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already bumping around ATL
without further IMKF support, I'd expect greater FX pressure
we won't easily see/access fdi flows but Bangladesh must be vulnerable to a run of hot money
I’m afraid that is what I thought was the risk here. As soon as the country eases usd payments, there will be an unsuppressed rush to get money out of the country regardless of what further usd funding is secured.
The issue also is that businesses are struggling to pay for imports, meaning businesses cannot get raw materials and inflation increases as a result.
Please share other views.
From a fundamentals point of view, PER, divi etc this looks a bargain. This is, it looked a bargain at 60p, 50p, 40p and now, unbelievably, it’s dropped into the 30’s. The divi money money still hasn’t shown itself either. What is going on here?
As I've commented before, I think the material risks are those faced by the country rather than the company itself. Bangladesh remains under pressure from availability of USD in country, high energy costs, weak BDT vs USD, imported inflation etc etc.
This is a good article to summarise the latest woes impacting the country.
https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Bangladesh-blackouts-magnify-heat-wave-linked-to-climate-change?utm_source=cbnewsletter&utm_medium=email&utm_term=2023-06-12&utm_campaign=Daily+Briefing+12+06+2023
And this:
DHAKA -- Bangladesh faces growing pressure to meet targets in its loan agreement with the International Monetary Fund, with key review dates looming.
Already the South Asian country is believed to have fallen short of the minimum foreign reserve criteria for March, set when the IMF approved a $4.7 billion loan in January. An IMF staff mission that visited from late April to early May checked on Bangladesh's progress but could not be assured that the June target would be met.
Full article here:
https://asia.nikkei.com/Economy/Bangladesh-on-hot-seat-to-meet-IMF-loan-targets
part 1
DHAKA -- Bangladesh faces growing pressure to meet targets in its loan agreement with the International Monetary Fund, with key review dates looming.
Already the South Asian country is believed to have fallen short of the minimum foreign reserve criteria for March, set when the IMF approved a $4.7 billion loan in January. An IMF staff mission that visited from late April to early May checked on Bangladesh's progress but could not be assured that the June target would be met.
"Persistent inflationary pressures, elevated volatility of global financial conditions, and [a] slowdown in major advanced trading partners continue to weigh on growth, foreign currency reserves, and the taka," Rahul Anand, IMF mission chief for Bangladesh, said in a statement.
Another IMF visit is scheduled for October to further assess Bangladesh's compliance with the loan conditions before disbursing a second tranche, to follow the earlier disbursement of $476 million.
Some officials and experts worry Bangladesh could fail to meet a number of objectives by the fall. Others downplay the concerns. Either way, there is little question that dollars remain in short supply, and that Dhaka will be tested over the coming months.
After signs of improvement, starting around the end of last year, export earnings have fallen for two consecutive months -- 2.49% on the year in March and 16.52% in April -- according to the Export Promotion Bureau.
Now, amid scorching weather, much of the country remains without power for long stretches, as electricity generation is squeezed by a lack of dollars needed to import fuel oil, gas and coal.
The central bank strictly controls letters of credit for imports. Such letters for capital machinery were down by 54% in the July to February period, and down 30% for raw materials. Some economists fear this belt-tightening may strangle industrial development and job creation, and limit production at existing factories.
The curb on foreign exchange outflows has also left foreign companies struggling to repatriate earnings. An agent of Meta, the parent company of Facebook, late last month announced that advertising by Bangladeshi companies would be limited due to the difficulty of transferring payments. International airlines and shipping agents have repeatedly lamented difficulties in channeling payments to parent organizations, as banks are unable to provide the required dollars.
None of this bodes well for meeting the IMF targets.
The deal with the fund set a floor for net foreign currency reserves at $22.94 billion in March, $24.46 billion in June, $25.31 billion in September, and $26.41 billion in December. Officially, Bangladesh Bank still reports around $30 billion in gross reserves, but the IMF has insisted on a far stricter calculation formula that shows how much the country has available for immediate use.
part 2
bangladesh has not disclosed this net reserves figure, but local media reports suggested the number fell short in march. more than $8 billion needs to be subtracted from the gross tally -- which continues to trend downward -- to arrive at the imf's accepted count, officials have said.
ahsan h. mansur, executive director at the policy research institute, bangladesh, and a former imf official, said forex reserves are a major reason for apprehension about the second tranche, though not the only one. "since february last year, reserves fell every month and never increased, while there is no sign of making a turnaround," he said, arguing there is no chance of hitting the imf targets.
at the same time, mansur said the current "growth compressing" level of imports is unsustainable. "we have to raise imports as well as enhance reserves," he said.
citing a lack of tangible policy reforms, he warned of the risk of missing multiple imf objectives. a failure to meet one or two conditions might result in the fund issuing a warning but still releasing the second tranche. failure on four or five points might cause more complications, he suggested.
he pointed to ****stan's stalled review. "while ****stan is saying we have done everything, the imf is saying, 'no, conditions are not met,'" he said.
zahid hussain, a former lead economist at the world bank's dhaka office, emphasized that the central bank's next monetary policy statement in july should make clear what is being done to meet the imf's conditions.
"the introduction of [the] interest rate corridor [to guarantee rates in a certain range], calculation of forex reserves as per the imf's [formula], and unification of [the] exchange rate of taka, has to be mentioned" in the new statement, he said.
the government says it is actively working to open up new trade avenues, and many insist the imf support in itself was merely precautionary.
binayak sen, director general of the bangladesh institute of development studies, believes the government is steering the economy successfully. "the worst situation that was predicted due to the ukraine war crisis has not happened."
"i am not [anticipating] anything bad," he said. while he conceded that inflationary pressure would persist, he added, "had our remittances as a whole collapsed, or exports lowered 50%, or crops failed 10% to 20% from flooding, i could have become concerned."