate high. The move even irked the governor. During the previous regime, rumor has it that former governor's relative got involved in exchange rate manipulation. Even if speculation has some role to play in the rate, I think the greatest danger may come from the foreign remittance houses. I wrote a piece about it last year.(Read "Exchange Rate Volatility: Policy Debacle Should Be Blamed")

The best way to get rid of this kind of speculation is to become unpredictable about the policy move.Well, it is certain that the central bank is going to raise policy rate under contractionary monetary policy. But when it will do that should remain unpredictable. For instance, it is sure that the next MPS ,likely to be published in January, will have the announcement of policy rate hike. Immediately after the raise,Taka will have a tendency to appreciate depending on the degree of the hike. If the market senses that the raise in the days to come will not contain the inflation then there will be speculative move.

From July to December, if the central bank raised the policy rate couple of times by 25 basis points at regular intervals , then we would not have seen this speculation in the forex market. Govt should be more unpredictable in its monetary policy decisions.

La Semaine Dernière A Mes Yeux

(21 décembre --- 27 décembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
21	Pain,Œuf,Chou	Riz,Poulet	Riz,Poulet,Soupe aux lentilles	Biscuits
22	Pain,Œuf,Chou fleur	Riz,Chou fleur,Soupe aux lentilles,	Riz,Poulet,Soupe aux lentilles,Pilaf	Jorda,Borhani
23	Pain,Poulet	Riz,Feuilles de radis,Soupe aux lentilles	Riz,Chou fleur,Soupe aux lentilles	Biscuits
24	Pain,Chou fleur	Riz,Chou fleur,Chou,Soupe aux lentilles,	Pain,Chou,Soupe aux lentilles	Patate douce
25	Pain,Œuf,Soupe aux lentilles	Riz,Poulet,Feuilles de radis	Riz,Poulet,Feuilles de radis,Soupe aux lentilles	---
26	Riz,Lait	Riz,Chou fleur,Soupe aux haricots mungo,	Riz,Chou fleur,Soupe aux haricots mungo,Œuf	Patate douce
27	Pain,Chou fleur	Riz,Pomme de terre,Œuf,ChouSoupe aux lentilles	Riz,Pianju(depuis marché),Chou,Pomme de terre,Soupe aux lentilles

Taka Is On Free Fall Again

Expansionary measures and less commitment on aid Maybe the cause for depreciation great.

Head of interim govt in a televised address hinted the possible timing of next general election,which will be held between December 1,2025 and June 30,2026. The much awaited announcement will definitely give a positive signal to the economy by ending the uncertainty about the interim govt. However, BNP is not happy with the announcement as it is expecting roadmap of the election.

Luckily, edible oil prices in the international market register a fall. It will contribute positively to bring down the inflation. However, USD is being sold at Tk 127 at some exchange houses and banks since govt instructed all banks to clear all international dues by December. Govt is also ready to swell forex reserve to get the next instalment of the IMF credit package. Govt also reintroduced a regulation that slaps 20% tax on interest payment on foreign loan in a bid to discourage private borrowing from abroad and augment its revenue earning. Despite the assurance of bankers that the high prices of USD are temporary, dollar rate may depreciate instead of appreciating. Why? The IMF revised its inflation forecast to 11% for 2025. It also lowered GDP growth forecast to 3.8%. Central bank needs several hikes in policy rate to surpass the inflation. Under the policy of gradualism, it takes time to raise the policy rate. So for a good amount of time inflation will remain elevated unless govt drastically addresses the issue,which is highly unlikely because of increasing strain on businesses for credit on working capital and on consumers for paying housing credits or consumer credits. The IMF also expressed concerns over liquidity support worth of Tk 220 billion to trouble ridden banks as it may aggravate the inflationary pressure.

Govt is also not prepared for restoring the law and order, prerequisite for improving business environment at home.Moreover, Trump administration's tough stance on foreign aid and downgrading of Bangladesh's credit ratings will make foreign credit and assistance more costly. Despite the higher pace of remittance inflow,market is not convinced that USD inflow will surpass the USD outflow.

The IMF also revised the revenue target to Tk 4.55 trillion from Tk 4.8 trillion. For the rest of the remaining fiscal year, govt will be desperate to attain the target. So, govt's fiscal and monetary expansions amid contractionary policy,lack of revenue, less prospect for foreign credit and poor law & order condition are contributing to Taka's depreciation.

La Semaine Dernière A Mes Yeux

(14 décembre --- 20 décembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
14	Pain,Œuf,Pois blancs	Riz,Pomme de terre,Soupe aux lentilles,Courge amère	Riz,Poulet,Soupe aux lentilles,Pomme de terre	---
15	Pain,Œuf,Soupe aux lentilles	Riz,Ruhi,Soupe aux lentilles,Pomme de terre	Riz,Poulet	---
16	Riz,Poulet	Riz,Ruhi,Soupe aux lentilles	Pain,Chou fleur,Soupe aux lentilles	---
17	Pain,Lait,Œuf poché	Riz,Pabda,Chou,Soupe aux lentilles	Pain,Chou,Soupe aux lentilles	---
18	Riz,Pabda,Œuf	Riz,Lakkha,Feuilles de taro	Pain,Feuilles de taro	---
19	Pain,Mélasse,Œuf poché	Riz,Lakkha,Chou fleur	Riz,Poulet,Soupe aux haricots mungo	Orange
20	Pain,Chou fleur,Œuf	Riz,Épinard,Pabda,Soupe aux lentilles	Pain,Épinard	---

Stick To Adjustment

Pursue crawling peg and fuel price adjustment, For early economic settlement.

According to a news report, exchange rate of Taka against USD in settling LCs reached Tk125/USD. Bankers fear it may increase inflation slightly(See "LC Settlement Dollar Rate Reaches Taka 125", Tonmoy Modok, The Business Standard,December 13,2024.Link: https://www.tbsnews.net/economy/lc-settlement-dollar-rate-reaches-tk125-demand-rises-1017321). Earlier, the visiting IMF team expressed dismay over not pursuing the crawling peg diligently as the exchange rate pegged at the official rate for more than 3 months and the gap between official rate and unofficial reached more than Taka 2.

I do not know why the govt is bothering about the pass through effect so much when the policy rate is on the rise,holding back unnecessary imports and domestic spending. Seasonal vegetables keep entering the market,registering a downward pressure on price levels. Moreover, remittances are keep coming as confidence on govt is back. Law enforcement is still weak but gradually comes into some kind of shape.

Not only the crawling peg, govt is not following the monthly fuel price adjustment. The two practices are good for monitoring the cost of living.

Even if crawling peg depreciates Taka by 2%, it will have no major impact. Why? Currencies of our trading partners are weak. Both the Rupee and Yuan witness significant depreciation. That means import from these countries will be cheaper.And Chinese policy rate is set to be lowers ahead of a potential trade war. This is also helping Bangladeshi importers to import from China in Chinese currency. In addition, Trump administration is in no mood to raise the Fed policy rate to make the domestic investors content. The US consumer spending will go up and investment will flow to Saudi mega projects that will recruit more foreign workers,further boosting remittances. If much needed trade war will come into effect, it will be a good news for global consumers as major kitchen commodities' prices will see large decline.

The OPEC+ coalition decided to up the oil production from April next year. It will further lower fuel prices. So the remaining months of this fiscal year sets the context for containing the inflation. In this backdrop, I do not think depreciation of Taka to Tk 125/USD would cause a lot of trouble. Rather it will boost the remittances and bring more export orders from abroad.

La Semaine Dernière A Mes Yeux

(07 décembre --- 13 décembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
07	Pain,Œuf,Lait	Riz,Poulet	Riz,Poulet,Soupe aux lentilles	Goyave,Pomme
08	Pain,Œuf,Soupe aux lentilles	Riz,Rita	Pain,Rita,Pianju(depuis marché)	Goyave
09	Pain,Œuf,Soupe aux lentilles	Riz,Feuilles de radis,Pomme de terre,Soupe aux lentilles	Pain,Feuilles de radis	---
10	Singara(depuis marché)	Riz,Ruhi avec pomme de terre	---	---
11	Pain,Œuf,Pomme de terre	Riz,Omelette,Pomme de terre,Soupe aux lentilles	Riz,Latya	Orange(depuis marché)
12	Pain,Omelette, Orange(depuis marché)	Riz,Feuilles de gourde bouteille,Soupe aux lentilles,Pomme de terre,Orange(depuis marché)	Riz,Feuilles de gourde bouteille,Soupe aux lentilles,Pomme de terre,Pabda poisson	---
13	Pain,Soupe aux lentilles,Omelette	Riz,Purée de pomme de terre,Pois blancs	Riz,Omelette, Courge amère	---

Growing Unease: Revenue & Inflation

Less foreign loan and assistance for next year Put the load on internal revenue to bear.

Inflation soared to 11.38% in November. Food inflation increased to 14% , indicating central bank has to do lot more to contain inflation. Most surprise came from soybean oil market where govt-subsidized-unbottled oil priced higher than bottled oil,distributed by private companies. Only 5-litre bottled soybean oil is available in the market in the face of overwhelming demand for bottled soybean oil. Private companies stopped supply of bottled soybean oil, urging immediate talks with govt to settle the price debacle. Anarchy in the soybean oil market is pretty old. Distributors are reluctant to furnish any transaction document to the retailer. I wrote a piece about it earlier. On the other hand, an Army subsidiary set up an edible oil plant promising to provide soybean oil in time of crisis. A public bank owes Tk 11 billion to the subsidiary, which even approached the govt to write off the loan. The truth is the soybean oil market remains the most unregulated, undocumented and unsupervised market.

In the IMF's second review report, inflation was forecast to be 9% in 2024 and 7.2% in 2025. But the headline inflation is still in double digit and it is highly unlikely that inflation will decline to 7.2% next year. Since policy rate is still below the inflation rate and as we do not know when the next policy rate hike will come, the contractionary policy will be prolonged.

In the second review, the IMF stresses on "tighter fiscal policy stance,through revenue consolidation," ¹to mitigate the inflationary pressure from exchange rate reform. The job of revenue consolidation is not being done properly. The IMF already held talks with the NBR to know the progress on finalizing the medium and long term strategies on revenue generation, a benchmark scheduled to be completed by December 2024. I still think the decision to lower VAT and tax from sugar and edible oil is an unwise move; it has no reflection in the market but costing the govt lots of revenue (at least Tk 150 billion). Similarly, religious charities and NGOs that have ample fund but engage in political activities should be taxed. Some scheduled banks see large inflow of funds from abroad during the month of Ramzan. Donation tax may be imposed on them. Point is their end use cannot be ensured. So taxing them may at least prevent misappropriation or abuse of this fund. Similarly, microcredit agencies' extra fund generated from 2 years of operation could be taxed instead of not taxing at all. In case of any force majeure, they may get the desired tax relief. Point is both the religious charity and microcredit money have some kind of use in politics. This is creating debate at home and abroad. So it is better to tax them. NBR could at least get Tk 50 billion from this initiative.

On the monetary side, it is a good news that Taka remains stable for more than 4 months. If it remains so for another 4 months, foreign investors' confidence will be back. It is anticipated that Trump administration will not raise the fed policy rate as he will cut the spending abroad. It means that non-food inflation may come down in Bangladesh and lowering the external pressure on monetary policy.Bangladesh Bank is in process of recruiting chief economist. A trained and practicing foreign economist (black/white) will help strengthening forecasting and policy analysis team and Monetary Policy Committee(MPC). I think industry insiders should be included into monetary policy committee. I hope MPC will conduct regular survey across Bangladesh before publishing the Monetary Policy Statement (MPS).

The governor in a press conference apprehended that NPL may reach 25% or 30% of total loans by June next year.Target is to lower it to the benchmark of 8%. But now the NPLs of state commercial banks stood at 22% of total loans. So it is quite an impossible task to bring them to 8% by 2026. Most interestingly, merger and takeover of banks do not bring back confidence on the merged banks. Still many depositors prefer to withdraw their money from the trouble ridden banks.

Increasing dependence on electronic fund transfer in public procurement will reduce corruption in the public sector². Good news is govt is ready to implement the project.

If Bangladesh Bank can introduce extended credit program for farmers and SMEs hit by natural disasters ,it will help them get back on track quickly. Similarly, more tax on tobacco, tax on multiple ACs, AC vehicle will improve our carbon footprint. Increasing tax on tobacco has other benefits too. Since air quality drops in winter, public smoking on the streets create a suffocating atmosphere for nonsmokers, COPD patients,senior citizens and children. Moreover it raises the risk of stroke and brain hemorrhage. Doubling the tax on tobacco could at least lower the incidence of public smoking.

One good news is that Bangladesh met the net international reserve target of $15 billion by December '24. But I cannot figure out how a positive financial account balance will be met next year. There will be less commitment on international aid under Trump presidency. China has already made less loan commitment for next year due to the worsening public debt at home. Moreover, downgrading of credit rating of Bangladesh will make foreign credit hard for private sector. So an optimistic scenario for next year in terms of FDI and foreign assistance is still bleak.

I think as the govt is facing revenue shortage, it may mull introducing universal Tk 1000 tax for every TIN holder. It will at least generate Tk 10 billion. Social spending should be based on "doers should be getters". Lower income bracket of private sector job holders,workers and farmers should get inflation allowance/ long term consumer credit from the govt. It will be appropriate for the govt to focus more on internal revenue generation than to expect more foreign assistance.

References:

1. Staff Report,IMF Second Review Under ECF,EFF And RSF,IMF,June 2024.
2. "IMF's Second Review On Credit Program", Rezaul Hoque, June 27,2024,https://hoquestake.blogspot.com.Link: https://hoquestake.blogspot.com/2024/06/imfs-second-review-on-credit-program.html?m=1

La Semaine Dernière A Mes Yeux

(30 novembre --- 06 décembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
30	Riz,Pomme,Pomme de terre	Riz,Feuilles de gourde bouteille,Soupe aux lentilles	Pain,Soupe aux lentilles,Feuilles de gourde bouteille	---
01	Pain,Tête de chèvre	Riz,Épinard,Poulet	Pain,Épinard,Poulet	---
02	Pain,Soupe aux lentilles,Œuf	Riz,Latya	Riz,Latya	---
03	Pain,Soupe aux lentilles,Œuf	Riz,Feuilles de gourde bouteille,Poulet	Riz,Feuilles de gourde bouteille,Poulet	---
04	Pain,Pois blancs	Riz,Poulet	Pain,Soupe aux lentilles,Œuf	---
05	Pain,Chou	---	Riz,Feuilles de gourde bouteille,Soupe aux lentilles	---
06	Pain,Chou fleur	Riz,Gobie charmante,Chou fleur	---	Pomme,Goyave

Things Remain The Same

Things remain the same 3 months later, Commit true reforms to make things better.

It has been more than 3 months since the interim govt assumed power with commitment to sweeping reforms. It is too early to comment how it made progress in that endeavor. White paper on economy is likely to see the light by Sunday next week. No major change is visible, this is the perception. One cadre-based party witnesses lifting of restrictions while the other one sees imposition of restrictions. Financial institutions free from one political creed while some specialized financial institutions see tightening of grip by other political creed. Financial institutions should be free from control of any kind of political creed. This should be the governing principle of financial institutions. At the same time, business and employment market should be free from all kinds of creed and garrison-based interference.

Consensus and reconciliation should take place among feuding parties. What we are seeing now is that consensus is being formed among like minded political parties. It will not dispel the uncertainty in politics and will not send a positive signal to the economy. Budget deficit may become wider in this backdrop and foreign loan may not be that easy next year. Moody's downgraded credit ratings of Bangladesh. Other credit rating agencies are likely to do so. Interim govt has not yet spelled out the date of next election. But elite civil society members stress for 4/5 years for implementing the reforms.

Current govt has a favorable ground to end discriminatory policies and to set up check and balance mechanism among state organs,particularly holding law enforcement agencies accountable to people. It is also in a favorable position to hold electoral reforms. Ordinances targeting free and fair election, accountability of law enforcement agencies and economy are enough for this moment. For these reforms, a govt does not need long time to stay in power. Most importantly , we have to initiate the culture of practicing democracy and accountability. This habit takes time to develop. A central bureaucratic machinery and a group of enlightened cannot install it and ensure it. But they can start the process.

Americans get rid of slavery through bloody disagreement. They outlawed slavery. They strengthened institutions to make sure they do not have to walk on the same path over some issues.

Govt ended controversial law that gave immunity to powerplant owners. It is planning to end draconian laws. Caretaker govt is being brought back to surface. But govt indulges in monetary and fiscal expansionary policies. While govt is lacking vital revenues, it lowered tariffs and VAT. Govt is providing liquidity worth Tk 225 billion to 5 trouble ridden banks. Earlier it had reintroduced a law that relieves microcredit agencies from tax obligations for 5 years. It is planning to issue bonds worth Tk 50 billion to pay energy dues¹. It is a continuation of practice started by previous regime that I highlighted in my "Economic Reforms: Morning Shows The Day" piece². It is mulling to introduce "Universal Basic Income", which aims to give every family a minimum income per month,costing the govt Tk 750 billion every year. Look what happened to Hasina regime,which gave 10 million family cards to families to provide subsidized food. It hardly reached the target group and her official residence got plundered, mob looted her fish, vegetables and swan. Moreover, there are kleptomaniac groups who are poised to siphon off this kind of social security programs.

It is a laudable move to give the exporters 8-year long extended credit to mitigate the loss from transitory effect of depreciation of Taka. But SMEs need more this kind of credit facility than exporters who benefit from Taka depreciation. I read a news report that divulged how a Gazipur-based SME sustained loss from rising interest rate,costing him around Tk 1.8 million. This SME needs more support from the govt to recuperate the loss.

Central bank said it would no more provide liquidity after this latest one. I think it will go for more policy rate hikes after the scheduled visits of IMF in the first week of December. Broader political consensus among feuding parties, alignment of monetary and fiscal policy, innovative program like the extended credit and a specific date on election could be the recipe for recovery. Otherwise, we will drive along the same roundabout.

References:

1. "Govt Owes Tk 500 Billion To Energy Sector,Govt Mulls Issuing Bond",Sheikh Abdullah & Abul Kashem,The Business Standard,November 05,2024. Link:https://www.tbsnews.net/bangla/%E0%A6%85%E0%A6%B0%E0%A7%8D%E0%A6%A5%E0%A6%A8%E0%A7%80%E0%A6%A4%E0%A6%BF/news-details-274296
2. "Economic Reforms: Morning Shows The Day",Rezaul Hoque,https://hoquestake.blogspot.com,January 12,2024. Link:https://hoquestake.blogspot.com/2024/01/economic-reforms-morning-shows-day.html?m=0

La Semaine Dernière A Mes Yeux

(23 novembre --- 29 novembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
23	Khichuri,Pangash,Œuf	Riz,Petit poisson	Riz,Chou,Petit poisson	---
24	Riz,Soupe aux lentilles,Œuf	---	Riz,Ruhi,Soupe aux pois blanc avec tête de chèvre	Goyave
25	Riz,Soupe aux pois blanc avec tête de chèvre	---	Riz,Ruhi	Singara(marché)
26	Riz,Soupe aux lentilles,Œuf	---	Riz,Poulet	Singara(marché)
27	Pain,Poulet	---	Riz,Épinard,Pangash	Singara(marché)
28	Pain,Chou fleur,Œuf	Riz,Soupe aux lentilles,Pangash	Pain, Soupe aux lentilles,Pangash	---
29	Pain,Tête de chèvre dans pois blanc	Riz,Poulet,Soupe aux lentilles	Pain,Œuf,Soupe aux lentilles	---

Specify The Timeline

Clear timeline to transfer of power May bring the recovery much earlier.

Interim govt completed its 100-day in power. In a televised address, Chief Advisor told the country would head towards election after necessary reforms.But no specific date is provided. Earlier an ordinance had been introduced validating the rule of the interim govt. It laid out that tenure of the current interim govt would be till the assumption of power by a new elected govt. From the ordinance, one cannot surmise the duration the current govt intends to stay.

No one is questioning the intention of the govt,but a specific election date is good for the economy. It will get a signal when this will end and when a new govt will take power. It will dispel uncertainty with so many factors. Take for instance the real estate sector. Since the regime change, the sector has been going through a bad spell. Some developers are too afraid to kick start new project. And many property owners are finding it difficult to encash / resell their properties as there are no buyers. Moreover, govt raised registration/reregistration fees to a level that discourages resell of properties. Since most of the nouveau riche are related to outgoing regime, there are not too many buyers with ample money to invest into property. It is a safe sanctuary of opaque capital as law permits investment of opaque capital in this sector. Since the anti-corruption drive is strong, investment of opaque capital into real estate has dried up. In addition, developers with genuine capital are reluctant to invest as interest rate is on the rise. It will raise their cost during implementation of the project. A BBC Bangla report revealed that a retired teachers couple shelved their plan for buying new apartment as they perceive the time uncertain,fearing unable to pay the instalment or developer company may go bankrupt. A specific election date will send a signal to the housing market when the tenure of this regime will be over. So the group planning to wind up business will go out of the business and the other group planning to step into this sector will have an idea when to step in. Some planning to go abroad will sell their properties to developers. Investors with opaque capital will get an idea when to invest. Construction sector recruits a lot of workers,addressing unemployment in major cities and absorbing rural labor force residing in the cities. Now this vital sector is in stalemate as the status of the current govt is creating some kind of uncertainty. Ongoing sit-ins, workers agitation, political differences among parties do not offer much room for optimism.

I thank the govt for honest reporting of the inflation data. Many blamed this govt for the rise in inflation rate(10.86%) during October. Inflation rose because govt took into account true price levels of the commodities. I will thank the govt more if it allows multiple parties including platforms of banks and the central bank to calculate and publish CPI and PPI.

In terms of revenue collection, govt achieved target from VAT but lags behind the targets of income tax and other duties. Govt is keen to tackle the inflation by March when the fasting month of Ramzan will commence. In this regard, it reduces the prices on edible oil,sugar,onion,rice and dates. As I have mentioned earlier,govt may review its decision on tariff on sugar and edible oil since the two are major sources of import revenue. Moreover, restrictions on potato export and revoking cash subsidy on potato export may lower the prices on potato. Potato export to Russia, Japan and the Middle East to some extent aggravated the situation.

I am expecting some structural changes from this govt rapidly. Govt doled out cheques as compensation to victim families of July-August movement. If it introduces an ordinance that requires perpetrator law-enforcement agency or personnel pay compensation to the victims of unlawful act, then it will curb tremendously recurrence of such extra judicial incident. The govt has a moral high ground to introduce such ordinance and no one will question its objective.

If the govt takes more time to publish white paper on corruption it may take it. But I have some observations on money laundering. Groups or individuals channelled out money outside the country without proper consent of Bangladesh Bank but showed it on the tax files /legal documents of the group's foreign subsidiary (under the same name) should not be deemed as money laundering. The money is in productive use as part of risk mitigation and maybe some regulations at home did not allow it to be transferred in legal way. Transfer of money to shell companies under false name or to unproductive investment should qualify for money laundering accusations. At the same time, govt should introduce another ordinance that holds agencies engaged in money laundering or failed to detect it.

We see in many countries there are parliamentary committee to oversee the conducts of security establishment. Unfortunately, we have not seen yet any reform commission on defense. Had they been active in time and played their role in due course we might not have seen so much corruption and a party might not become so authoritarian. Most of the corrupt groups are closely associated with the Armed Forces or police. Moreover, the Armed Forces were also involved in many mega projects. Yet they are not accountable for their conducts. There should be parliamentary oversight committee to summon them and offer their explanation over controversial issues.There should be constitutional clauses on safety of media outlets,journalists and owners of outlets to report on defense related irregularities. Since govt is opening new reform commission at measured intervals,it may open a new one on defense.

So far remittances and foreign assistance/soft loans give the govt an aura of confidence to start some expansionary fiscal policy. But I think from March it should align its fiscal policy with the monetary policy,which needs more tightening as policy rate is still lower than the inflation rate. The first priority is to fix the economy and then to go for other ones. Resuming regulatory role and a specific timeline to transfer of power may send a positive signal to the economy.

La Semaine Dernière A Mes Yeux

(16 novembre --- 22 novembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
16	Pain,Chou fleur	Riz,Chou fleur,Poulet	Riz,Chou fleur	Biscuits
17	Khichuri,Œuf	Riz,Courge amère,Soupe aux lentilles	Riz,Courge amère,Soupe aux lentilles	Pomme
18	Khichuri,Œuf	Riz,Radis,Soupe aux lentilles	Nouilles	---
19	Khichuri,Œuf	Riz,Feuilles de radis,Purée de banane verte,Soupe aux lentilles	Pain,Feuilles de radis,Purée de banane verte	Pomme
20	Pain,Chou	Riz,Feuilles de gourde de bouteille,Purée de banane verte,Soupe aux lentilles	Riz,Feuilles de gourde de bouteille,Purée de banane verte,Soupe aux lentilles	---
21	Riz,Soupe aux lentilles,Œuf	Riz,Épinard,Pangash	Riz,Épinard,Pangash	---
22	Riz,Soupe aux lentilles, Œuf	Riz,Radis	Pain,Radis	---

Stop The Tie-in

Privileged sales and banks' money to in-laws Lead us to a market full of flaws.

In recent weeks, some mobile operators are offering mobile phones with new SIM connection. "Tie-in" sales are pretty common in consumer activity but we have to keep an wary eye on such sales as it has the potential to harm consumer interests in the long run. In addition, many leading operators are offering insurance to protect your cell phones from future damage. At first sight, it appears harmless and beneficial to consumers. But a deeper look may unravel some uncomfortable truth.

For instance, operators offering "tie-in" sales are also providers of high speed data. With high speed data, you will often notice that browsers auto add plugins or updates,often supplied by malicious providers with dubious intentions. Furthermore, YouTube streaming or other live streaming like in Facebook often makes your device vulnerable to hacking. Apart from that ,WiFi hotspots and free WiFi network also make your handsets and devices vulnerable to hacking. Maybe some deranged employee within an operator may engage in harmful activities, causing you lots of trouble financially. I experienced these things in the past and am often vocal against such consumer practices. I used the public operator for some time at ease ,experiencing higher pace of internet and no damage to my handset whatsoever. But for the last 11 months, I have stopped using it as services deteriorated. Switching to other operators only brought back those bad experiences back. Why are you offering insurance to handsets or new handsets with new connections if you are not acknowledging there are some faults in your side causing damages to consumers' handsets? Damages range from wiping out the operating software to key-logging the onscreen keyboard,from dark screen to dysfunctioning touch pad. Very few consumers have little knowledge about what happened. Moreover, lack of technical knowledge of the law enforcement agencies and consumers also fails to track the origin of the problem .

From the perspective of fair business, "tie-in" may cause unhealthy business competition. Say company A holds significant market share in industry A and another company B (say it is in the mobile phone business) holds significant market share in industry B. The companies decide to offer "tie-in" product for industry A(say the mobile SIM market). This "tie-in" will consolidate their market shares for both the industries by pushing up their sales. In this time of austerity, while consumers tighten their pockets, this kind of "tie-in" gives unreasonable privileges to the companies who consolidate their market shares to worrying level. This should be stopped.

At the same time, there should be no access to public banks' money for operators whose owners are politicians or in-laws of politicians. In the past, we witnessed how banks' money fallen into the hands of politically blessed in-laws became bad loans, only worrying the ordinary depositors and worsening banks' balance sheet. If they have better business ideas, they should go to the stock market, to IFC/MIGA or to the Dubai/Singapore based banks. They should not be given access to local banks' money.

From poultry ingredient market to the cellular networks ,we see how tie-in is adversely effecting the consumers, leaving a heavy blow to welfare and competition alike. For the sake of business and consumer's interest in this time of austerity, all kinds of privileged sales pitch should be stopped.

La Semaine Dernière A Mes Yeux

(09 novembre --- 15 novembre)

Cliquez pour voir/cacher

Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
09	Khichuri, Œuf	Riz,Ruhi	Riz,Ruhi	Biscuit
10	Khichuri,Ruhi,Œuf	Riz,Purée de banane verte,Ruhi,Poulet	Pain,Poulet	Pomme
11	Riz,Poulet	Riz,Soupe aux lentilles,Ruhi,Poulet	Pain,Lait	---
12	Riz,Soupe aux lentilles,Œuf	Riz,Pomme de terre,Soupe aux lentilles	Riz,Pomme de terre,Soupe aux lentilles	Pomme
13	Khichuri,Œuf	Riz,Chou fleur,Soupe aux lentilles	Riz,Chou fleur,Pianju(marché),Soupe aux lentilles	Pomme
14	Khichuri,Œuf	Riz,Tête de Ruhi dans soupe aux haricots mungo	Riz,Tête de Ruhi dans soupe aux haricots mungo	Singara(marché)
15	Khichuri	Riz,Feuilles de radis,Petit poisson	Riz,Feuilles de radis,Petit poisson	---

Need Prudent Decision

Prudent macroeconomic management Helps to weather the bad event.

Bangladesh Bureau of Statistics (BBS) is about to publish the inflation rate for October. September inflation rate declined to 9.92%. Despite the ongoing contractionary monetary policy, market has yet to reflect the official inflation data. Govt lifted all duties and taxes on rice import following the heavy loss of Aman paddy cultivation due to unusual precipitation in August-September. This is happening at a time when the govt embarked on bringing the corrupts to the book. During this anti-corruption drive many groups are reluctant to open L/C. On the other hand,high interest rate and lack of instructions from the central bank bar new entrants to go for rice import. Govt has to play crucial role to encourage grain import in this troubling time.

Yesterday(November 06), I read a Reuters report that depicts pessimism about economy following Trump's victory. The report says a fresh round of trade war would accelerate inflation as consumers will pay higher prices for consumer goods¹.

I do not think so. Previous round of trade war under Trump presidency shrank global growth by 0.30%,according to the IMF. This time too, both the IMF and the World Bank projections hint slow down of major economies except the USA for next year. When growth shrinks,demand for output falls and it brings down the price levels. Trump's plan to impose 10% tariff on all foreign goods and 50% tariff on Chinese goods are likely to protect the car industry, particularly the electric vehicle industry. Apart from that it will bring pace to import substitution industry in the US along with the new tax rebate policies for the US businesses. This is heading towards more jobs,more income and more consumption. Trump is likely to recuperate loss from tax rebate by cutting govt spending abroad ( less military spending abroad, less foreign assistance, less fund for climate change etc). This Trumpian resource mobilization will boost consumer activity, a good news for Bangladeshi apparel export. I also disagree with Reuter's fear that it will delay Fed's plan for lowering the policy rate. Fed has already lowered the policy rate. Fall of demand for goods will bring down the price levels. Moreover, Saudis are planning to cut the prices for oil for Asia in December². Prices of fuel, which influence the price levels, registers a decline. So lowering trend of inflation along with boost of American export due to increasing military spending across the globe will force the Fed to lower the policy rate. Back in June 15 this year, I highlighted in my piece titled "Macroeconomy Amid Trade War V", how fall in prices of soya and soya meals may help Bangladesh in the fight against inflation³.

Most importantly, high tariffs on Chinese goods will help relocating manufacturing units to other countries. More FDIs are expected under Trump presidency. In general for Bangladesh, non-food inflation will come down in the first two quarters of next year if any disaster does not disrupt the global supply chain.

Many social media channel claimed China refused to provide fresh credit to Bangladesh. They equated the decision with the regime change. I think it is economic reason rather than political one. Prior to former Prime Minister's visit to China,a Politburo member of Chinese communist party came to Bangladesh in an official visit along with EXIM bank of China and other ministry officials. They held talks with the central bank about the macroeconomy. JICA officials also held talks with the central bank about economy at this time to know first the real economic situation here. According to a report by Reuters⁴, Chinese public debt tripled its GDP due to the crisis in its housing market. So it slows down the economy and the party directing fresh credit to the manufacturing sector at home while the Belt and Road project gets less priority. I think for this reason China is not committing new loan to Bangladesh.

Last week, another decision, it appears, may hurt govt's revenue collection target for the next year. Government decided to revise 30% tax on capital gain from the stock market. The new rate is 15%. It will evidently hamper govt's revenue collection target of Tk 4.8/5.1 trillion next year. No ordinary or common people come to invest in share market, where opaque capital enjoys safe sanctuary. Earlier govt slashed tariff on edible oil and sugar. There are too many fiscal relaxations when the fiscal policy is supposed to align with the monetary policy. I think except the handful few kitchen items , which are consumed by all income groups, there should be no relaxation on taxes.

Government has to reconsider its decision on soft tax policy when normalcy in daily life and kitchen market has yet to return [and it has to meet a colossal revenue target]. Economic activities are not in full swing. Though external situation is in favor of a quick recovery, weathering the bad spell requires prudent economic management.

P.S.: BBS published the inflation for September when I am preparing the piece. General inflation increased to 10.87% and food inflation increased to 12.66%.

References:

1. "Trump Victory To Reverberate Through Global Economy ",Balazs Koranyi,Reuters,November 06,2024. Link: https://www.reuters.com/markets/us/trump-victory-reverberate-through-global-economy-2024-11-06/
2. "Aramco Cuts Oil Prices To Asia",Yahoo Finance,November ,06,2024. Link:https://finance.yahoo.com/news/aramco-cuts-oil-prices-asia-185011180.html
3. "Macroeconomy Amid Trade War V",Rezaul Hoque,June 15,2024.https://hoquestake.blogspot.com. Link:https://hoquestake.blogspot.com/2024/06/macroeconomy-amid-trade-war-v.html?m=1
4. " Why Trump Tariffs Pose A Bigger Threat To China's Economy This Time",Marius Zaharia,November 06,2024. Link: https://www.reuters.com/world/china/why-chinas-economy-is-more-vulnerable-trump-tariffs-this-time-2024-11-06/