Poor FM

Finance Minister (FM) M A Muhith denied his previous position on growth projections and now talks in the line what the Governor talks. As FM says now,
"Earlier I said about the difficulty of achieving 7.0 per cent gross domestic product growth, considering the current economic scenario. But I did not say that it is not achievable."
Pressure, or outcome of pressure!


Here is the news link.

Budget deficit and government borrowing

Professor M A Taslim writes on the latest economic development with a focus on increasing budget deficit, and its links with excessive government borrowing as part of budget financing. With a discussion on economics philosophical background and what they mean in reality, he termed the current approach of the government risky  in the long-run and suggested the government to restrain its ambition for the sake of long-run macroeconomic stability of the economy. Another excellent piece from him to know economics philosophy, theories and their interlinks in reality.

Here is the link for the article.

Finance Minister vs. Governor

Within a period of less than a week, two leading heads of the country's economic structure, the Finance Minister, the head of the fiscal authority and the Governor, the head of the monetary authority, gave contradictory statements on projected GDP growth in the current fiscal year. While the Finance Minister is uncertain about meeting the 7.0% growth target, which seems logical based on the update of current economic indicators, Mr. Governor, on the other hand, is confident that the targeted 7.0% growth would be achieved.

Well, receiving contradictory statements on a particular issue from the policymakers is not unusual. However, on the most important indicator of the economy, giving a completely opposite views by the top two policymakers of the country provides wrong signals to market agents, in terms of apparent inconsistency in the government, lack of coordination among top institutions, and may be, some kind of conflicts. This is obviously an warning sign and policymakers need to be prudent while providing their views in public. Can we remember the implications of contradictory comments made by these two top policymakers before the stock market crash in December 2010?

Anyway, here are the links:
Muhith himself doubts 7% growth projection.
7% growth achievable.

Bangladesh economy bleeds!

Though the title of the article made me laugh (because of the word choice), but the facts in the article didn't! Those are the truth and the economy is leading into a trouble situation, which basically started since the stock market crash in December 2010.

Anyway, you can read the latest development of the Bangladesh economy in this article of the Daily Star by Rejaul Karim Byron and Rizanuzzaman Laskar. Here is the link.

Seigniorage and inflation tax

Professor M. A. Taslim writes on the relationship between the excessive government borrowing and inflation through the interaction between money creation and inflation tax. This is an excellent piece for learning, especially it counters those arguments that favor the government's excessive borrowing from the banking system for budget financing.

Here is the news link. 

Statement of IMF

An International Monetary Fund (IMF) mission visited Dhaka during November 30–December 13, 2011 to discuss a reform program with the government of Bangladesh for possible support under the IMF’s Extended Credit Facility (ECF). 


Here is the official statement of IMF on this mission.

Desperate efforts to increase govt. funding?

So, news on various government efforts to increase its funds for ambitious expenditure plan. Unfortunately, all are related with building government burdens (or, burden for future generations). I don't know, how long this approach will be sustainable.

Anyway, here are the news on that issue.

Govt plans to hike interest rates on savings instruments.
$2.0 billion IDB loan for BPC to import petroleum products.
MoF to issue Tk57.32 billion special bonds to three SCBs.

News on loosing Taka value

So, news on the drastic depreciation of Taka against US$ in the past few weeks keeps taking a significant place in the business media, because of its various implications for the country as well as consumer.

Here are some of the news and analyses on the issue.

Dollar hits all-time high in kerb market.
Dollar crunch intensifying.

There are several implications for exchange rate depreciation:

1. From the consumer perspective, it will definitely have an direct impact on prices of imported goods. Prices of those will go up. If those goods are necessary products, then people sill suffer. If those are not necessary, then may be imports of those items will decline.

2. If there are domestic substitutes of imported products, then demand for those product will increase and accordingly production of those. In this way, there is an investment opportunity of those products. Prices of substitute products? well, it depends on the elasticity.

3. It will definitely improve the export competitiveness because other competing currencies including Indian Rupees also have been depreciating against US$.

Protest against Mankiw

Though the topic is not related with macroeconomic development, but with the philosophical belief on economics issues, I thought I would share it with you to know a more polite approach to protest and defend.

A few of Economics 10 of Harvard University walked out from the class of Mankiw to protest the corporatization of higher education as part of Global Occupy movement. They also expressed their exact views on an open letter to Professor Mankiw.

Here is the link of the letter.

So, Professor also answered to the questions and concerns of protesters in his column in New York Times.

Know What You're Protesting.

People in Economics, F&D

IMF’s Finance and Development (F&D), December 2011 edition provides the profiles of Ms. Ngozi Okonjo-Iweala, the two times Finance Minister of Nigeria and former Managing Director of the World Bank. 

Here is the link.

Nobel Winners in 2011

So, do you want to know more about personal and professional life of two 2011 Nobel Winners in Economics?

Here is an article on them including their interviews in New York Times. Trust me, it's a worth reading, and moreover, you can find lots of articles of their interest and works. Cheers!

Remittance inflow falls in November

The inflow of inward remittances fell by 8.3%, year-on-year, in November 2011 and by 12.1% over October 2011. The overseas Bangladeshi workers sent $915.5 million in November 2011.

Reason: October remittance inflows was higher because of Eid festival and in November, remittance flows softened.

Here is the news link.

Dollar price reached to Tk80

Yesterday, for the first time, the US dollar price against the taka reached to Tk80 in the inter-bank foreign exchange market. Though the central bank authority claimed that it regularly provides foreign currency to the market to make it cool, the private bank authorities denied that and we see the result as well. With declining trend in foreign reserves, there is no option for commercial banks, but to follow the market equilibrium.

Here is the news link.

Inflation goes up in November

General inflation, year-on-year, went up to 11.58% in November 2011 from 11.42% in November. Bangladesh Bureau of Statistics blamed recent fuel price hike for such upward movement of inflation.

While food inflation fell marginally to 12.47% in November from 12.82% in October, non-food inflation keeps rising and rose to 11.16% from 9.05%. Despite monetary tightening measures, the rising trend in non-food inflation remains a concern as it is considered as the second-round effect of food inflation, and usually, the effect of non-food inflation is permanent, say for example, wage rise.


One basic question: Is monetary policy ineffective? Or, it has a lag effect, rather an immediate effect?  


Here are the news link:
1. Fuel spikes inflation
2. Point-to-point inflation rises to 11.58pc in Nov
3. Inflation edges up

Lowest reserves in 27 months!

Foreign exchange reserves fall to $9.3 billion in November 2011, the lowest since August 2009, due to increasing import payments.

Here is the news link.