La Semaine Dernière A Mes Yeux

(15 mai --- 22 mai)

Selon un reportage, UBER Eats a affirmé que la société allait fermer son bureau au Bangladesh à compter de début de juin.

Selon un reportage, des ouvriers se sont insurgés contre leur arriéré et sont descendus dans la rue à Mirpur. Ils ont immobilisé les rues à Mirpur-10 et Mirpur-13.

Selon un reportage, des gens ont mis le feu à la maison d’un chanteur folklorique à Sunamganj. La maison a été détruite.

Selon un reportage, cyclone Amphan, entrainait rafales de 160 km/h, a frappé les côtes de Bengal occidental en Inde et le Sud-ouest du Bangladesh. 80 personnes, dont 16 Bangladais, ont été tuées par le cyclone. L’abattage a provoqué le plupart de mort. L’orage a balayé les champs de riz, les établissements de crevettecole, les manguiers. Le gouvernement estime un bilan de Tk 11 miliards. Le prix de mangue a chuté à cause de cyclone Amphan. Un kilo de mangue coût Tk 0,50 paisa à Rajshahi.

Selon un reportage, Bangladesh a enregistré 30205 cas de coronavirus. Le vendredi, Bangladesh a détecté 1694 cas de coronavirus. La propagation s’allonce mal.

Devalue Currency To Augment Demand

Taka loses fast its value against dollar,
Reasons put forward for paying the bills of importer.
Increase in money supply depreciates local currency,
Devalued taka augments demand, output and local vacancy.
Overshooting exchange rate may approach stable value,
Lowering interest rate is a must amid pandemic flu.

A recent news report (May 20)says there has been a dollar crisis. To meet the growing import bill amid sluggish export, demand for dollar surged. Taka against dollar has been depreciated to Tk 88.50 at the banks. This is happening when government doled out Tk 5000 crore credit to RMG owners to clear dues of workers. In addition, government assured cash benefits to rural poor and other incentives to various sectors. By the time I am writing this piece, remittances in the month of Ramzan have reached $1.09 billion.

I embarked upon to see what impact an increase in M2 would leave on exchange rate. M2 comprises of currency outside bank, demand deposits, narrow money supply and time deposits. Data were taken from Bangladesh Economic Review 2018 for the period 1996-2018.

Autocorrelation check for 23 observations and 1 explanatory variable reported positive correlation (d = 0.374). I did not transform the data. It was assumed that during the unit root test inclusion of lagged residuals will take care the autocorrelation.

Then I went for unit root test to see whether exchange rate and M2 were stationary. To bare eyes, it appeared that both the variables wandered around a trend. So I constructed the following regression equations:

🔺 Exch_t = a + bt + c Exch_t-1 + d 🔺 Exch_t-1
🔺 M2_t = a + bt + c M2_t-1 + d 🔺 M2_t-1
Where 🔺 Exch_t= Differences in exchange rate at t,
Exch_t-1 = exchange rate at t-1,
🔺 M2_t= Differences in M2 at t,
M2_t-1= M2 at t-1,
🔺 M2_t-1= Differences in M2 at t-1,
t = a time trend variable, here year.

After the regression run , I obtained the following result: 🔺 Exch_t = -1778.34 + 0.902t -0.501Exch_t-1 + 0.455 🔺 Exch_t-1
(t=-2.52, p=0.022, se=706.22) (t = 2.53, p=0.022, se=0.36) (t=-2.79, p=0.012, se=0.18) (t=1.97, p=0.065, se=0.230)
(F=3.39, p=0.042) 🔺 M2_t = -7176664 + 3590.12t + 0.0028M2_t-1 + 0.373 🔺 M2_t-1
(t= -2.59, p=0.019, se=2774933) (t=2.59, p=0.019, se=1386.81) ( t= 0.088, p= 0.93, se=0.0313) (t=1.27, p=0.22, se=0.29)
(F=67.54, p=0.00)

Huge standard errors put question mark on the intercept and trend coefficient of 🔺 M2 function. Tau statistics of slope coefficients of lagged exchange rate and M2 , -2.79 and 0.88 , in absolute terms were smaller than MacKinnon critical tau statistics at 5% level, -3.4620. So I did not throw away the null hypothesis that c=0 or exchange rate or M2 are nonstationary.

As the first differences of these two variables appeared to be nonstationary, it was assumed , for the sake of simplicity that they were integrated on order d,I(d). Regressing exchange rate on M2 , I obtained the residuals for cointegration test. Then I ran the following regression:

🔺 resid_t = b resid_t-1 + c 🔺 resid_t-1

And the result was: 🔺 resid_t = -0.160 resid_t-1 + 0.51 🔺 resid_t-1

(t=-2.012, p=0.058,se=0.079) (t= 2.84, p=0.010,se=0.18)

(F=5.85,p=0.011)

The computed tau statistic -2.012 was greater than the critical value -3.37% at the 5% level of significance. I did not reject the null hypothesis that least squares residuals are not cointegrated. Cointegrated Regression Durbin Watson (CRDW) test also validated the claim . The computed d = 0.374 turned out to be smaller than the critical value 0.386 at 5% level of significance. So I did not reject the hypothesis that exchange rate and M2 are not cointegrated.

In this particular situation, exchange rate and M2 were I(d) series and not cointegrated. So I went for a VAR model:

🔺 Exch_t = b₁🔺 Exch_t-1 + b₂ 🔺 Exch_t-2+ b₃🔺 M2_t-1 + b₄ 🔺 M2_t-2+ v^🔺Exch_t

🔺 M2_t = c₁ 🔺Exch_t-1 + c₂ 🔺 Exch_t-2+ c₃ 🔺 M2_t-1 + c₄ 🔺 M2_t-2+ v^🔺M2_t

VAR model did not fit well (🔺 Exch chi² =6.88, p= 0.144, and for 🔺 M2 chi²= 142.85, p=0.00). Nevertheless, I wanted to see the Impulse Response Function (IRF) that shows effect of a shock of endogenous variable on itself and other endogenous variables. An increase in orthogonalized shock to M2 resulted in a short decrease ( depreciation of Taka ) in the exchange rate that withers away 1 period later.

Though the VAR model is to be accepted with a dollop of salt, this is pretty much in line with theory found in economic text book. Temporary drop in global demand shifts the DD schedule, which shows mixes of output and exchange rate for keeping output market in equilibrium in the short-spell, to the left. This in turn reduces full employment-level output to a lesser level, provoking depreciation of currency. A currency depreciation augments both aggregate demand and output at home. Meanwhile, increase in money supply in the domestic market depreciates exchange rate and causes AA schedule, which links exchange rates and output levels to keep the money and foreign exchange markets in equilibrium, to shift upward. Domestic goods become more competitive in global market , triggering a rise in domestic output and employment. For a given level of output, an increase in money supply can cause exchange rate to overshoot its long-term exchange rate for a while. One may argue that since our import surpasses our export and in this time of falling export earnings a depreciation may erode our current account balance. Point is that economic theory says for a brief period there may be a dent in the current account balance (ours a negative) but in the long run it will definitely improve.

Point is currency depreciation is good for our economy and wild fall in Taka may approach its long-run value with the course of time. To revive the falling demand, government can do more apart from doling out incentives. One step can be to lower the domestic interest rate in a bid to increase the money supply.

La Semaine Dernière A Mes Yeux

(08 mai --- 15 mai)

Selon un reportage, deux sociétés pharmaceutiques de Bangladesh ont demandé au gouvernement de fabriquer Remidevicir ici. Une autre société a dévéloppé kit de décriptage qui poursuit essai clinique.

Selon un reportage, les ateliers de confection ont licencié 8300 ouvriers depuis le début de la pandémie.

Selon un reportage, de plus en plus de cas de coronavirus a été détecté parmi les ouvriers de confection à Savar où le gouvernement a introduit la mesure de déconfinement.

Selon un reportage, la tuerie de dauphin gangétique à atteindre le niveau inquiétant à Chattogram. En 3 ans, 24 dauphins sont morts dans le fleuve Halda où les poissons closaient. Des pêcheurs clandestins y ont posaient le filets pour les attraper. De plus en plus de dauphins se sont trouvés dans les pièges.

Selon un reportage, le centre de reproduction de tortue à Karamjal, Sundarbans, a fait clore 34 progénitures de Batagur Baska, tortue engendrée.

Selon un reportage, les victimes de coronavirus ont franchi 20.000 au Bangladesh. 170 paramilitaires, 1926 policiers et 16 pompiers sont tombés victimes de coronavirus.

Agriculture Holds The Key

Flood,cyclone press for importing more food.
It still looms large though Boro harvest was good.
Govt can’t influence foreign consumer demand,
Focus on agriculture to bring back the economy on command.

It is, indeed, a good news that Bangladesh has become the third largest rice producing country of the world. This achievement has come at a moment when the country is facing asphyxiating situation in the transport sector, caused by Coronavirus, crippling the agricultural supply chain. Despite being a food importing country, sustained effort made it possible to increase the production of foodgrain and other vital crops. The success story is writ large on the graph of yield per acre(Kg) of some key crops.

Yield per acre(kg) Source: BBS Pocket Book 2018

Between 2011 and 2018, yield per acre of key crops like rice , wheat, pulses and oilseed rose steadily. Wheat production per acre made a significant mark in the given period. In 2011 an acre of paddy field yielded 1177 kg of rice. In 2018, an acre of rice field produced 1292 kg. For Wheat, it was 1053 kg in 2011 and 1267 kg in 2018. If we stretch the comparison for the last three decades , then the achievement will appear remarkable. Not just the yield per acre , but agricultural wage rose significantly in the given period. At least the BBS statistics claim so.

Nominal wage indices in 2018 were 150.59(Base 2011=100). For agriculture, industry and service, the wage indices were 150.27, 149.45 and 154.44 respectively. If this is really the case then this Rural labor market is really a promising sector, whose prospect is only hindered by seasonality.

Nevertheless, the success story of our crop production does not cease import of foodgrain. Domestic demand-supply mismatch often met by imported food grain. But the quantity of import is higher during the disaster years. Severe flood or cyclone years stalled or damaged grain production at home, pressing for more foodgrain import. I did a little analysis in this regard. I gathered data for import of foodgrain and rice production at home delving Bangladesh Economic Review 2018. The period under consideration was between 1996 and 2017. As usual serial correlation check for 22 observations and 1 explanatory variable reported no autocorrelation (d = 1.88). I constructed the following regression function:

lnFoodgrain_t = a + b RiceProd_t + c D_t

where lnFood_t = log natural of foodgrain import at t,
RiceProd_t = domestic rice production at t,
D= 1 for disaster years(any kind),
= 0 for calm years.

Resulting regression function looked like this:

lnFoodgrain_t = 6.825 + 0.0000396 RiceProd_t + 0.0639 D_t

(t=14.78, p=0.00, se= 0.46) (t= 2.52, p=0.021, se= 0.00) (t=0.36,p=0.72, se=0.18)
(F=2.15, p=0.066)

The model did not turn out to be significant at 5% level of significance. But it was significant at 10% level. Intercept and the dummy coefficient did not appear to be significant at 5% level of significance. If the dummy coefficient had been significant , foodgrain import during disaster years would have been higher by 6.597% than that of during calm years.

Despite the data at hand did not lend evidence, there is no gainsaying that foodgrain import was higher during disaster years. For instance, in the flood year of 1999 we imported 5491 thousand metric ton of foodgrain. In 1998 we also witnessed a severe flood.In 2000, a calm year, we imported 2104 thousand metric ton of grain. In 2008, post Sidr year, we suffered from cyclone Reshmi and imported 3471 thousand metric ton of foodgrain. The poin is if natural calamity damages our crop production, we rely heavily on foodgrain import. Some years remain as exception.

This year as the country embraces for another super cyclone, harvest of Boro crop has already been completed. Prior to this cyclone Amphan, our foodgrain stock is quite satisfactory that ensures our food security for at least a year. Depending on the damages of Amphan, we could say how much resources we have to mobilize to deal with the obstacles of next cultivation.

Till then, agriculture stands out to be the most promising sector that vies for more government allocation in the post covid-19 period. Since our external sector depends on the regeneration of consumer demand of foreign countries, government at home can stimulate economic activities by investing more in agriculture sector. Rare is the sector in our economy where 100% value adding economic activities take place.

Cyclone Amphan amplifies the possibility of import of food. There has already been a wheat ban, put up by major wheat producing countries, as this year’s yield did not live upto anticipated level. In the wake of cyclone Amphan, government should double its effort on agricultural activities to mitigate the losses of disaster.

La Semaine Dernière A Mes Yeux

(01 mai --- 08 mai)

Selon un reportage, 20 ouvriers d’atelier de confection se sont dévéloppés les symptômes de Covid-19 après le gouvernement avait entamé déconfinement dans la confection.

Selon un reportage, le gouvernement a annoncé que les magasins et les hypermarchés rouvriraient  dès 10 mai. Cependant, deux hypermarchés ont affirmé qu’ils restaient fermé jusqu’à l’Aïd.

Selon un reportage, un salarié d’une ONG turque s’est trouvé mort dans la chamber d’un hôtel à Cox’s Bazar.

Selon un reportage, 7 ambassadeurs étrangers au Bangladesh ont mis l’accent sur respecter les droits de l’expression au Bangladesh. Face à l’incarcération des journalistes, ils ont exprimé leur souci.

Selon un reportage, l’armée de la mer a secouru un bateau plein de Rohingyas depuis la mer de Bengale. Ils traversaient la mer pour parvenir Malaisie. L’armée de la mer les a mis en quarantaine dans une petite île au large de Noakhali.

Selon un reportage, une dizaine de Urduphones , aussi connu comme Bihari, ont succombé à la mort  à Geneva Camp à Mohammadpur pendant les mesures de confinement. Police soupeçonne que coronavirus a provoqué la mort. 

Selon un reportage, les cas de  coronavirus ont franchi 13.000 au Bangladesh. De plus, la pandémie a aussi péri plus de 200 Bangladais.

Means To Fuel Post-Pandemic Push

Duty on talk-time, debt ease and spared import,
Show the ways of financing post-pandemic revival effort.

As frantic search for financing for post pandemic revival program continues, the next fiscal budget is knocking on the door. There have been reports that tax revenue collection is far below than what was anticipated. Undoubtedly fixing  an economy reeling from the pandemic shock will be a grueling task.

As usual we are going to have budget deficit this year. May be bigger one. Falling tax revenue, shrinking export earnings and remittances make that grim prospect more likely. Generally foreign grants, foreign loan, bank loan and non bank loan play key role in balancing the budget. I did a little analysis to see their role in budget balance. Data were gleaned from BBS Pocket Book 2018 for the period 2008-2018. Following regression function was constructed:

Budget Balance_i = a + b Grant_i + c ForeignLoan_i+ r Bank Loan_i + q Non Bank Loan_i

For 11 observations and 4 explanatory variables, the Durbin-Watson statistic was 1.98, which appeared to have fallen in indecisive zone. Then modified d test was carried out. It turned out that d < d _u (1.98<2.283) or (4-d) < d_u (2.02<2.283). So I ruled out no autocorrelation and concluded there is evidence of autocorrelation. To get rid of serial correlation, I transformed the regression function as follows:

Budget Balance*_i = a + b Grant*_i + c ForeignLoan*_i+ rBank Loan*_i + q Non Bank Loan*_i

Where

  BudgetBalance*_i = BudgetBalance_i - p BudgetBalance_i-1,

Grant*_i= Grant_i -p Grant_i-1,

ForeignLoan*_i= ForeignLoan_i - p ForeignLoan_i-1,

BankLoan*_i= BankLoan_i - p BankLoan_i-1,

NonBankLoan*_i= NonBankLoan_i - p NonBankLoan_i-1

Since in the generalized difference equation I lost the first observation, I took help of Prais-Winsten transformation and transformed the first observations of the variables by multiplying them with square root of (1 – p²) in order to retain them.

 

Then I ran the regression and got the following result:

 

Budget Balance*_i = 2.499 – 3.54 Grant*_i -1.15 ForeignLoan*_i- 0.99 Bank Loan*_i -1.44 Non Bank Loan*_i

(t=1.049, p =0.33, se =2.38) (t=-2.61, p =0.039, se =1.35) (t=-1.77, p =0.126, se =0.646)

(t=-2.33, p =0.058, se =0.426) (t=-3.51, p =0.0126, se =0.411)

(F= 3.94  , p= 0.066)

Except Grant and Non Bank Loan , neither the model nor the coefficients turned out to be significant at 5 % level of significance. They are significant at 10% level of significance. I also noted that standard errors of the generalized difference equation were smaller than the serially correlated regression function, hinting more reliable estimates.

Budget Balance was always negative in the given period. Turning towards  regression result revealed that Grant and Non Bank Loan played a crucial role in the given period to reduce the budget deficit. A 1 unit increase in Grant ( measured as % of GDP) led to 3.54 unit decrease in budget deficit( measured as % of GDP). Meanwhile, 1 unit increase in Non Bank Loan (measured as % of GDP) decreased budget deficit by 1.44 unit. After Non Bank Loan, foreign loan turned out to be major contributor of budget financing.

Despite the fact that our outstanding debt has not crossed the worrying level, it is piling up gradually.

There are other alleys for government to finance its post pandemic economic recovery program. For instance, Bangladesh every year regularly pays millions of dollar as part of its debt service obligation. Disruptions caused by Coronavirus compelled G20 to announce a moratorium on debt service payments until the end of this year, starting from May 1. This is indeed a good news for Bangladesh. In 2018 , it paid $1409.2 million as part of debt service payments. In 2019, it paid $1593.8 million as medium and long term loan repayment.  Clearly Bangladesh will not have to pay this year’s debt payment. This money could be rechanneled to finance the compensation package.

Falling import demand also opens up another avenue for the government to redraw resources to finance its post-pandemic economic scheme. Major primary commodity items like raw cotton and crude petroleum will be less in demand as there is drop in export orders and infrastructure and other* manufacturing come to a stand-still. Similar arguments hold true for major intermediate goods like staple fiber, yarn , petroleum products and capital machinery. The spared import spending could then be reused to facilitate post pandemic economic efforts.

Another popular step, as frequently happened in the past, will be to impose supplementary duty on mobile phone services. This will fetch another thousand  crore Taka.  So without leaning towards costly options like foreign loan, there are ample means to fuel the post pandemic revival drive.

And the lists include:

• Spared BPC subsidy worth Tk 4512.204 crore

• Relaxation of debt service obligation worth at least $1500 million

• Imposition of supplementary duties on mobile services worth at least thousand crore taka

• Drawing forex from spared import spending worth at least one billion dollar

 

As this piece was conceived, Asian Development Bank approved $500 million of assistance for Bangladesh to  deal with post pandemic situation. Similar pledges and grants are on the pipeline. The more they surface, the less likely the chance for costly foreign borrowing.

La Semaine Dernière A Mes Yeux

(24 avril --- 01 mai)

Selon un reportage, une étude faite par Singapour prévoit que coronavirus peut disparaître depuis Bangladesh d’ici 19 mai. Les chercheurs estiment que 99% coronavirus va quitter le pays d’ici 30 mai.

Selon un reportage, coronavirus s’allonce mal aux magasins et supermarchés. Fermeture de magasins et supermarchés a coûté les magasins Tk 1200 milliards puisque personne ne fait les courses pour l’Aïd comme d’habitude.

Selon un reportage , personne ne respecte pas les mesures de confinement. Petit-à-petit le nombre de victims va atteindre le plateau. Les ouvriers reprennent le chantier pour atelier de confection puisque des ateliers redémarrent leur operation. À Gazipur, des ouvriers se sont insurgé contre licenciement. Là-bas, un atelier de fabriquant de masque sanitaire a utilisé ses salariés pour travailler dans le jour de travail. Les plateformes d’atelier confection se sont dit qu’ils ont perdu commande d’achat de $8 milliards depuis le début de pandemie. Rouverture d’atelier a fait pour ne pas perdre les commandes actuelles.

Selon un reportage , coronavirus a ciblé 300 restaurants bangladais en Angleterre.