Formalizing Festival Economy

Formalizing our festival economy Boost sales and lower revenue agony.

Eids have always been great drivers of augmenting domestic sales. This Eid is no different. Despite slow improvement in law & order, Eid economy is doing well according to some news reports. There has been no formal study of the size of Eid economy. Platform of shop owners claims it would be around Tk 3 trillion. It maybe an exaggerated figure. Unfortunately we do not have any market research institution that could corroborate the claim. Such institution could initiate a study and come up with the [approximate] size of Eid economy.

This kind of study helps policy intervention. So that govt incentives fall into the right hands. Policy makers will also have an idea about flow of money and links between key sectors. Now only news reports are key sources of this information. Govt can help float this kind of market research institution through public private partnership.

Undocumented transaction in many shops is an obstacle estimating true figure of festival economy. Currently there are 2.6 million shops across the country according to the platform of shop owners. But many do not have business identification number (BIN), which is required for paying VAT(see "Subdued Festival Economy" published here on March 23,2025.https://hoquestake.blogspot.com/2025/03/subdued-festival-economy.html?m=1). So govt does not get enough revenue from transactions take place during the festivals. Till March, revenue shortfall reached Tk 714 billion. If the shops were BIN registered , govt would get enough revenue just from the shop owners.

Moreover, revenue shortfall indicates govt may further borrow from the banks ,lowering the share of private credit. Squeezed private credit stalls expansion/growth of businesses ahead of major festivals. If funds like Equity And Entrepreneurship Fund (EEF),which remains unused throughout the year, of the central bank becomes available for shop owners during key festivals, then it will have major impact on the growth of these shops.

Another thing I notice is that govt provides bonuses to public servants during festivals of Eid and Bengali new year. This policy also influences private sector to give bonuses during the two major events. Altogether the policy boosts sales in the festival seasons. Similar kind of incentives given six months later may also increase sales later period of the year,which usually see dull period in sales revenue. Celebrating Autumn, Winter may be the occasions to choose for.

Informal nature of our festivals fails the govt to tap the potentials from them. They are great drivers of generating sales demand and growth of SME businesses. Bringing them into a formal structure will help govt to keep a close tab on the flow of money and augment the tax revenue.

Subdued Festival Economy

Festivals face few challenges, They shape sales changes.

In short span of time, Bangladeshis are going to celebrate two major festivals. At the start of April, they are going to celebrate Eid-ul-Fitr, festival marking the end of the fasting month. And two weeks later, Bengali new year will also be celebrated with jubilation. But the two back-to-back festivals have cast shadow over sales of goods. Festival sales already took a hit due to poor condition of law and order. The Police in its own assessment found that criminal activities increased by around 7% since the fall of the former govt in August last year. Rampant mugging incidents and extortion dampen the business mood and dishearten many businessmen.

Usually, one-third of the total sales of a typical store here takes place during this fasting month to celebrate Eid. We still have one week to go. Yet the general atmosphere in the market hints a dull shopping season, causing further woes among businessmen. Previous year, mysterious fire and govt raid were the causes of concern. Now collapse of law & order appears to be the main concern.

Platform of the retail stores, Bangladesh Dokan Malik Samiti, furnishes a sales figure after Eid every year. According to them, there are 2.6 million shops (groceries, tailoring shop, boutique shop etc) across Bangladesh. Last year , a total of Tk 2 trillion worth of sales occurred in these shops during Eid. I take the estimation with a dollop of salt. I think it is exaggerated. Undocumented transactions are included here. In addition, not all the shops have business identification number (BIN), provided by the NBR to track VAT record.

Even that exaggerated number may become further lower this year. Across the Buriganga river, a little zone of garments factories sprang up in the last two decades to cater the need of local consumers during festivals like Eid.Squeezed private sector credit even cast shadow over their businesses. Recent MPS admits that private sector credit growth shrinked to 7.3% against a projection of 9.8%. However, the World Bank and other private banks mobilized money to the SME sector. I do not know how much of it reached the SMEs.

New year festival economy is also likely to take a hit due to fall in demand amid high inflation. Eid spending further squeezed the pockets of consumers ahead of new year. Many urban dwellers will spend the vacation in the countryside due to a long Eid vacation and as the the new year celebration is mostly an urban event,a dull selling season is apprehended. The press reports indicate that around Tk 200 billion worth of sales takes place during the Bengali new year's celebration. That figure may become much lower this year.

In brief, two major festivals face multiple challenges in terms of sales this year: first, high inflation squeezes the pockets of consumers;second, occurrence of the two events in short span of time may lower the overall sales of the new year; third, poor law & oder condition dampens the mood; fourth, subdued private credit flow hampers business as usual.

Govt may easily address at least two issues to make easy doing business in this festival season. Tightening the law and order situation with beefing up the security at shopping centers. Ensuring access to credit for the businessmen who require money to meet the growing demand of the consumers.