Rejaul Karim Byron

The government has officially abandoned the austerity stance it took on at the beginning of the fiscal year as it deems the economy is nearing good health.

Major global rating agency Moody’s yesterday downgraded its outlook of Bangladesh’s banking system from stable to negative -- a crushing development that is set to make foreign transactions trickier and costlier for businesses and banks.

The first seven months of the current fiscal year of 2022-23 saw the lowest implementation rate of the annual development programme (ADP) in the last three years, with only 28.16 per cent of the total outlay being spent till January. 

Health and education are set to get the biggest chop in the revised development budget for this fiscal year, when the International Monetary Fund has stipulated more spending in the two sectors as part of its $4.7 billion loan programme.

Private power plants that use furnace oil risk facing severe shortage of fuel and this may result in power cuts during the hottest months of this year.

Bangladesh could explore health financing reforms that increase public financing for the health sector to reduce out-of-pocket spending, which is threatening to undermine national poverty reduction efforts, said the World Bank in a recent study.

Bangladesh’s economic crisis will not go away if the government does not strictly adhere to the conditions tagged with the International Monetary Fund’s 42-month loan programme, said the lender’s top official.

Weak banks in Bangladesh with small holdings of government securities, which are used to mobilise funds either from the central bank or peers, may become more vulnerable in the days to come, Moody’s Investors Service warned yesterday.  

Bangladesh’s preparation for LDC graduation would start in earnest with the International Monetary Fund’s 42-month loan programme, where one of the objectives is to overhaul the monetary and exchange rate policies to meet the needs of an open economy.

The International Monetary Fund would be watching the Bangladesh economy like a hawk, stipulating an extensive list of data reporting regularly as part of the conditions agreed upon for the $4.7 billion loan programme.

The government is poised to adopt a set of guidelines that will fundamentally change the way 40 percent of the annual budget is spent, focusing on the whole life cycle cost of goods and services rather than the lowest tender offer in public procurement.

Bangladesh has ramped up its activity in the international spot market for liquefied natural gas after the recess of seven months, purchasing yet another cargo in a space of two weeks as the government looks to ensure adequate supply ahead of Ramadan and the summer months.

The country’s per capita external debt currently stands at more than double from what was seven years ago as both public and private sector foreign loans have seen an increase by this time.

The private sector’s foreign debt decreased by 4.3 per cent, or more than $1 billion, in the second quarter of the current fiscal year following Bangladesh Bank’s strict measures to control imports.

The record subsidy allocation of Tk 82,745 crore is set to be topped up with another Tk 27,360 crore in the revised budget in the face of demands from ministries even after the notable price hike of gas, electricity and fuel.

Bangladesh has a low risk of external and overall debt distress despite higher external borrowing in recent terms, said the International Monetary Fund.

The International Monetary Fund has identified the problems in the banking system, including the high volume of defaulted loans, as one of the three domestic risks that derail the economy in the short- to medium-term.

Bangladesh is expected to get about $6 billion over the next four years from development partners other than the International Monetary Fund to meet the development financing needs, particularly to address climate change challenges.

The International Monetary Fund has laid out 20 conditions for Bangladesh for its $4.7 billion loan programme aimed at restoring macroeconomic stability, accelerating overdue macroeconomic reforms and tackling climate change challenges.

The International Monetary Fund’s $4.7 billion loan programme won’t be a miracle worker for the Bangladesh economy.