In the run-up to May’s critical upazila (local) elections, the main opposition party, the BNP, have expelled 73 members of their party for preparing to take part in the election, thereby violating the BNP’s decision to not take part. The IMF has, for the second time in recent months, reduced its GDP growth forecast (down to 5.7%) for Bangladesh for the current fiscal year. Exports continue to show positive signs, crossing the USD 5 billion mark for a fourth consecutive month, but remittances fell below USD 2 billion for the first time in three months in the backdrop of the weakening of the dollar against the Taka. The Central Bank has assured account holders at different banks that the mergers which are being planned in the banking sector will not affect the deposits of either individuals or institutions. The Central Bank has also reduced loans to state and private banks by 10% through a repurchase agreement to keep money supply under control.
BNP Expulsions. “The BNP has expelled 73 grassroots leaders for [deciding to take] part in the first phase of upcoming upazila (local area) elections violating the party’s decision.” The leaders of the party took the decision according to their constitution. Of the expelled leaders, 28 are contesting for upazila chairman, 24 for vice-chairman, and 21 for female vice-chairman. According to the Election Commission’s schedule, elections will be held in 152 upazilas on 8th May as part of the first phase of the elections. In total, 492 upazila elections will take place across four phases, with the next phase elections taking place on 23rd May, 29th May, and 5th June.
AL Comments on BNP. Awami League General Secretary Obaidul Quader has claimed that the main opposition party BNP is undemocratic, and is always on the lookout for hatching conspiracies and to destroy the stability of the country. He said that the BNP’s ideology itself opposes democratic values and in fact has no respect towards a lawful and systematic approach of doing things. He blamed the BNP for trying to resort to terrorism and anarchy in trying to stop the national elections (which were held in January) from taking place. He said various leaders of BNP are now trying to instill frustration among the general population. Quader’s comments are merely a continuation of comments from him and other Awami League leaders, who have long alleged that BNP are undemocratic in nature.
GDP Growth. The International Monetary Fund (IMF) has once again reduced its GDP growth forecast for Bangladesh for the current fiscal year (FY24) down to 5.7%, as mentioned in its latest World Economic Outlook report. It is the second time in recent months that the IMF has reduced its forecast for Bangladesh, having initially reduced it from 6.5% down to 6% in October 2023. The latest forecast takes into account various local and global challenges related to inflation, unemployment, and lower remittance inflows. The Asian Development Bank, meanwhile, has forecast the country’s GDP growth to be 6.1% in the current fiscal year, mainly riding on exports, and has estimated that it may go up to as much as 6.6% in the next fiscal year (FY 25). The World Bank, meanwhile, has set its forecast for the current fiscal year to be at 5.60%, going up to 5.7% in the next fiscal year (FY 25), estimating gradual growth with the implementation of reforms in the areas of monetary policy, exchange rate, and other monetary and financial instruments. They have also said that it will be important to keep an eye on the tighter liquidity conditions which could exacerbate existing vulnerabilities in the banking sector, while fiscal risks include revenue shortfalls. It also urgently recommended an efficient framework for the resolution of non-performing loans (NPLs).
Banking. The Central Bank has assured the public that the deposits of both individuals and institutions in the banks which are in the process of merging will be safe. The depositors will be able to maintain their accounts as usual. The Central Bank is making the move to merge weaker banks with stronger banks as it looks forward to the country’s next phase of growth post 2026, when Bangladesh becomes a developing nation (graduating from Least Developed Country status in 2026), and will therefore need better and more stable banking services. The Central Bank made the announcement to clear up any confusion that people may have in the face of misleading information recently been published in the media. In other banking news, the Bangladesh Bank has reduced the loan amounts given to state banks and private banks by 10% through a repurchase agreement, as part of an attempt to curb inflation and keep money supply under control. Senior officials at the central bank have said that banks currently have excess money which could have a negative impact when it came to controlling inflation, so the measure was an attempt at reducing the money supply slightly. However, not everyone is happy with the move, with the managing director of one particular bank (anonymously) saying that if the Central Bank reduces lending, then the banks will also adjust their monetary requests accordingly (for example, by asking for 10% more money than they actually need to make up for the 10% lending reduction from the Central Bank’s side).
Exports. Bangladesh’s exports for March 2024 totaled USD 5.10 billion, the fourth consecutive month that the export figure had exceeded USD 5 billion. The amount reflected a 9.88% year-on-year increase (from March 2023), but was slightly less than the previous month’s earnings of USD 5.19 billion. Insiders are hoping that the consistently high export earnings will go some way towards addressing the country’s dwindling foreign reserves and also to contributing to stabilizing the volatility in the country’s dollar market. Apparel exports grew 11% year-on-year to USD 4.34 billion (from USD 3.89 billion in March 2023), while knitwear exports grew by 16.47% year-on-year to USD 2.42 billion, and woven apparel exports grew by around 6.2% to USD 1.93 billion. This brings the overall export earnings for the current fiscal year (July 2023-March 2024) to USD 43.55 billion, a 4.39% increase compared to the USD 41.72 billion worth of exports over the corresponding period in the previous fiscal year.
Remittances. Remittances for the month of March 2024 totaled USD 1.99 billion, down from USD 2.16 in the previous month. The decline comes in the backdrop of the weakening of the dollar against the Taka, which experts have said have led to expatriates being discouraged in terms of using official remittance channels to send money back home. For most of March, the USD-Taka exchange rate fell to around 113 Taka/USD, down from Tk.120-122/USD in the preceding two months. Bankers have mentioned several other possible reasons for the fall in remittances, including sending money through hundi (non-official channels which often give better exchange rates), as well as lower demand for dollars in banks. The increase in unemployment in some countries around the world over the past few months was also given as a reason in this regard as well. The fall in remittances is worrying, especially as it came in the month of Eid (one of the main religious festivals in Bangladesh, where it could be expected that people would send more remittances). It is also concerning from the point of view of the country’s dwindling foreign exchange reserves, which were recently down to USD 20.57 billion, having consistently fallen after reaching USD 48 billion in August 2021.
Tobacco. The National Heart Foundation of Bangladesh and the Platform Doctors Foundation have jointly called for increasing prices of all tobacco products in the upcoming budget for fiscal year 2024-25. Recent data shows that there are 37.8 million tobacco users in the country. Further, 1.5 million people are suffering from tobacco-related illnesses, while the government’s expenditure on treating these patients is proving to be higher than the revenue being generated from tobacco sales. According to the two aforementioned organizations, tobacco-related reasons cause up to 161,000 deaths annually in Bangladesh. The organizers called for specific tax rates for different tobacco products, with Tk. 60 (USD 0.55) for low-level cigarettes, Tk. 80 (USD 0.73) for mid-range, Tk. 130 (USD 1.18) for high-level, and Tk. 180 (USD 1.64) for premium-tier cigarettes.
Three members of an organized gang involved in the manipulation of stock market trading have been arrested by the Detective Branch of the Dhaka Metropolitan Police. The gang would manipulate the market by spreading false information on social media platforms such as Facebook and WhatsApp. The arrested trio are Amir Hossain (37), Nurul Haque Harun (52), and Abdul Kaiyum (39). The group also extorted money from listed companies by posting negative information against them if they did not pay.
The upcoming upazila elections have already been thrown into chaos with the BNP’s decision to expel 73 of their members. In our assessment the BNP is only cutting its nose off to spite its face, and is sustaining more damage to its own strength and credibility than it is inflicting on the Awami League. On the economic front, whilst it is concerning that GDP growth forecasts are fluctuating and being downgraded, in the context of the global economic climate these adjustments seem prudent and not altogether unfair or doom-laden. The falling remittance rates, coupled with the weakening of the US Dollar against the Taka, suggest to us that GDP growth will indeed not be as strong as initially thought, and that the decreased estimates of the IMF and World Bank (both at 5.7%) are more likely than the ADB’s more bullish 6.1% estimate. In the interim we shall be keeping a wary eye on the plans for bank mergers and the risk of a run on any one, or several, banks as media-fostered panic provokes depositors to rush to withdraw their savings en masse.