Apparel gains from China’s rising costs

BBC Business News made a report on the garment industry of Bangladesh. Here is the link.

Economy is at risk!

Showkot Hossain and Manjur Ahmed from the Prothom Alo writes a report on the current risks of the Bangladesh economy. It's wonderful to read the views on the issue from two prominent macroeconomists of the country, Prof. Wahiduddin Mahmud and Prof. M. A. Taslim. Especially, reading the views from Prof. Wahiduddin on economic update after such a long time is great. To me, the concerns that they made and came through the report, are very much logical. 

Here is the news link!  

World Development Report 2012

The World Bank Institute publishes World Development Report (WDR) 2012: Gender Equality and Development. 


Here is the link for the whole report.

Rise in fuel prices

The government has raised fuel prices by Tk5.0 per litre for diesel (from Tk46.0 before), kerosene (from Tk46.0 before), petrol (from Tk76.0 before) and octane (from Tk79.0 before) and Tk 8.0 per litre for furnace oil (from Tk42.0 before) with effect from 19 September, just four months after the previous hike on 6 May 2011.

Why the government had to take such a decision despite a persistently higher inflation in the country?

Government's explanation: (i) to reduce the losses (or, reduce the subsidies of the government in this sector) of Bangladesh Petroleum Corporation (BPC), which was due to the rising demand for petroleum products, especially by new diesel and furnace oil-fired rental and quick rental power plants.; (ii) to help check the smuggling of petroleum products to the neighbouring India and Myanmar.


Other plausible (and possibly, that's the main reason) explanation:  To fulfill the conditionalities of IMF to receive US$1.0 billion programme loan from this multilateral organization. 


Impact: Obviously, it will push up prices of food and transportation cost, although the government plans to give cash subsidy for diesel to be used for pumping water to the farmland. Even this subsidy measure of the government can't stop the direct adverse effect of higher fuel prices on commodity prices.


Here is a news link from the Financial Express.
  

IMF Statement on Bangladesh

An International Monetary Fund (IMF) mission led by Mr. David Cowen of the Asia and Pacific Department visited Bangladesh during September 5–15 to conduct the 2011 Article IV Consultation discussions. 


Here is the link for Press Release.


One interesting observation:
IMF projected 6.3% real GDP growth for Bangladesh in FY12, whereas just a few days back, Asian Development Bank projected 7.0% real GDP growth in FY12!

Inflation in August reached 11.3%

Though food inflation declined marginally in August 2011 from its level in July, the overall inflation rose to 11.3% in August from 11.0% in July, basically due to significant increase in non-food inflation (from 6.5% in July to 8.8% in August!). Interestingly, the rise in non-food inflation is higher in rural areas than urban areas!

The significant increase in non-food inflation lately may be due to the second-round effect (wage rise) of high food inflation and, usually it persists for a longer term.

Here is the link for latest inflation data.

New Banks: Don’t Say ‘Yes’ If You Want to Say ‘No’

Despite the 'good' suggestions from both people and institutions for not issuing new licenses for banks, Bangladesh Bank Board finally decided to give licenses for new banks, as you all know, I suppose. And again politics kicked out economics, unfortunately.

After reading the wonderful article (New Banks: Don’t Say ‘Yes’ If You Want to Say ‘No’) from T T Ram Mohan, I think, RBI is facing the similar problem as BB; however, the arguments that has given in Mohan's article for opening up new banks are good and BB can follow the similar objectives while making its guidelines for new banks. In addition to fixing large capital binding, BB can clarify in its guidelines why it thinks that the Bangladesh economy needs more banks at this moment: either for ensuring greater competition, or ensuring financial inclusion. And then how these new banks will ensure these objectives?

Here is the link of the article.

Thanks to Mr. Rashed Al Mahmud Titumir for notifying this.

Asian Development Outlook Update 2011

Asian Development Bank publishes its flagship report Asian Development Outlook Update 2011: Preparing for Demographic Transition presents an analysis of developing Asia’s recent economic performance plus its prospects for the next two years.

Here is the link for the whole report. 

Here is the Bangladesh Country Chapter.

Elinor Ostrom: The Master Artisan

The Finance and Development of the IMF profiles Elinor Ostrom, the first and only woman to win the Nobel Prize in Economics. It's a real pleasure and honor to read a detail on this wonderful person.

Here is the link.

Dhaka: Worst Stock Market!

So, Bloomberg News confirmed that Dhaka Stock Exchange is the worst performer in Asia, while last year it was the third among the global best!

Do we always love to live around the extreme line? 'সত্যি, বিচিত্র এই দেশ!'

Here is the news link.

Sixth Five-Year Plan!

The Government of Bangladesh has launched its 6th Five-Year Plan (2011-2016). Here is the link of the document for your information. 


Link of Sixth Five Year Plan


Cheers!

Transit and Bangladesh-India relationship

Economist Dr. Binayak Sen writes on the Bangladesh-India relationship and critical issues in regards to transit in today's Prothom Alo. The facts that issues related to institutional and infrastructural bottlenecks in India have been creating problems while exporting Bangladeshi commodities to India received significant attention in this article. And providing transit to India should not take place without resolving these issues, as came up in the concluding remarks in the article. 

Though the article is not so long, however the depth of the analytical approach is critical to know. A nice one to read. 

Here is the link. 

Policy Rates increased

Bangladesh Bank raised its key policy rates, repo and reverse repo, once again by 50 basis points to 7.25% and 5.25% points, respectively, as explained, to curb the recent high trend of inflation. However, in my suspicion, the decision is closely related with the target money supply growth as mentioned in the latest Monetary Policy Statement (MPS, July 2011). It's the right decision to keep the money supply growth in tolerable level, however the opportunity cost of that should be measured properly and alternatives policy options are always good to open.

Here is the news link.  

Wrong monetary policy of BB?

Well, according to this news link of the Financial Express, inflationary pressures will persist in the Bangladesh economy due to wrong monetary policies taken by the central bank, Bangladesh Bank (BB) (in the Monetary Policy Statement (MPS)), as noted in its latest Bangladesh Economic Update (BEU) of 'Unnayan Onneshan', a non-government research organisation.

As explained in BEU, there are two factors that has been driving the current phase of inflation: (i) quick transmission of international prices into domestic prices; (ii) weak public distribution system. On the misguide of MPS, the policy rate hike will increase the cost of production, thus will dampen investment, which may fuel the price at further level in future. Good explanation!

Here is the news link.

Here is the link of Bangladesh Economic Update of 'Unnayan Onneshan'

In my view, the explanation is partly right. While the central bank has been assuming the demand side pressures to control price level while setting its policy rates, which is partly true; the BEU considered supply side factors as the sole explanation of the problem. This is true that supply side factors outweighs those from demand side, however the central bank is simply can't sit independent without interfering in the money market. The facts should be remembered are: (i) money supply growth is so high (in fact doesn't match with the great MV=PY theory!); (ii) huge excess liquidity; and (iii) unproductive use of money. Though the reasons for inflation are the same in China and India as in Bangladesh, please look at their policy decisions; they are more aggressive (or, restrictive) while conducting their monetary policies. I am not pretending that BB is doing a good and appropriate job in controlling inflation; however, I am just defending its position.

Macroeconomics and basic common sense

Stephen Moore writes an article 'Why Americans Hate Economics?' in the Wall Street Journal on some basic issues of U.S. govt's economic policies and how those policies puzzle others. With some specific example, he seriously questioned the ability of the Keynesian economics and blamed it for lacking basic common sense! lolz...

As usual, economists like Paul Krugman, David Glasner, Noah Smith and Stephen Williamson termed Moore's article as anti-intellectual, naive conservative and confused.