La Semaine Dernière A Mes Yeux

( 17 août --- 23 août)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
17	Riz,Soups aux lentilles,Œuf,Haricot vert	Riz,Gourde bouteille,Haricot rouge	Riz,Haricot rouge	---
18	Riz,Œuf,Gourde bouteille,Soupe aux lentilles	Riz,Soupe aux lentilles,Luffa,Ruhi	Riz,Soupe aux lentilles,Gourde bouteilles,Ruhi	---
19	Riz,Œuf,Gourde bouteille,Soupe aux lentilles	Riz,Soupe aux lentilles,Haricot very,Ruhi	Pain,Haricot vert,Ruhi	----
20	Riz,Œuf,Pomme de terre,Soupe aux lentilles	Riz gonflé(depuis marché)	Riz,Gourde bouteille,Papaye	---
21	Pain	Riz,Soupe aux lentilles,Latya,Gourde bouteille	Riz,Soups aux lentilles,Gourde bouteille, Latya,Petit Poisson	----
22	Pain	Riz,Soupe aux lentilles,Pomme de terre,Banane verte	Riz,Pomme de terre,Rita,Haricot rouge avec sec latya	----

Thinking The Unthinkable

NBR misses the revenue target, Taxing export maybe the solution perfect.

Latest NBR revenue collection data shows the collection for July falls short of the stated target by Tk 28.62 billion. VAT outshines others,but income tax and customs duty did not perform as anticipated. The shortfall came amid rising food inflation while international commodity market showing a downward trend.

It is hard to ascertain what caused the price of rice to rise amid record production. If there were [a producer] price index ,then we could see where the problem lies. I have argued about this here(See "Resume The Routine Work", published here on October 9,2024). Unfortunately, it is not available and neither govt nor the BBS shows any intention to launch it pretty soon.

Governor himself acknowledged that $35 billion was plundered from the banking system in the last 15 years. Unlike the USA, Bangladesh does not allow any bank to collapse. So an initiative is on to merge six trouble-ridden banks. Literally, govt is taking the bad managerial decision of the troubled banks upon its shoulder. Letting them go bankrupt would be more prudent solution: you made a wrong decision and you bear the consequences. Govt does not bail out petty businesses, why should it bail out politically motivated projects?

NBR is desperate to make new directives. One directive seeks bank account details of TIN holders. Tax deduction on bank deposits, balance at the end of June and interest earned are the information to be investigated in real time for online tax return. The new directive will discard the need for such proof as the whole thing will happen in real time. Instead of going after how much existing TIN holders earned, it is better to expand operation in other districts, particularly in border districts and real estate booming districts like Sylhet, Chattogram and Rajshahi. Recovering the stolen asset, as govt claimed it traced $3 billion worth of stolen asset abroad, will be another area. Next 4 months after election may see unexpected rise in revenue as new elected govt will assume office for 4 years. Many laundered assets will come back in disguise of FDI, export earnings and remittances. Late [Prof.] Nurul Islam did a remarkable research on this topic and highlighted the two way traffic of this stolen asset(see "Corruption,Its Control And Drivers Of Change: The Case Of Bangladesh",by Nurul Islam,BIDS)

If NBR is really eager to boost revenue, the most plausible way is to impose tax (at least 1%) on remittances and export as I explained in an earlier piece. Central bank's depreciation policy through forex intervention and reduction in reciprocal tariff made room for such taxation. Why not take the advantage while leaving the industry unscathed? Another area is to reimpose duty on sugar that generates ample revenue for the govt. It will bring domestic sugar on [a par] with imported sugar in terms of price. Standard & Poor's forecast says oil prices will be lower next year. So inflationary pressure will not be a concern.

Meeting the revenue target should focus on expansion of taxpayers' base, thinking the unthinkable ( taxing the remittances and export), sugar tax and stolen asset recovery. Hopefully ,post election period will bring the much needed optimism and make NBR's task much easier.

[Update: this piece is updated by me on August 21,2025; update includes link to references.]

Need For Combined Policy

Agriculture policy should include biofuel, Creating ecosystem and make changes real.

The central bank is planning to provide Tk 390 billion worth of agricredit for the next fiscal year. The decision came amid rising inflation and good harvest of rice last year. Agriculture has growing leverage in employment, value addition and boosting consumption in other sectors. For instance, motorbike industry attributes increase in sales to rising remittances and boost in agricultural production,which augments income of rural households.

Since value addition to agriculture is higher than any other sector, its growth has lasting impact on the economy and provides extra capital for other businesses. In particular, good rice production could reduce the pressure on inflation and thereby may lead to a stable macroeconomic [situation]. Last year, Bangladesh produced $2 billion worth of extra rice. We have a better potato yield last year. The extra harvest ,however, contributed to drop in prices, causing woes to many potato farmers. Perhaps rice yield is not good enough to bring down the prices. So we have to import more rices from abroad.

Last year's extra earnings also include around $4.7 billion worth of remittances, which our workers earned working abroad, and around $2.59 billion worth of RMG export. The extra earnings set the ground for monetary intervention provided that extra earnings surpass extra losses of last year (see"Last Year's Extra Money", published here on January 10,2025).

But there are some questions on extra RMG earnings and remittances. As value addition to some items in the RMG is low, a large part of earnings go to pay off the input cost. In addition, some of the laundered money of past years return home in disguise of remittances and RMG earnings, producing nothing or adding no value to economy rather creating inflationary pressure. Not only that most of the RMG export money do not come to the country in the same fiscal year. So in the end true extra earnings from RMG export and remittances are much lower than the reported value. In that light, extra agricultural production retains most of the earnings at home and is crucial for the economy.

I think Bangladesh should blend its agriculture policy with a national biofuel/ethanol policy. If there is no biofuel policy,then we should introduce one. India has an active biofuel policy where it meets a certain percentage of its energy needs through biofuel. The byproduct of the biofuel industry is used as animal feed, which we also import from India. So having a functional biofuel policy means good use of extra yields of potato,tomato etc and creating an ecosystem for livestock and fisheries industry. Peasants are protected from any drop in prices and transportation cost will come down as petrol filling stations in rural areas will sell petrol-biofuel mix.

So combined agriculture and biofuel policy will help peasants from price shock,developing new industry, reducing transportation cost in rural areas and curbing inflation. Another special advantage is it will help providing a steady supply of grain, potato( even lower quality from abroad) for the biofuel industry and thereby helping grain market stable. Agricredit in that case will have more meaningful use,upholding peasant's interest, and monetary intervention, even amid tight monetary policy,will be justified.

La Semaine Dernière A Mes Yeux

( 10 août --- 16 août)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
09	Pain,Papaye	Pain,Feuilles de Taro,Pangash	Pain,Papaye,Pangash	---
10	Riz,Banane,Lait poudre(	Riz,Épinard malabar,Soupe aux lentilles,Sec latya	Nouilles	---
11	Riz,Banane,Lait poudre	Riz,Soupe aux lentilles,Épinard malabar,Haricot vert	---	----
12	Riz,Banane,Lait poudre	Pain,Soupe aux lentilles,Omelette	---	---
13	Riz,Banane,Lait poudre(depuis matché)	Riz,Soupe aux lentilles,Haricot vert	---	----
14	Riz,Lentilles-Papaye,Œuf	Pain,Haricot vert,Gourde bouteillle	Riz gonflé(depuis marché),Pois chiches	---
15	Riz,Lentilles-Papaye,Œuf,Pomme de terre	Riz,Soupe aux lentilles,Courge amère	---	----

Policy Rate Perks And Taxing Export

Policy rate has many solutions to offer, Tax export to fill govt coffer.

Latest inflation data reveals that inflation rose to 8.55% from 8.48% in July. Constant increase in rice prices,caused food inflation to rise to 9.56% in June , and rise in nonfood inflation from 9.37% to 9.38% maybe the reason for this hike. Rice price in particular increased by Tk 8/ kilo, prompting govt to allow private importers to import rice.

Meanwhile, keeping the policy rate at double digit is still being criticized though it brought down inflation from 11% to current level. The govt is apolitical and it has courage to do this thing before election. Otherwise, popular govt may have difficulties maintaining this kind of contractionary policy amid pressure from various groups. Before election, investors are reluctant to go for new investment and poor private sector credit growth tells all of it. So the timing is good and central bank is doing the right thing though many thought it was wrong.

As I highlighted before, keeping the policy rate high thwarted would-be launderers from taking loans and keeps Taka's value stable. Lowering the policy rate may make central bank's intervention in the foreign exchange market ineffective. With the high policy rate, depreciation pressure on Taka is low, so central bank's intervention in forex market will lead Taka keep a desired value. With low policy rate, depreciation pressure on Taka will be higher as the NPL keeps growing, so forex market intervention may not yield the desired result and wild fall of Taka maybe observed, worsening the passthrough effects of inflation and farther raising the cost of goods and services. Another thing I mentioned in one of my earlier posts is that higher policy rate is helping many ailing private and public institutions and it helps provident fund to grow,addressing the inflation. Otherwise, govt would have to intervene and provide cash to them through printing money or using the bloc grants. The balance sheets of many institutions say ,as the news reports revealed, they made profit through investment in treasury bonds. Again market mechanism addressing the prevailing maladies, when investment prospect and law & order situation is doomed at grassroot level. Recently, I encountered a news report on a public sugar mill[,located in Jhenidah,] bogged down with unsold sugar worth of TK 360 million as market price is lower than the govt set price. The mill is waiting with the sugar stock amid undue payments for the workers. If the provident fund's money is invested into treasury bonds, then by this time workers would take loan from provident fund and may not face financial hardship. They might sell the sugar in favorable time and clear the loans. Govt intervention would not need at all. Moreover, situation like workers [descending] on streets could be avoided.

The 20% tariff is not something to remain complacent. Back in February, no one would imagine such a situation might pop up. But it happened and seriously jolted the macroeconomic situation. We have to accept that WTO is dead and we live in post WTO world. We exactly do not know what will happen in the next two quarters. So there is no reason for being content with the 20% tariff. Rather, we should chalk out contingency plan how to avoid situation like this again.

It is indeed interesting that other countries are imposing [tax] on our exports and remittances while we are charging nothing. I argued several times if we would tax remittances and export(*see "Tax On Remittance: Good Or Bad?", published here on May 20,2025), govt coffer might fill with ample money to provide more private sector credit. 1% tax on remittances and export will bring Tk 4/5 billion revenue , discarding the need for imposing minimum tax on all the TIN holders. Revenue will be used to intervene in the forex market to depreciate Taka in a bid to give incentives and provide private sector credit to banks. There should be two way traffic of receiving incentives and giving tax.

It is indeed a good move to keep the policy rate same as it screens out would-be launderers, improves balance sheet of companies amid stagnant business, keeps the depreciation pressure low, checks cost of production and [reduces] need for govt intervention. 20% tariff does not herald a new dawn rather exposes challenges in a post WTO world where black swan events will be more frequent. We should start imposing tax on remittances and exports to cover the incentives. Preparing and bracing ourselves against the black swan event will prevent the need for Middle Eastern intervention for saving the day.

[*Update: this piece is updated on August 12,2025. The update includes reference to tax on remittance argument.]

La Semaine Dernière A Mes Yeux

( 03 août --- 09 août)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
03	Pain,Jaggery	Riz,Haricot rouge avec sec latya	Riz,Haricot rouge avec sec latya	---
04	Riz,Haricot rouge avec sec latya	Riz,Papaye,Pangash	Pain,Haricot very,Soupe aux lentilles	---
05	Pain,Soupe aux lentilles	Riz,Soupe aux lentilles,Pomme de terre,Mangue(depuis marché),Lait poudre	Riz,Soupe aux lentilles,Pomme de terre,Latya	----
06	Pain,Papaye	Pain,Soupe aux lentilles,Papaye,Bronze featherback	Riz,Papaye,Soupe aux lentilles	dattes
07	Pain,Papaye	Riz,Soupe aux lentilles,Pomme de terre,Papaye	Riz,Papaye	Dattes,Biscuits(depuis marché)
08	Riz,Papaye	Riz,,Pangash	Riz,Papaye,Pangash	dattes

MPS And The New Tariff

Challenges are there amid low tariff, MPS targets depend on but and if.

Bangladesh Bank formally published the Monetary Policy Statement (MPS) for the second half of 2025. Inflation declined to [8.48%] in June,yet it has not touched the desired level of 7% ,below which policy rate may witness a drop. MPS aims to achieve 5.5% GDP growth rate in FY 2026. Key developments in the first half of this year set some positive indications on that direction. Free floating of exchange rate did not witness sharp fall of Taka rather Taka appreciated and the central bank had to intervene to depreciate Taka in order to give exporters and remitters incentives. Forex reserves start to grow and stopped the continuous decline.

However, private sector credit growth was low compared to what it had been projected. Only 6.4% growth achieved against the target of 9.8%. For this reason, the target is set to be 7.2%. Election uncertainties, poor law & order condition and drop in deposit growth might have contributed to the poor private sector credit growth.

Broad money growth also witnessed decline. Its impact may be seen in the next 2 months. As demand for major commodities will be lower, anticipated in the MPS, in the international market and dollar may be further weakened impact of import-induced inflation may be lower. So deflationary pressure may prevail provided that govt's grain procurement is satisfactory and no deterioration or fresh eruption of regional conflicts in multiple regions.

MPS highlighted govt's formation of three task forces to reform the banks,stricter policies to classify loan, review of risk guidelines, introduction of new laws to get rid of troubled banks and managing the Non Performing Loans (NPL). But the NPL turned worst and keeps growing. So it is highly unlikely that NPL situation will improve dramatically when domestic private sector investment is stagnant and govt is heading towards election preparations.

Lowering of US tariff to 20% from 35% came as a relief to the cash strapped economy. But there is little room for complacency. China faces 30% tariff, India 25%, Vietnam 20%,Indonesia 32% and Pakistan 19% tariff. Most of these countries have huge investment in backward linkage industry. Their value addition to readymade garments,particular in woven, is relatively higher than Bangladesh. But Bangladesh has the largest number of US and EU compliant green factories and Bangladeshi workers are more productive than workers of those countries. But both China and Vietnam have sustained policies to weaken their currencies. India has to depreciate its currency by 5% to be on per with the other competitors. So this tariff rate is only delusional, it is the macroeconomic policy, productivity, investment in value addition that will be the deciding factors in capturing the US market share. Though for the moment depreciation pressure on Taka is low, keeping a close tab on how Yuan, Rupee and Dong behave against USD in the next 2/3 months will chart the course for our exchange rate policy.

Despite favorable context in the international commodities market and export market, there are challenges in achieving the 5.5% GDP growth rate. Govt itself apprehends domestic turbulence ahead of election. In addition, low private sector credit growth shows no sign of optimism. If govt bars the undocumented money into real estate and allows it to banks,then law and order situation may dramatically improve and liquidity situation in the banks may improve as well.