Could Taka Remain Stable Next Year?

Grim credit and NPL situation Questions Taka's valuation.

Despite Standard & Poor's projection of a decline in oil prices next year, India's decision to impose restrictions on rice export [has] cast shadow over the general inflation. The country supplies 40% rice to the global market and the decision has potential to hike rice prices. Govt has to concentrate more on procuring rice from other sources. Now which one outweighs the other is what we need to see. Since the govt is continuing the contractionary policy,we will see some impact on the inflation.

Meanwhile, [the] IMF limits Bangladesh's foreign credit intake to $8.44 billion for 2026 as the country's risk rating is slided from low to moderate. Moody's already noted that unrecovered loan reached 24% of total loans from 11.1% in 2024. And the credit rating agency observed that central bank's latest loan rescheduling measure, 2% payment for [rescheduling the] loan, will only increase the tally of NPL ,further worsening the financial stability.

In this backdrop, opportunity of private sector credit from foreign source is shrinking and getting tougher. One positive impact is more and more banks are coming to stock market for raising funds. Eastern, Pubali,NCC and Jamuna announced to issue separate bonds in a bid to raise a total of Tk 26 billion from the market. I argued here several times to raise funds from the stock market, where undocumented money has easy flow and accountability is ensured. This step reduces pressure [on] public banks and central [bank] and helps a lot inflation-taming measures. Now it is time to see what response they will get from the market.Moreover, as debt service obligation is rising ,the central bank is creating a database to collect and store information about foreign credit taken by private sector.

The revenue generation will be a challenge for next year. As I highlighted in the piece "Need For More FTAs", if govt does not chalk out a plan on how to compensate the loss of tariff revenue stemming from reciprocal tariff then budget deficit will grow. Similarly, in "Altering Policy To Rejuvenate The Economy" I highlighted there is no clear roadmap on how to tackle the $34.71 billion NPL. The IMF foreign credit ceiling of $8.44 billion for 2026,part of which is already disbursed, and negative credit rating of the various agencies has already put severe constraint in getting private credit from abroad. There is also uncertainty about the kind of inflation we will have next year. The central bank is in OK mood to the merger of 6 troubled [banks],costing govt Tk 200 billion. So contractionary policy will likely to prolong. In this backdrop, how much money lying outside banking system comes to bank through stock exchange and remittances may become a deciding factor. Though [the] size will be much smaller compared to the void created by the NPL. Clearly ,it puts huge pressure on the value of Taka against major currencies. Despite the current appreciation pressure, govt is intervening into forex market. Could taka remain stable next year? That is a crucial question whose [answer] will be searched by everyone in coming months.

La Semaine Dernière A Mes Yeux

( 27 septembre--- 03 octobre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
27	Pain,Papaye	Riz,Ruhi	Riz,Ruhi	Riz gonflé,Chira bhaja
28	Riz,Papaye,Soupe aux lentilles,Œuf	Riz,Épinard malabar,Petit poisson	Riz,Petit poisson	---
29	Pain,Soupe aux lentilles,Œuf	Riz,Petit poisson,Papaye	Riz,Petit poisson,Papaye	---
30	Pain,Pois blanc avec œuf	Riz,Papaye avec pois blanc	Riz,Papaye avec pois blanc	---
01	Pain,Soupe aux lentilles,Œuf	Riz,Soupe aux lentilles	Riz,Soupe aux lentilles,Banane verte,Pomme de terre	---
02	Pain,Soupe aux lentilles,Pomme de terre avec œuf	Riz,Pomme de terre,Soupe aux lentilles	Riz,Pomme de terre,Petit poisson	---
03	Pain	Riz,Soupe aux lentilles,Pomme de terre,Petit poisson	Riz,Soupe aux lentilles,Petit poisson,Pomme de terre	---

Yes For "Bangladeshi Bhasha"

It is time to accept a new language, It will secure future and work as hedge.

Recently a row over Bengali language between the central govt and state govt of Bengal in India caught everyone off guard. It started when a Police officer in Delhi sent a letter to the state govt of Bengal ,requesting for interpreter of "Bangladeshi Bhasha". The interpreter would try to get the meaning of Bengali documents ceased from migrant workers,hailing from Indian state of Bengal. Authorities in Delhi alleged them to be Bangladeshi, not Indians. But the letter caused great unease in Bengal as there is no such thing as "Bangladeshi Bhasha" or Bangladeshi language. The language spoken in both Bangladesh and Indian state of Bengal is called Bengali or "Bangla". But there are different hues and dialects in the ways Bengali [spoken] and written in the two parts. But the beauty is people from both sides comprehend the language of the other side without giving much effort. Bengali letters are based on Brahmi script whereas Hindi is based on Devnagri script. And the languages have their [roots] in the Sanskrit. Unlike Hindi, Bengali language was shaped by the colonial rulers.For this reason, to me, Hindi is more down to earth than Bengali.

Literary works of the affluent class residing in the Indian state of Bengal give it a prestigious presence among other languages. But it is widely practiced and spoken in Bangladesh where most of the Bengali speaking people reside. Just few years ago an online book platform of Bangladesh did a survey among the highest selling Bengali books. It was found out that the book that topped the list was a religious book written by a religious scholar from Madrasha. Nowadays, Bangladeshi publishing industry is thriving on publishing books for Madrasha students and on religion. As most of the books are written [in] Arabic, Persian and Urdu in these schools, there is a need for greater explanation and literary notes in Bengali for these scholarly works. And Madrasha is drawing more students because education is cheap and free and three-course meal [is] provided here with accommodation. Moreover, one can switch to school, college or university after passing some certain level. Most of the Madrashas are less susceptible to outside political interference and the environment in general is less troubling than other educational institutions, which nowadays are used for various occasions,including smoking hashish. Flexibility, austerity push families to send their kids to Madrasha. And the Bangladeshi publication industry survives [] catering to the need of these Madrasha. Compared to Bangladesh, practice of Bengali is in receding stage [in Indian Bengal]. Delhi's apprehension is that language similarities drawing the Bengali speaking people of the two countries [closer], posing a threat to its integrity. Consecutive successes of jointly produced Bangladeshi films with record budget cementified that apprehension. In addition, highest number of irregularities in the voter list of Indian state of Bengal found in Murshidabad , a Bengali speaking Muslim majority district adjacent to Bangladesh border. This further caused the suspicion to have roots. Though this term of "Bangladeshi Bhasha" is mooted for the first time, I [think] Bangladesh should snatch it to launch and promote a "Bangladeshi Bhasha" in a bid to make distinction between the languages spoken here and other side of the fence. I went through few language schools and had the chance to leaf through pedagogy books of one of them ,so I think I have the right to chew few words about this matter.

The French, Japanese and Koreans modified their languages so that a great number of people can understand and practice those languages. French Academy modified syntax,conjugation of verbs [and] limited the number of verbs with the consent of linguists. Japanese Hiragana and Katakana were introduced to make easy learning [of] the Chinese characters and distinguishing between foreign and Chinese entries into the language. Koreans also introduced abridged version of characters to make it distinct from the Chinese characters. We are not unfamiliar with modifications of languages in Bangladesh. Recently, Chakma language got a new written form,script and syntax. Rohingya language has introduced hanafi script. Even Sylheti language, many claimed it is a different language than Bengali,has its own script called "Nagri". For "Bangladeshi Bhasha", we could introduce a new script or [modify] the existing one.The letters should include letters from Thai,Rakhine,Saontal,Sanskrit,Roman ,Chakma,Persian languages,reflecting contributions of them shaping our language.My suggestion is to limit the letters between 20 and 25 instead of 49.We do not need at the same time "ই"(i) and "ঈ"(ii) or "উ"(u) and "ঊ"(uu). Similarly, we have awfully lot of consonants. For example, "ট" and "ঠ", the series "ত","থ","দ"," ধ" and "প","ফ","ব","ভ" are pronounced from same locations of the mouth. Just for differences in pronunciation, we introduced some redundant letters. We have an appetite for redundancy, overspending and this tells why we are having such big budget deficits! Instead of too many letters,we could have introduced accents like the French. Just one letter with different accents represents different pronunciations.

In our cuisines, we do not use too many spices. So our language should be devoid of redundancy. Orthographic adjustment are also needed to be made. For instance, "বিনিয়োগ"(investment),"আস্থাহীনতা" (lack of trust), অদূরদর্শী(lack of foresight) are long words. We could use concise words instead to express these terms. Similarly, syntax could be different from now what we have. Since we are living in an era of technological marvels, we should take aid from programming languages to shape the vernacular language. Instead of saying " I have eaten Bread,Potato ,Egg ,Tea in the breakfast" ,We could write "সকাল::নাশতা::রুটি,আলুভাজি,ডিম,চা" (Morning::Meal::Bread,Potato,Tea,Egg). The use of scope resolution operator from C++ makes the phrase more concise and understandable.

The new language will work as a barrier to protect us from demoralizing campaign. Language and cultural similarities are often used to demoralize other races. It will make a distinction between Indian Bengalis and Bangladeshis. So allegations of clandestine migration could be checked real time. To that happen, we need at least 20/30 years! It all depends on how popular the new language will become among the population. A closely knitted group of people may start the endeavor among themselves. Often kids develop their own fun languages to communicate among them. It could [start] just like that. If great number of people subscribe to that language, then Bangla Academy may convene linguists, scholars of linguistics ,lexicographers to formally give shape the new language. The new language will best capture identity of people of this country and will be bedrock for a new culture that we aptly call our own. This distinctive identity will help us getting rid of any demoralization. "Bangladeshi Bhasha" is indeed a great idea coming from an interesting place. We should embrace the idea irrespective of its origin, and securing our future averting demoralizing influences. So there is a big [yes] for "Bangladeshi Bhasha" and [no] for the Adani deal. The Adani power purchase deal is hurting Indo-Bangladeah relationship. Nitty gritty of the deal came to surface and is causing great unease. 15% punitive fee for delayed payments, higher coal prices than the market rate, penalty to cease the deal are costing the future potentials of both countries. Bangladesh is going through serious macroeconomic adjustment and austerity. For the sake of two countries,the deal should be reviewed. As both parties are heading for court, I think and hope the strategic community of India will abstain from taking sides here. State apparatus and influence should not be a tool and platform for giving undue privileges to exclusively few partisan businesses and promote cronyism. So to save the bilateral relationship this deal needs to be reviewed or discarded. Again yes for "Bangladeshi Bhasha" but no for the Adani deal.

La Semaine Dernière A Mes Yeux

( 20 septembre--- 26 septembre)

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Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
20	Riz,Œuf,Pois blanc,Igname violette	Riz,Pois blanc,Petit taro chinois	Riz,Petit taro chinois	---
21	Bread,Petit taro chinois,Pois blancs,Œuf	Riz,Igname violette	---	---
22	Pain,Lait	Riz,Beans avec Courge amère	Pain,Beans avec Courge amère	---
23	Bread,Lait,Œuf	Riz,Ruhi	Riz,Ruhi	---
24	Bread,Lait,Œuf	Riz,Pomme de terre ,Feuilles de Arum,Pangash	Riz,Feuilles de Arum,Pangash	---
25	Bread,Soupe aux lentilles,Œuf	Riz,Papaye,Pois blanc	Bread,Papaye,Pois blanc	---
26	Bread,Lait,Œuf	Riz,Petit taro chinois	Riz,Papaye/td>	---

Need For More FTAs

Tariff debate also risks new export market, FTA appears to be a solution perfect.

Bangladesh and the USA have started final round of negotiations to ink a deal on tariff. Reciprocal tariff on Bangladeshi items have already declined to 20% from 35%. There is room for further reduction. I think it will be within 10% and 15% range. If further tariff reduction really happens, Bangladesh may get a significant share of US apparel market.

Bangladesh has already increased cotton and LNG import from the USA. Previous year Bangladesh imported $600 million worth of US cotton. This year that cotton import [from the USA] has reached more than $200 million in two months and we still have 10 months to go. But the EU market ,where half of our apparel export goes, is offering a tough competition. All the exemption of duties will be gone if Bangladesh is graduated from the LDC countries. In addition, the UK and India signed Free Trade Agreement (FTA), which is heralding boost in Indian export and investment in the UK. In this backdrop, both export earnings and remittances may shrink. There is more! As US dollar becomes weaker and the Euro getting appreciated , the total export of the Eurozone may shrink, casting shadow over their apparel import from Bangladesh.

Bangladesh's emerging apparel export market may bring bad news too. Bangladesh's apparel export to Russia has crossed $1 billion mark long ago. Russian apparel market is estimated to be $32 billion. India's growing ties with the Russia says the country may get a big chunk of this Russian apparel market, mitigating the loss of US export market resulting from the US punitive tariff. Furthermore, India has access to cheap Russian oil. And its processed petroleum export to the Netherlands and the UAE almost doubled in one year. Cheap Russian oil and weakened Rupee(which registers fall in recent weeks) mean its export items will be more competitive in years down the line. Relationship between China and India thawed recently. It may further boost bilateral trade between the two countries. In addition, diplomatic relationship between Canada and India resumed. Canada is a major destination of Bangladeshi apparel export. China's weak consumer spending,fall in industrial production and troubled real estate market mean Bangladesh's export to China may not see dramatic improvement in the next one or two year. So latest development indicates that there may be significant market share gain to the US market but there are serious challenges in Bangladesh's traditional destinations like UK and Canada and emerging destinations like Russia and China.

Another challenge lies in revenue generation. The main theme of this tariff debate is about narrowing down the trade deficit/surplus. In doing so, Bangladesh has to lower tariff so that more American goods & services enter the country. Previously Bangladesh got huge import duty [revenue] from LNG ,Soybean, cotton etc. As these items are coming from the USA in large amount, there is a loss in tariff revenue. If it is not compensated from other sources,then this loss in tariff revenue will stay and complicate the budget deficit. Two quick solutions are to impose tax on remittances and export and to depreciate Taka even more. Both are likely to augment tariff revenue. NBR can also aim 500000 shops scattered across the country. Most of them lack proper documentation of transaction and very frequently ownership of these shops gets changed,contributing nothing to govt coffer. NBR remains in the dark about the volume of transaction and owners of these shops. Similarly, a large sum of money originated from Dhaka's footpath/mobile vendors [falls into hands of vested quarters every year]. A study put the figure between Tk 15 -20 billion. Often it falls into wrong hands. I argued here several times that if NBR mops up part of the money by issuing special [tax] certificates worth Tk 500/1000 for 6 months/1 year then it will give them some sort of legitimacy and ensure that part of the money collected from them enters govt coffer.

But these are tiny drops to fill the growing budget deficits. We have to wait to see whether gains of reciprocal tariffs outweigh the losses. Best approach is to go for Free Trade Agreement with some major trading partners. Indonesia is a trillion dollar economy. We have almost finalized a preferential trade agreement (PTA) with them. We have to revive it. Similarly if we have FTA with Thailand, Malaysia, Brunei,Myanmar,Sri Lanka and Bhutan in the neighborhood ,then we will get cheap coal, palm oil,rice,aluminum, locomotive, oil, tea from these countries .It will keep the inflation low at one hand , and on the other our apparel,light engineering and agro products export will augment manifolds. To consolidate our apparel export, we need to ink FTA with South Korea,UK, Canada,Japan,Brazil and Australia. This will increase our export market share,remittances and FDI. In post WTO world where multiple trading systems and blocs [are becoming a reality], it seems more and more FTAs could secure export and FDI.

La Semaine Dernière A Mes Yeux

( 13 septembre--- 19 septembre)

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Ma Semaine Gastronomique

Date	Petit déjeuner	Déjeuner	Dîner	Snacks,Sucreries,Boissons et Fritures
13	Pain,Pomme de terre	Riz,Ruhi	Riz,Ruhi	---
14	Riz,Lait	Riz,Tengra,Gourde blanche	Riz,Tengra,Soups aux lentilles	----
15	Pain,Œuf,Soupe aux lentilles	Riz,Feuilles de Moringa	Riz,Feuilles de Moringa,Tengra	---
16	Pain,Œuf	Riz,Épinard,Malabar, Gourde blanche	Pain,Épinard malabar,Gourde blanche	---
17	Pain,Œuf	Riz,Soupe aux lentilles,Gourde blanche	Pain,Soups aux lentilles,Gourde blanche	----
18	Pain,Gourde blanche,Soupe aux lentilles	Riz,Soupe aux lentilles,Petit poisson	Riz,Soupe aux lentilles,Petit poisson	---
19	Pain,Œuf,Lait	Riz,Igname violette	Riz,Igname violette	---

Altering Policy To Rejuvenate The Economy

A shift in policy can bring lasting change, Rejuvenating the economy,being the best hedge.

Govt has decided to float a new specialized bank, merging 5 troubled banks. In this endeavor, it intends to provide Tk 200 billion ($1.65 billion)to the new bank. When the new bank will become profitable, it will sell its share to private investors.

Though $1.65 billion into economy [is] within the limit of annual extra resources Bangladesh every year [produces],it still has the risk of falling into bad hands. Moreover, it will send a wrong signal to the economy: if you get away with bank's money ,govt is there to rescue it.

I think best thing would be to float shares of the new bank in the stock exchange and see how the investors respond to it. Response from the stock market will be its initial capital. Govt will make it profitable and then sell it to the private sector is indeed a bad idea.

The bigger danger is if this $1.65 billion of public money becomes bad then it will add to the $34.71 billion NPL.

This $1.65 billion could have been used in productive manner instead of giving to the troubled banks. Govt can add this money to its credit program for the SMEs to mitigate the loss stemming from exchange rate volatility and policy rate hikes.

Apart from that money could be used to give soft credit to RMG subcontractors who are in expansion mood and the return will come back within 24 months if they are not politically motivated entrepreneurs.

Govt does not have to provide liquidity support to the private sector. It can do so by changing policy. A good part of public spending goes to defense. If it allows private sector to get part of this public spending through introduction of special ordinance, then it will rejuvenate the economy by allowing fresh orders for private companies, which are/should be enlisted into stock exchange. Two good things will happen----part of public spending will go to the private sector and there will be transparency to spending as private companies will compete and disclose information about them in public domain. There is no need for govt purchasing [& producing] boots, uniforms, ammunition ,training munitions ,patrol boats and crafts for the Armed Forces. Former military technicians, engineers, workers will be absorbed into these companies and some of them will [be] owners of these companies. Now most of them engage in sectors where their skills go into ashtray and where polarized politics [turns] them into rogue personnel. This initiative will make good use of their skills and post-military career, making safe both politics and security establishment.

In Malaysia, a small private company makes training [munitions], rockets for their fighter planes.They save money and keep part of the spending at home through domestic private companies. Every year the Armed Forces need training munitions, bullets. Private sector could easily take charge of supplying them through investment in production facilities. This can be done in 1 or 2-year. Technical people are available. Even Sri Lanka makes its own APC and missiles for its Armed Forces in spite of having much smaller budget compared to Bangladesh(See Sri Lanka Electrical & Mechanical Engineers And Centre For Defense Research & Development).

Since this is an Army-backed govt, it can easily introduce reform programs [in the defense]. No one will [bother] or question its legitimacy.There are RPO and other laws for politicians and political parties to ensure their transparency. The only organ of the country that stays above of any transparency is the Armed Forces. Two distinct ordinances---one for ensuring accountability [of the Armed Forces] to the Parliament and the press and another for allowing private sector in defense article production--- could do a great service to the nation and make meaningful tenure of this govt. In one of my pieces, I highlighted appropriate laws in neighboring country and in the USA (See "Joint Defense Production: Some Points To Note", published here on February 23,2024). As a democracy ,we have to make sure that our taxpayer's money does not fall into coffer of state institutions that do not respect the Parliament and [are] not accountable to the people. In this time of austerity, this simple initiative could bring the much needed rejuvenation to the economy discarding the policy of liquidity support and manipulating economic data.