The seemingly daily blame-game between the two main political parties continues apace, with the two blaming each other for a lack of democracy in the country. On the economic front, exports continue to surge with a third consecutive month of USD 5-billion plus earnings, while remittance collection also continues to show good numbers. The central bank has encouraged weak banks to merge with stronger banks, while experts have called for banks to form three super banks instead of the practice of mergers. The pharma industry seems to be slowly recovering as well as a result of improving supply chains globally.
.AL General Secretary Comments on BNP. “Awami League General Secretary and Road Transport and Bridges Minister Obaidul Quader (has) said that BNP wants to nullify the meaning of independence, as they did not believe (in) the spirit of the War of Liberation and democracy.” He mentioned that under the Awami League’s leadership, citizens were getting the benefits of freedom, but that the BNP has instead always been anti-democratic and communal. He mentioned that the BNP had the same ideology as Pakistan, and that they (BNP) only wanted power and gain a fortune from Bangladesh. He blamed BNP Secretary General Mirza Fakhrul Islam Alamgir of making baseless and fabricated statements without giving any proper evidence, and claimed that BNP leaders were being able to operate normally under the current Awami League regime, whereas, when BNP were in power in the early 2000s, they had a culture of violence and killings against Awami League leaders.
BNP Comments on Awami League. “BNP Secretary General Mirza Fakhrul Islam Alamgir (has) said that 80% of BNP leaders and activists faced torture unleashed by the ‘fascist’ Awami League government.” He blamed the government for trying to hold on to power by suppressing the rights of the people, and that their main victim was the BNP Chairperson, Khaleda Zia. He claimed the government had created a culture of fear where no one could speak or write freely, and said it had reached a level where even the opposition party members’ families were not being spared. He alleged that various victims had shared stories with him of the inhumane treatment they got while in prison, and that the BNP were doing their best to free the country from the current leadership.
Banking. The central bank has encouraged weak-performing banks to independently merge with stronger ones by the end of 2024. The central bank has said that after December 2024, they themselves will decide on which banks will merger with whom, while the directors of those banks will lose the authority to have any decision-making power with regards to this issue. In an internal Bangladesh Bank report named ‘Bank Health Index’ (BHI), as many as 29 banks were in the ‘yellow zone’, meaning that their financial health was between good and fragile, while banks in the ‘red zone’ (poor financial health) included AB Bank, National Bank, Padma Bank, and BASIC Bank, among others. The report stated that banks in both the yellow and red zones need supervisory attention. In related banking news, Dr. Zia Hasan, a noted economist, has said that instead of mergers and acquisitions, Bangladesh should have three super banks, and believes the current trend of mergers is worrying for the country’s banking sector. He said that forming large super banks was one way of overcoming the culture of large non-performing loans. He said the super banks can be formed in three categories; all Islamic and Shariah-based banks, all weak scheduled banks, and all-state owned commercial banks. He said that if the country moved ahead with the mergers, it would harm the general public in the form of inflation.
Exports. Bangladesh’s export earnings for the month of February were USD 5.19 billion. This marked a 12.04% year-on-year growth, and is particularly significant as it marks three straight months of USD 5 billion-plus exports. The impressive exports figures come at an important time for Bangladesh economy, and it is hoped that it will help to fortify the country’s foreign exchange reserves. Data from the Export Processing Bureau (EPB) showed that apparel exports grew by 14% year-on-year to USD 4.50 billion, while knitwear exports grew by 15% to USD 2.4 billion, compared to USD 2.1 billion in February 2023, while woven apparel exports grew by 12.83% to USD 2.08 billion. This brings the overall export earnings for the current fiscal year to USD 38.45 billion, up from USD 37.07 billion in the corresponding period of the previous fiscal year, a growth of 3.71%. Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said that apparel stores had enjoyed good sales in recent months due to festivals and events like Christmas, Boxing Day, and Black Friday, which helped them clear old inventory and give new orders.
Remittances. Remittance for the month of February 2024 totaled USD 2.16 billion, which is the highest amount garnered in a month this fiscal year. This is a positive development as Bangladesh continues to attempt to improve its depleting foreign exchange reserves. The amount was a 40% growth year-on-year, as the remittance amount for February in 2023 amounted to USD 1.56 billion. With this month’s receipts, it brings the overall remittance receipts for this current fiscal year to USD 15.06 billion. The positive flow of remittances is a welcome relief to the Bangladesh economy, which has been facing multiple threats in the form of dwindling foreign exchange reserves and other internal and external factors in recent times.
Debt Servicing. Bangladesh has spent a total of USD 2.03 billion in the first eight months of the ongoing fiscal year on external debt servicing, including principal and interest amounts on foreign loans. The principal amount repaid stood at USD 1.22 billion, while the interest amount repayments stood at USD 805.9. As a comparison, the total debt servicing in the first eight months of the previous fiscal year was USD 1.42 billion, meaning this year so far, there has been a 40% increase in repayments over the corresponding period. According to officials at the Economic Relations Division, the increase is driven mainly by increased interest repayments, which has doubled this year, compared to last year. (USD 805.9 million this year versus 403 million in the corresponding period last fiscal year). Another reason was the increased loan commitment this fiscal year from the different development partners. Development partners have so far pledged a total of USD 7.2 billion in this fiscal year, which is a huge increase from the USD 1.78 billion pledged in the first eight months of the previous fiscal year (June 2022 to July 2023). Despite some concerns about Bangladesh’s rising debt portfolio, the Economic Relations Division is targeting a total loan commitment of USD 9.92 billion for the current fiscal year, and are therefore trying to get the remaining USD 2.7 billion in loan commitments in the remaining four months of the current fiscal year (March to June 2024). The government maintains that the repayment of the rising debt will have to be covered by the expansion of the Bangladesh economy, while maintaining the country’s safe and stable debt to GDP ratio.
Development Financing. The government of Bangladesh has signed three credit facility agreements with Agence Francaise de Development (AFD). Under this agreement, AFD will provide EUR 277 million to Bangladesh for three projects. EUR 62 million will go towards the ‘Greater Dhaka Sustainable Urban Transport Project; EUR 175 million for the ‘Chattogram Metropolitan Sewerage Project’; and the remaining EUR 40 million towards another environmental sustainability project.
Pharmaceuticals. Bangladesh’s pharmaceutical industry seems to be on the steady path to recovery as the opening of Letters of Credit (LCs) for raw materials is gaining momentum after the difficulties brought about by the Covid-19 pandemic and Russia-Ukraine war. The opening of LCs in the sector in the July 2023-January 2024 period (the first seven months of the current fiscal year) was USD 636.26 million, a 14% increase year-on-year from the corresponding period in the previous fiscal year. Industry experts have said that as the dollar crisis in the country is slowly easing, the global supply chain is also slowly getting back to normalcy, and this has helped the pharma industry. According to Md. Mahbubul Karim, Executive Director (supply chain management) of Incepta Pharmaceuticals, during the peak of the dollar crisis and the Russia-Ukraine war, supply chains were massively impacted, to the extent that they could not even keep up with lead times in the raw material supply chain, and also alleged that while they would open LCs at the given government rate, they were then asked to settle them at higher rates later on. Various leaders within the pharmaceutical industry also attributed the recovery of the sector due to efficient business practices, good management, and government cooperation.
Nothing significant to report.
March was a good month on the economic front for Bangladesh, with a third consecutive month of exports earnings over USD 5 billion, while remittance earnings were also the highest for this fiscal year so far. On the banking front, the central banks have encouraged weaker banks to merge with stronger banks by the end of this year, or risk the central bank doing so by themselves. However, given merging with weaker banks could weaken the management and financial situation of the stronger banks, there remain concerns. Further, these mergers have the risk of passing on any increased costs (loan default, NPLs, etc.) to the general public in the form of inflation. An alternative is to form a limited amount of ‘super banks’ which will form an umbrella for all the other banks. Whatever the decision, it will be important to keep an eye on this since it will have huge ramifications for the country’s struggling banking sector going forward. On a more positive note, the country’s pharmaceutical industry seems to be slowly recovering, with more orders coming in and the supply chains slowly coming back to normalcy.