Sixth Instalment Delayed

Few clear economic reform agenda on the sight, Recovery delays ,so does the freedom from economic plight.

The IMF in a press conference stated that it would negotiate the sixth instalment of the $5.5 billion credit package with the next elected govt,which is likely to assume power by February next year. The present govt has three months to go and the contesting parties have not yet presented any detailed scheme on economic recovery, as I highlighted here several times. Moreover, macroeconomic situation has improved a lot since the program started: erosion of reserve stopped, market determined exchange rate is set, inflation eased slightly, and flexible exchange rate is introduced.

If this positive trends continue and post election optimism prevails, the remaining instalments may not be needed. On top of that ,if elected govt is not committed to economic reform programs envisioned by the IMF, it will be pointless to continue the reform programs here. So a wait-and-see approach is adopted.

When this mission arrived, they were eager to know when the central govt would lower the policy rate. The central bank on the other hand plans to lower the policy rate when inflation falls below 5 or 6%. Inflation is still hovering over 8% and the IMF's projection for the rest of this fiscal year is that inflation would remain elevated above 8%.

The latest statement hints they accepted the argument offered by the central bank. They are in favor of lowering of policy rate when inflation rate falls below 6%.

The IMF even sat with several political parties to have a glimpse about their economic programs. Long before the arrival of the IMF, former commerce minister and BNP senior leader Amir Khosru Mahmud Chaudhuri stated BNP believes sovereignty of the central bank but it opposes separation of policy and implementation departments of the NBR. Reform programs outlined by other parties are not so pronounced. Women participation to the economy and recent "end-of-prophecy" movement garnered lots of media attention. The "end-of-prophecy" movement created communal tensions in the country. Particularly the Ahmadiya community who thinks their leader was the last prophet feels intimidated. The persecuted group has huge presence and investment in Bangladesh. Pushing up this sort of political campaign widens the fault lines existed in Political field and threatens the stability of politics and economy.

The NBR chairman in an interview said from next year the NBR would cease to impose decision on taxes abruptly and it would pass the authority to the Parliament. End of ad hoc practice of decision making would benefit the business here as tax policy would be more projectionable and it will help them in business operations and investment plan.

Govt is criticised right and left as it is not taking any bold steps towards reforms. As I mentioned earlier, this govt is formed through blackmailing: the chief advisor himself was about to languish in prison, the commerce advisor faced several charges before taking up the post, legal advisor and student advisors were summoned to the cantonment on the eventful days of July last year. And most importantly it was formed to rescue the economy, not to do any bold political reforms, riding on the image of Prof Yunus. The objective was partly fulfilled , but to a great extent it was a disaster. A govt formed through blackmailing does not deliver much. Macroeconomic situation improved, yet passport fell in international ranking,overseas employment shrank, western countries restrict entry of Bangladeshis, political rift widened as a major political party will be absent in next election, NPL situation worsened, law & order situation deteriorated further. I think it is naive to expect much from a mandate less ,blackmailed govt. Bangladeshis in general are eying towards the next election. They hope the situations will improve a lot under the new govt.

In brief, sixth instalment is delayed to see what the next elected govt will offer as economic reforms and how the economy behaves in the meantime. Despite major macroeconomic improvement, we should not expect much from this blackmailed govt!

It Is Indeed Good For Us

Delaying graduation clips the wings, Delaying opportunities as popular mood swings.

Bangladesh's plan to become graduate from Least Developing Countries(LDC) faces stiff resistance from various quarters. In 2026, Bangladesh is scheduled to get out from LDC countries, discarding the privileges it is enjoying all these years. Bangladesh is supposed to be a developing country by 2020. However,COVID-19 obstructed the graduation. Now many business platforms and other organizations suggest the govt to delay the graduation for another 3/5 years. Removal of duty-free access,higher cost of private loan, Intellectual Property Related(IPR) restrictions are identified as reasons behind such proposition.

Govt earlier decided to make appeal against graduation, but later dropped the idea in favor [of] smooth graduation. I personally think smooth graduation will be best possible alternative instead of delay. This is not the first time we are encountering a situation like this.The closure of Multi Fiber Arrangement back in 2005 cast similar shadow over our RMG export and economy. The MFA allowed Bangladesh to source raw-materials from various countries and export the ready-made garments to the West, which also gave Bangladesh quota on RMG export. The facility was a relaxation on value addition clause and ensured some set market access for Bangladesh. Many argued that post-MFA and Quota period [would] be a doomsday scenario for Bangladesh garments. Fortunately, Bangladesh proved them wrong, increasing volume of export from mere $5 billion to more than $40 billion now. And Bangladesh also increased its value addition in the RMG sector. It also witnessed unprecedented amount of investment in backward and forward linkage industry.

By the same token, I am convinced, post-LDC graduation will be a path strewn with overcoming challenges,bringing the changes needed for a developing country and endless opportunities against the overblown challenges.

First, disappearance of duty-free access is an ungrounded fear. The moment I am writing this ,Japan has already given Bangladesh duty-free access for 3 more years after LDC graduation in 2026. Tariff debate has led to bilateral trade agreements that witness many countries enjoying favorable access to developed countries. FTAs,PTAs turn out to be deciding factors here. Despite being an LDC country,Bangladesh may lose big if its rivals get FTA advantage to key export destinations. Solution is to become a developing country and ink more FTAs.

Second, duty-free access to developed countries also accompanied with money laundering activities through faulty ,and willful, trade invoices. Even official export figure encountered $10 billion mismatch in 2024, an embarrassment to the govt. Removal of duty-free access will curb the incidence of money laundering and provide opportunities for more able exporters,showing the wrongdoers the exit door. Small and medium factories will become subcontractors of big exporters. Voilà, this withdrawal of duty-free access is not an issue.

Third, no more soft credit is also a boon for Bangladesh. As I shared this perception before, higher interest rate works as screen to thwart any attempt to take unnecessary loans. Bangladeshis in general are paying the price for this unaccountable development works at the cost of their money with the support of soft credit. So there will be less unreasonable development works with the evaporation of soft credit. Private sector that depends on overseas credit market will come to stock market for financing, developing the local bond market and ensuring more accountability and transparency.

Fourth, intellectual property right hurdles will pave the path for domestic investment on local solutions for addressing the issue. One argument I hear is that medicines will be costly as the ingredients will be costly (they will no longer be free). Govt recently lowered duty on cancer-related drugs. Govt can do so for essential drugs on serious diseases. I think once this advantage is over,we will see shutting down of many small pharmaceutical companies. Many of them have capacity to produce base ingredients for medicines of silly diseases and often they are being used as precursor to make narcotics in the neighboring countries. UNODC already highlighted the issue in its report(see "UNODC Report & Meth Market Of Bangladesh" published here on July 25,2019). LDC graduation is a hidden blessing for Bangladesh in combatting the narco. It will significantly lower the incidence of narco activities and curbing the volume of narco trade and thereby lowering the incidence of narco-related violence.

Fifth, LDC graduation will make govt more oriented to people. As a developing country, govt will be committed to ensure accountability, spend a percentage of its GDP in healthcare, education, defense and other sectors like other responsible developing countries.And we will see people-centric development and policy initiatives.

Plethora of arguments put forward to delay LDC graduation based on unsubstantiated fear. I hope this piece will work as a template for the low voice in favor of early graduation that Bangladesh desperately needs. LDC graduation is indeed opening opportunities for Bangladesh as a hidden blessing to address many enduring issues that deeply trouble the country. The UN itself once delayed graduation of Bhutan and this may happen with Bangladesh, a country plagued by corruption and mismanagement. I hope the incumbent and future govt will stay on course for graduation by 2026. Delaying graduation means delaying the opportunities.

[Update: this piece is updated by me on November 14,2025 at 9 PM Bangladesh Standard Time.Update includes reference to UNODC report.]

La Semaine Dernière A Mes Yeux

(08 novembre --- 14 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
08	Pain,Chou,Œuf	Butterbon(from market)	Riz ,Radis,Petit poisson	---
09	Pain,Chou,Œuf	Riz ,Radis,Gourde bouteille,Chou-fleur,Soupe aux lentilles,Petit poisson	Riz ,Pianju(depuis marché),Gourde bouteille,Soups aux lentilles	--
10	Pain,Chou-fleur	Riz,Gourde bouteille,Soupe aux lentilles,Chou-fleur	Pois chiches,Puri(depuis marché)	---
11	Pain,Chou	Singara(depuis marché)	Riz,Petit moglaï parata(depuis marché),Œuf,Radis,Soups aux lentilles	--
12	Pain,Chou-fleur,Œuf	Riz,Radis,Soupe aux lentilles,Chou-fleur	Pois chiches,Pianju(depuis marché)	---
13	Riz,Soupe aux lentilles,Chou fleur,Œuf	Singara(depuis marché)	Riz,Chou,Baim (Zigzag eel) poisson,Lait	--
14	Pain,Chou,Œuf	Riz,Baim,Chou	Riz,Silver carpe,Shou,Soupe aux lentilles	---

Tariff Debate Continues

More partners press Dhaka for tariff concession, Reserve accumulation employed to rescue ally from awkward situation.

Both the European Union and Japan have asked for similar concessions that Bangladesh pledged to give the USA. If [everything] is OK, Bangladesh and the USA are likely to have a deal by December this year. But the USA stressed that Bangladesh would not give similar concession to other countries (for instance, reduced tariff on US originated goods and services and purchase of 25 Boeng aircrafts in next 20 years). Recently, the EU countries held a press conference and emphasized that the EU would expect similar purchase commitment from Bangladesh. Bangladesh is scheduled to be graduated from LDC countries by 2026, which Bangladesh wants to be delayed. Once graduated from the LDC countries ,Bangladesh may lose duty free access to EU countries ,where 49% of its export goes.

Tariff reduction and import from the USA witnessed a revenue shortfall of Tk 88.99 billion against a target of Tk 990.05 billion. It is too early to tell whether tariff debate or moribund business activity hit by tight monetary policy contributed to the decline of tariff shortfall. Because reduced tariff came into effect from early August and we still have three quarters to go. And there will be widespread optimism in the economy if there is a participatory election by February next year.

Tariff commitments to EU and Japan [mean] we have to increase import from the countries. Bangladesh is thinking to sign an FTA with the EU and PTA with the Japan, which even sent a letter to Bangladesh to expedite the negotiation to conclude the deal.

Increasing import from these countries means we have to downsize our import from somewhere else. Currently India and China are the largest sources of import. Both countries account for around $40 billion of import. We mostly import intermediate goods from these countries. From China, we heavily import defense equipments. Since Japan and the EU are unlikely to be major sources of intermediate goods in one decade, the most plausible conclusion is Bangladesh may end up procuring more Western originated defense articles. Bangladesh has special agreement with the Turkey,France,Italy,Japan and the UK.

Since the EU and Japan may not provide the raw materials at competitive price, it is highly likely we may share part of import spending in defense with the two partners to secure the export market there.

Yuan is still cheaper than USD. But whether it [will remain] so in the future is not certain. In October, we saw the USA announced a currency swap line worth $20 billion to rescue the Argentine peso ,halting depletion of forex reserve of the Argentine central bank. The US treasury secretary urged US banks and investment funds to invest more in Argentina. This is the first time,[reserve accumulation] is employed in tariff debate. This time it is used to rescue an ally Argentina to curb influence of China,which has also given a $18 billion currency swap line with the Argentina. Earlier, Argentina had chosen refurbished F-16 over JF-17 and J-10C offered by China for its Air Force. Here security is being projected as public good and currency is used to aid ally through security umbrella. Now think there comes a moment when this same [reserve accumulation] is being used to punish/ stall behavior of a rival. In fact, Federal Reserve governor Stephen Miran depicted such scenario in his influential paper on tariff titled "A User's Guide To Restructuring Global Trading System" where the US govt requests the Fed to print $1 trillion in a bid to purchase Yuan so that it appreciates in the international market.(See "Reshaping Global Trading System:What Lies Ahead" published here on April 4,2025)

The step may weaken the US dollar,which the US administration wants in the long run, and hurt communist party related corporations and Chinese billionaires who denominated their assets in USD across the globe. Weakening USD downsizes /shrinks their wealth. Point is [reserve accumulation] may be employed by any big trading partner for harmful purposes,not only for rescuing ally.

Ultimately we are heading towards a clustered trading blocs. Despite risk of import revenue shortfall, import diversification appears to be new reality in this new trading system. Despite challenges, export registered a 2% growth in the first 4 months of this year. If the growth of revenue collection for the remaining period surpasses the shortfall and optimism prevails then there will be good news from this tariff debate. And we have to be cautious about intentional use of major currencies to influence other currencies [through reserve accumulation].

[Update: this piece is updated by me on November 06,2025 at 9:13 AM Bangladesh Standard Time; update includes replacing words like "currency tool", "currency weapon" with "reserve accumulation".]

La Semaine Dernière A Mes Yeux

(01 novembre --- 07 novembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
01	Pain,Lait poudre	Riz ,Radis,Gourde bouteille	Riz ,Radis,Gourde bouteille	---
02	Pain,Œuf,Gourde bouteille	---	Riz,Pianju(depuis marché),Épinard	Singara(depuis marché)
03	Pain,Lait	Singara(depuis marché)	Riz,Banane,Pois chiches	---
04	Pain,Œuf,Pois chiches	Bakerkhani(depuis marché)	Riz,Soupe aux lentilles,Gourde bouteille,Pomme de terre bhaji	---
05	Pain,Œuf,Pomme de terre	Singara(depuis marché)	Riz,Gourde bouteille,Pomme de terre,Soupe aux lentilles	---
06	Riz,Œuf,Soupe aux lentilles,Pomme de terre,Gourde bouteille	Bakerkhani(depuis marché)	Riz,Purée de banane verte,Soupe aux lentilles	---
07	Riz,Banane,Lait	Riz,Petit taro chinois,Radis	Puri(depuis marché)	---

Cushioning Fall Of Taka

Allow businesses to transfer money abroad To keep the incentive spending short.

The uncertain situation about Non Performing Loans casts serious doubt about Taka's stability next year. Exchange rate of Taka against US dollar in this week is Tk 122.46/USD ,which was Tk 121.75/USD a month ago. Though this depreciation is within the tolerable limit and the expected range of Bangladesh Bank,a big fall may cause serious trouble. As I have mentioned several times in this space, Bangladesh can afford depreciation of Taka between 5%(Tk127/USD) and 10%(Tk 133.1) in a year. Transitory effect of depreciation will be manageable and less severe given more forex making entry into the country. Otherwise, it will make lives miserable by pushing up the prices of essential goods and services and accelerating capital flight from the country. A macroeconomic nightmare for any govt.

The chance is high that after the election when many restrictions will be relaxed a fresh round of capital flight may be observed. The volatility of local currency in short span of time increases the risk for fund management of the companies as it shrinks their assets if those are denominated in Taka. Unfortunately, Bangladesh Bank has stricter policy to transfer money abroad through official channels. For this reason, many opt for clandestine means to launder money abroad. If these companies have means to invest their money into foreign resources through legal channel , I think incidence of money laundering could be [curbed] to a great extent. One way is to set a ceiling on investment abroad and provide some quota on foreign investment by a Bangladeshi company. Another approach is to allow investment on commodities, foreign bonds through Bangladesh. Soon commodity exchange market will be operational in Bangladesh. If local companies can invest part of the assets in gold,silver,platinum, copper ,then part of the money they launder abroad will stay at home. Similarly, if we allow them to invest in foreign bonds through local stock exchange or by any other means then that will add great value to their investment. At the same time, purchase of foreign real estate should be legalized inside Bangladesh. The central bank can have a clear tab on investment on such property and repatriation of capital gain from resale of such property. At the moment,Bangladesh Bank remains in the dark about [laundered] money caused by political uncertainty and currency volatility. The measures suggested here will give the central bank some idea how much money will go abroad and how much proceed/ return on investment will come back to home. Most importantly, it will hold back to some extent the capital flight.

Nonchalance stance to take money abroad legally puts pressure on government incentives. When these companies will fall into trouble due to currency volatility ,they usually seek public incentives. In most of the cases govt complies to their demand, costing tax payer's money. Allowing businesses to transfer money abroad for investment purposes legally discards the need for such incentives.

The $800 million Chinese investment pledges,which is likely to happen in next 12/24 months in the textile and RMG sector, is mostly influenced by global tariff debate, China's shrinking opportunity to invest in Occidental countries and not by uncertainty about Taka's value. China has excess capital of more than three trillion dollar. They have a controlled money market and problem-stricken property market, denting in their returns. The Chinese does not spare opportunity to invest this money abroad. This is why they aggressively invest in the RMG sector in this country. The volatility of Taka has little impact [on] their business decision because in any such case they will simply convert it into Yuan and repatriate the money back to China. And the Chinese central bank is willing to lend Bangladesh more Yuan when the Chinese investments will be in trouble in Bangladesh. The point is instability of Taka poses serious threat to future FDI and local investment given Chinese investment is an exception.

To protect domestic companies from currency volatility risks, the central bank should allow them to invest abroad. Or let them purchase foreign assets from Bangladesh. The move is aligned to check public spending and keep the private business balance sheet healthy without the need for govt intervention.

La Semaine Dernière A Mes Yeux

(25 octobre --- 31 octobre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
25	Riz,Lait	Singara(depuis marché)	Riz,Tengra,Pomme de terre bhaji	---
26	Pain,Œu,Soupe aux lentilles	Singara(depuis marché)	Riz,Pianju(depuis marché),Tengra,Soupe aux lentilles	---
27	Pain,Soupe aux lentilles, Œuf	Butterbon(depuis marché)	Riz,Feuilles de gourde bouteille	Pois chiches
28	Pain,Lait poudre	Riz,Soupe aux lentilles,Banane verte,Pois chiches,Pomme de terre	---	---
29	Pain,Lait	Singara(depuis marché)	Khichuri,Poulet	---
30	Pain,Yaourt	Riz,Poulet,Gourde bouteille	Petit mughlaï paratha (depuis marché)	---
31	Pain,Lait poudre	Riz,Petit taro chinois,Radis	Butterbon(depuis marché)	Œuf