Bangladesh received $1.68 billion in remittance through legal channels during the first 25 days of January.

On average, expatriates sent $67.04 million per day during this period.According to the latest data from Bangladesh Bank (BB), the total remittance flow for January is likely to surpass $2 billion if the current trend continues.

A breakdown of the central bank’s data shows that of the $1.68 billion received: $354.28 million came through state-owned banks, $74.4 million through a specialised bank, $1,242.53 million from private banks, and $479 million via foreign banks.

However, eight banks did not record any remittance inflow during this period. These include the state-owned Bangladesh Development Bank (BDBL) and the specialised Rajshahi Krishi Unnayan Bank.

Private banks such as Community Bank, ICB Islami Bank, and Padma Bank also failed to report any remittance. Among foreign banks, Habib Bank, National Bank of Pakistan and State Bank of India did not receive any remittance.

During the first half of FY2024-25 (July–December), remittance inflows totalled $13.78 billion, compared to $10.8 billion during the same period last year—an increase of $2.98 billion.

An initiative has been taken to withdraw the upper ceiling on investment in wage earners development bonds for expatriate Bangladeshis. With this, the authorities aim to lure expatriate professionals and businesses to invest at home, clear ways for foreign investments, and increase inflow of remittances.

The expatriate welfare and overseas employment ministry issued a letter to Abdur Rahman, Khan, secretary of the internal resources division (IRD), on Wednesday, asking him to take action in this regard.

The wage earners development bond was introduced in 1981, with a maturity period of five years.

Asked about the issue, the IRD secretary declined to make any comment and claimed that he has not yet received any letter over the issue

According to the Wage Earners Development Bond Rules, 1981 (amended on 23 May, 2015), there was scope to invest any amount in the bond. However, during the Covid-19 outbreak, the IRD issued a notification on 3 December, 2020, imposing an investment limit of Tk 10 million (or its equivalent in foreign currency) on wage earners development bonds, US dollar premium bonds, and US dollar investment bonds.

The cap on US dollar premium bonds and US dollar investment bonds was lifted later on 4 April, 2022, allowing unlimited investments.

However, the investment limit for wage earners development bonds remains unchanged, with no provision for auto reinvestment. Hence, expatriates are being forced to withdraw their investments.

In its letter, the expatriate welfare ministry told the IRD secretary that the upper ceiling on investment should be abolished or relaxed to boost remittance inflows and attract more investment from expatriates.

On Tuesday, expatriate welfare and overseas employment adviser Asif Nazrul told the media that he proposed to cancel the ceiling of Tk 10 million on the purchase of wage earners development bonds.

“It needs the assistance of Bangladesh Bank, and I hope Bangladesh Bank will facilitate this,” he said, expressing optimism for more remittance in the coming days.

These bonds can be purchased from offshore and authorised dealer (AD) branches of Bangladesh Bank, exchange houses, exchange companies, and scheduled banks. Its profits are free from the tax net. Also, there are scopes to take loans against the bonds, and there is no requirement to have a foreign currency (FC) account to buy these bonds.

Foreign exchange earners themselves can invest in these bonds, or invest in the name of their nominee. Government employees who serve in Bangladesh missions abroad are also eligible to invest in Wage Earners Development Bonds.

It was learned that the IRD will present a summary of the proposal to finance and commerce adviser Salehuddin Ahmed for approval next week. Once it gets approval, the IRD will issue a notification, while the central bank and the national savings directorate will implement.

When asked about the matter at the secretariat on Thursday, adviser Salehuddin Ahmed told that the proposal should be submitted first before any further comments can be made.

He believes that if these measures succeed, inflation will decrease. This would be great achievement if people’s anger and suffering are alleviated.

Ahsan H Mansur made these remarks at a roundtable discussion organised by Prothom Alo titled “Where do we want to see the banking sector?”

Ahsan H Mansur said that three task forces are being formed for the reform of the banking sector. One task force has already been established, and several measures have been implemented, including changes to the boards of some banks.

To improve the situation, 10 to 11 weak banks are now under regular supervision, he said adding these banks report on 20 specific issues to Bangladesh Bank every day.

The central bank governor said, “After implementing these measures, deposits in banks have increased by Tk 80 billion. This is a great relief. Once the liquidity crisis is resolved, we will move on to the next steps.”

Ahsan H Mansur noted that if the current trend in the dollar market continues, there will no longer be instability in the market. For the first time, the exchange rate for remittances in dollars is higher than the rate in the open market. The dollar market is stabilising.

The governor said, “Reducing inflation is my primary responsibility. Various measures are being taken to achieve this. Monetary policy is already stringent, and steps are being taken to make it even stricter. While there may be temporary difficulties for businesses, inflation will decrease, ultimately benefiting the overall economy.”

The Bangladesh Bank (BB) has formed a task force for banking sector reform, with six experts on the financial sector as members of the taskforce.BB governor Ahsan H Mansur will serve as the coordinator of the taskforce.Apart from taking different measures to reform the banking sector, the taskforce will also publish a white paper.

The central bank disclosed this in a notification published on Wednesday.

The six members of the taskforce are chief adviser’s special envoy for international affairs Lutfey Siddiqi, former deputy governor Muhammad A Ali, BRAC Bank chairman Mehriar M Hasan, former lead economists at the Dhaka office of the World Bank Zahid Hussain, ZNRF University of Management Science vice chancellor M Zubaidur Rahman and Partner at Hoda Vasi Chowdhury & Co, Sabbir Ahmad.

According to the notification, this taskforce will mainly assess the existing financial situation, bad assets and major risks to maintain economic stability. Besides, the taskforce will conduct financial index review, assess actual conditions of the loans, actual price of assets, security deposit deficiency and will separate the bad assets of banks concerned.

The Bangladesh Bank said the task force will submit proposals related to limiting political and corporate influence on banking decisions, reform of bank ownership and development of the regulatory system under the process of strengthening good governance and risk management systems in the banking sector to achieve crisis time resiliency.

Besides, the taskforce will retrieve the money of the struggling banks, prepare regulations and related policies and will adopt separate policy measures for the weak banks.

The notification further said this taskforce will also amend different laws related to the financial sector, including the Bank Company Act and Bangladesh Bank Order and will propose for legislation, amendment and reform of laws regarding the asset management companies, bank acquisition and unification. It will also take measures to publish a white paper of the banking sector.

Following the ouster of the Awami League government, the interim government declared to form a bank commission for the reform of the financial sector. However, the government has formed a task force now.

The officials say the World Bank (WB) and Asian Development Bank (ADB) are providing loans for the banking sector reform. The money from the loan will also be spent on the modernisation of the central bank and enhancing its capability. At the same time, there has been an assurance of help from the International Monetary Fund (IMF) also.

He made the call at a press conference on Wednesday, responding to a query regarding the group’s reported attempts to sell its properties.

“It needs to be carried out in compliance with legal procedures… We will request the government to take steps in this regard. Besides, no one should acquire the group’s properties, as the proceeds from their sale will be used to repay the depositors,” he explained.

The central bank governor described the group’s owner, Saiful Alam, as the first individual in history to have looted banks in a planned manner. “I have no idea if anyone else in the world has looted banks in such a well-planned way.”

Regarding reforms in the banking sector, Ahsan H Mansur said that a banking commission will be introduced within around a month, in collaboration with Bangladesh Bank and foreign specialists.

He also detailed their plans to buoy the Islami Bank, saying, “We have asked the new board of Islami Bank to submit their action plan within a week. This is not a place for sitting idle; it demands hard work. Bangladesh Bank will extend all sorts of assistance.”Ads by

He warned that the bank’s board might be changed again if it fails to fulfill its role effectively. “All are being monitored. None will be spared if they commit irregularities.”

He added that similar actions will be taken in the banks found with irregularities.

Regarding rising inflation, he said steps have been taken to control it. The dollar exchange rate has remained stable. If it continues, inflation is expected to decrease within the next six to seven months.

As the central bank is not offloading dollars, there is no risk of reserves going down. Even the government demands are being met from the interbank foreign exchange market. Therefore, the reserves are expected to rise in future, he added. The governor urged depositors to remain patient and avoid withdrawing all their deposits at once.

Analysts said the past government borrowed heavily from local sources due to a lack of proper debt management. Economists and experts, however, always welcome taking foreign loans in foreign currency. But, foreign loans had also been taken heavily over the past 15 years, most of those being received without proper negotiations and scrutiny, resulting in a growing pressure of liabilities on the government.

The Finance Division officially released reports on foreign and domestic debts till December 2023 showing a total loan outstanding of over Tk 16.59 trillion. Debt reports are updated every three months and the March-June reports will be released soon. The Finance Division estimates the total foreign and domestic debt outstanding will be at Tk 18.36 trillion at the end of June – Tk 10.35 trillion in domestic debts and Tk 8.01 trillion in foreign debts.

According to data from the Economic Relations Division, foreign debts stood at USD 67.90 billion at the end of June or equal to Tk 8.01 trillion (USD 1 equals Tk 118). Total foreign debts outstanding were at about Tk 4.06 trillion at the end of December 2023.

As of December last year, the outstanding loans was equal to the allocation of three budgets. These loans are known as government or sovereign debts. This process involved borrowing, paying interest, paying capital and borrowing again. The money cited as outstanding is payable in future. At the end of December, total domestic debts stood at about Tk 9.54 trillion, and that includes a loan outstanding of over Tk 5.25 trillion to the banking sector and the remaining borrowings were against treasury bills, bonds, saving certificates and general pension funds.

An analysis of data from the Finance Division shows the domestic debt outstanding was over Tk 3.20 trillion at the end of December 2017 while the Awami League was also in power. Yet, such debts rose by three folds in just six years.

When the Awami League took office on 6 January 2009, foreign and domestic debt outstanding was at about Tk 2.77 trillion, mostly foreign debt outstanding. The scenario becomes the opposite at the end when the government leaves. However, the size of gross domestic product (GDP) increased during these times.

Now the pressure of payment of interest and repayment of capital of these huge debts falls on the incumbent government. Interest rates have also risen significantly recently. Interest on treasury bills and bonds rose to 6 per cent from 1 per cent two years ago. Currently, the average interest rate stands at 12 per cent. Sales of saving certificates are also low, but interests of debts taken previously against it are being paid with tax money now. As many as Tk 1.14 trillion was allocated in the budget for the 2024-24 fiscal to pay debt interests and Tk 930 billion was to pay interests of domestic borrowing.

The government borrows from domestic and foreign sources to meet budget deficits. Experts said foreign debts are easier, as well as have less interest and a long repayment period, but it comes with negotiation capacity, as well as terms and conditions. Quite the opposite, domestic loans are easier to get. The Awami League governments heavily deepened on domestic borrowings that long ignored the opinions of economists and experts.

Bangladesh Bank and commercial banks are the sources of borrowings in the banking sector. To borrow from Bangladesh Bank requires printing out new currencies, and it triggers inflation due to the rise in the supply of currencies to markets. According to the Bangladesh Bureau of Statistics (BBS), overall inflation was at about 12 per cent and food inflation surpassed 14 per cent in July.

Centre for Policy Dialogue (CPD)’s distinguished fellow professor Mustafizur Rahman told the past government relied on both foreign and domestic borrowings; both debts accelerated in the past 6-7 years, but domestic borrowings increased more. There were also reasons for this; tax collection was set at 14 per cent compared to GDP in the seventh five-year plan, but it did not happen. In contrast, this ratio dropped from 8 per cent to 11 per cent, which means the government could not reach the affluent for tax or did not want to do so, and this is the old sin. Had the target of tax collection been met, this huge debt would have not been needed at all.

Mustafizur Rahman further said, “We speak proudly for building the Padma Bridge with our funds, but it was too built on loans. The pressure of loan paying is coming. Suppliers credits have been in such an unplanned way and almost without any negotiation, now it will be felt to the bone. Paying of interests for the loans of the Rooppur Nuclear Power Plant project will have to start after two years.”

According to data from the Economic Relations Division (ERD), the burden of foreign loans increased threefold in the past 15 years. External debt accumulation was at USD 20.84 billion. The Awami League government borrowed from various countries including India, China and Russia, as well as various donor agencies on tough conditions to build a tunnel under Karnaphuli river, Rooppur nuclear power plant, elevated expressways, as well as for rail and power sectors.

The foreign debt accumulation rose to USD 67.90 billion after the 2023-24 fiscal ending in June this year, which means there is an average debt of about USD 4000 per citizen.

Though the Awami League governments borrowed heavily on the pretext of developing infrastructures in the country, they too had been under pressure to repay the debts over the past couple of years. The pressure mounted at a time when a crisis of foreign currency has been on for quite some time. Additional pressure also falls on the budget along with the foreign reserves due to spending extra money for loan repayment.

According to sources, one-third of the foreign borrowings that the government receives every year are spent on the payment of previous debts and interests. Payments of foreign debts rose by 25 per cent in the 2023-24 fiscal from the previous fiscal.

ERD sources said payments of interest and capital on foreign debts reached a record of about USD 3.36 billion in the last fiscal. Of which, USD 2.01 billion was for repayment of capital and about USD 1.35 billion was for payment of interest. Payments of interest and capital on foreign debts increased to USD 2.68 billion in the 2022-23 fiscal from USD 1.10 billion a decade ago in the 2012-13 fiscal.

Payment of loan installment for the Rooppur nuclear power plant project will start in 2026 with negotiations underway to extend the grace period for two more years. Talks are pressing on reducing loan instalments for various Chinese projects. Dhaka adopted a ‘go-slow’ policy on the about USD 5 billion loans taken on Chinese currencies, and a Chinese delegation was scheduled to visit Dhaka in August to discuss about this debt, but it has become uncertain now.

The new government, however, advised the officials to follow caution on foreign borrowings. Finance advisor Salehuddin Ahmed held a meeting with the ERD officials on this matter on 14 August and directed the officials to scrutinize interest rates, instalments, payment periods and various terms and conditions while taking foreign loans.

The finance advisor told the journalists on that day, “All are interested in lending to Bangladesh, and I asked the ERD officials to scrutinise the loans before taking those because we have witnessed the tragic consequences of many African countries which borrowed randomly.”

The banking sector regulator, Bangladesh Bank, issued an instruction in this regard to the managing directors of the banks on Saturday.

In its message, the central bank said as the banks are facing issues in transporting cash to branches, it will not be allowed to withdraw more than Tk 300,000 from a single account this week. Also, monitoring activities should be strengthened on transactions, and any suspicious transactions should be stopped.

However, there will be no limit for transferring money from one account to another and for digital transactions.

The interim government began its journey on 8 August, but the police are yet to resume their activities in full swing. This posed significant security concerns, particularly in transporting cash. Besides, there were apprehensions that the vested quarters might attempt to destabilise the situation by withdrawing large amounts of cash.

Against the backdrop, the maximum limit for cash withdrawal was Tk 200,000 in the previous two weeks. An official of Bangladesh Bank explained that the decision aims to foil any attempts to destabilise the situation as well as to address the security concerns. The limit will be lifted completely in a gradual process.

Over a dozen banks increased the US dollar exchange rate on Monday, 29 July for remittance, while the flow of expatriate remittances saw a downfall since the last week of this month.

Bank officials said that internet service closure and the recent students’ quota reform demonstration impacted inward remittance flow.

To boost the flow of remittances, the Bangladesh Bank gave verbal instructions to banks on Sunday to purchase remittance dollars even at higher rates.

As a result, the remittance dollar rate surged by 60-70 basis points in a span of a day on Monday.

The amount soars to $23 billion if the two years is taken into account instead of 10 months. The country is now facing a possibility of seeing a decline in gross domestic product (GDP) size if this “corrected” export income data is considered in relevant calculations.

According to an initial calculation, Bangladesh’s GDP size could shrink by 2 per cent, which amounts to $9 billion or over Tk 1 trillion, with the dollar rate being Tk 115.If the GDP size shrinks, the per capita income will also come down.According to a latest calculation, Bangladesh’s GDP size was $459 billion in 2023-24 financial year.An analysis of recently published data of the Bangladesh Bank and Export Promotion Bureau (EPB) showed these.

The central bank on Wednesday published the “actual data” of exports for the first 10 months (July-April) of the just-concluded financial year. There was a difference of about $14 billion with the data published by EPB, triggering debates over the misrepresentation of export data.According to EPB, the monetary value of the export of goods and services in that period amounts to $47.47 billion but the BB says the amount is $33.67 billion. The difference between the two calculations is $13.8 billion.

The businesspersons, however, have been complaining for a long time that the EPB is providing inflated data on export earnings.Mustafizur Rahman, a distinguished fellow at Centre for Policy Dialogue (CPD), told “The size of GDP will decrease slightly if exports decrease. But the contribution of exports to our economy is not much as value addition from exports is comparatively smaller. Take the apparel sector for example – export items are produced by importing a huge amount of raw materials.”

The export income has been shown much higher than the actual account for a long time. There were reflections of this in all relevant sectors and indicators, including GDP and per capita incomePolicy Research Institute executive director Ahsan H MansurAccording to Mustafizur Rahman, the change in the calculation of the outgoing fiscal year’s GDP will come as a result of the decline in exports.

Alongside the shrink in size, the contributions of agriculture, industry and service sectors may also change, he remarked.

Contribution to GDP $30 billion, says EPB.Eighty five per cent of the products exported from Bangladesh are ready-made garments while the rest of the earnings come from leather and leather products, tea, jute and jute products, plastics, food products and other products.

According to the EPB data, Bangladesh exported RMG products worth $40.35 billion in the 10 months. Nearly 40 per cent of the total export earning of this sector is spent to import yarn, cloth and other raw materials. That means, raw materials worth $16.14 billion were imported in that time. The remaining $24.21 billion was added to GDP.

EPB said that $7.12 billion was earned through exports of non-apparel products during the July-April period.

However, the rate of local value addition from these products is much higher than that of RMG products. About 90 to 100 per cent domestic value addition is achieved through these products.

If a low rate of 90 per cent value addition is assumed, then $6.4 billion has been added to the GDP from the export of these products.

If the export earning data provided by EPB is taken into account, then the total value addition to GDP from exports of RMG and other products during the July-April period of last fiscal was $30.61 billion.

Contribution is $21 billion, says Bangladesh Bank

The Bangladesh Bank collects the data of export earnings coming to the country through various banks. The central bank thinks that this data and the actual export earnings “do not differ much”.

But the actual data, the Bangladesh Bank released Wednesday, showed that in the first 10 months (July-April) of the last financial year, goods and services worth $33.67 billion were exported from the country. That is, the difference between EPB and “actual export income” is $13.8 billion.

This ‘actual information’ regarding export of the Bangladesh Bank will have an impact on the size of GDP. Roughly, the RMG sector covers 85 per cent of the export. As such, RMG products worth $28.62 billion have been exported in the last 10 months, according to the BB. Excluding 40 per cent of the money for raw material import, the local value addition stands at $17.17 billion.

As per the central bank assessment, other products, worth $5.05 billion, have been exported. That means, considering a 90 per cent value addition from the non-apparel products, $4.54 will be added to the GDP. The total value added to the GDP from exporting RMG and other products in between July and April stands at $21.71 billion as per the export data of the Bangladesh Bank.

The export information of the central bank is considered the final account. Therefore, the contribution of the export sector in GDP will decline. It has been calculated that due to the difference in the information provided by the EPB and BB, the contribution of the export sector in GDP is likely to decline by $9 billion.

The Bangladesh Bureau of Statistics (BBS) declares the size of GDP in both dollars and taka. According to the intermediary BBS account, the size of Bangladesh’s GDP is $459 billion. As a result, the size of GDP is likely to decline by 2.13 per cent as per the new information.

According to a Bangladesh Bank report, the banks approved loans and investments in the recent months, which significantly exceeded the amount they received as deposits. In the aftermath, they witnessed their current account deficit to swell significantly.

The central bank is providing collateral-free loans to these banks under special considerations, enabling them to continue their loan and investments.However, there are allegations that the banking sector regulator is not monitoring the banks properly even after lending special cash assistance, which eventually lingering the crisis.

The scenario was revealed during conversations with officials of the concerned banks, in addition to analysing the recent central bank report.

A total of 10 Shariah-based banks are now in operation in Bangladesh, while six of them are suffering from acute cash crisis. The banks are – Islami Bank Bangladesh Limited (IBBL), Social Islami Bank (SIBL), First Security Islami Bank (FSIBL), Global Islami Bank (GIBL), Union Bank, and ICB Islamic Bank.

The central bank reported that the 10 banks maintained a combined deposit of Tk 4038.5 billion till December last year, but the amount dropped  by Tk 43.01 billion to Tk 3995.49 billion in March.

On the flip side, their loan disbursements rose by Tk 107.52 billion during the period, from Tk 4146.8 billion recorded in December to Tk 4254.32 billion in March.

The Shariah-based banks are required to maintain an advance-deposit ratio (ADR) of 92 per cent, but their ADR was recorded at 96 per cent in December last year, while it rose to 99 per cent in March this year.  Besides, the banks recorded a steep fall – Tk 50.43 billion – in excess liquidity, from Tk 56.47 billion to Tk 6.05 billion.

The central bank disbursed Tk 220 billion in special loans to seven banks, including five Shariah-based ones, on the last working day of the previous year, to help them appear with better financial health.

Thanks to this infusion, the banks showed handsome amounts in surplus liquidity in their financial statement at the end of the last year, which impacted the entire Shariah-based banking system. The same policy was followed in the preceding year too.

Two officials from Shahjalal and Exim Bank, requesting to remain unnamed, told Economist that the five Shariah-based banks kept their aggressive loan distribution unchecked despite their liquidity crisis. Since they do not have enough deposits, they are now providing loans with the borrowings from the central bank.

They alleged that such aggressive loan disbursal is tarnishing images of all Shariah-based banks. Officials of Al-Arafah Islami Bank and Standard Bank also echoed the concerns.

It was learnt that the crisis-hit banks have long been failing to maintain the required level of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) at the central bank.

A separate report from Bangladesh Bank revealed a combined deficit of Tk 164.39 billion in the current accounts of the five troubled banks as of May this year.

Among them, the First Security Islami Bank has Tk 89.35 billion in current account deficit, while Tk 21.27 billion in Islami Bank, Tk 30.89 billion in Social Islami Bank, Tk 20.61 billion in Union Bank, and Tk 2.27 billion in Global Islami Bank.

The managing directors of the troubled banks could not be reached over the phone despite repeated calls.

Despite the financial woes, the Shariah-based banks continued to recruit fresh manpower, with those rooted in Chattogram in priority. These banks had a total workforce of 48,883 at the end of December, and it rose to 49,742 in March this year.