University of Chittagong

ASSIGNMENT ON

Bangladesh Studies and Economic Development

Course Code - BCC 210

Prepared For

Dr. Suraiya Nazneen

Professor
Department of Finance
University of Chittagong

Prepared By

TEAM GAZELLES
 Team Members

1. Mohammad Joynal Abedin (21303001)

2. Saklima Akter (21303047)

3. Saika Ferdous (21303053)

4. Ahanaf Siddique Ristha (21303058)

5. Imtiaj Mahmud Sabid (21303075)

6. Md. Mizan (21303076)

7. Minhaj Shafi Shehab (21303084)

8. Md. Saddam Hossain Sagor (21303115)

9. Nur Alam Juwel (20303074)

10. Jannatul Kawsar Mukta (21303121)

Question-1: Discuss the characteristics of Bangladesh Economy

Answer-

Bangladesh's economy stands out due to its growing clothing industry, agriculture,
foreign worker remittances, and focus on export-oriented growth .Due to its position, it
faces difficulties like inadequate infrastructure, unstable political conditions, and
increased susceptibility to climate change. The government's initiatives to promote
economic growth and attract foreign investment have contributed to the general
economic success of the country.

Internal Factors

★GDP:

Gross domestic product (GDP) is a monetary measure of the market value of all the
final goods and services produced in a specific time period by a country. GDP measures
economic progress and compares national economies on the international market.

➤The amount of nominal GDP in Bangladesh will be $455.2 billion in 2024.

➤GDP at PPP was $1.476 trillion in 2023 and it is estimated to be 1.612 trillion in 2024

➤GDP per capita was $2621 dollar in 2023, and estimated amount is $2846.76 in 2024.

➤Growth rates of Real GDP from 2022 to 2024 are 7.1%, 6.03%, and 6% respectively,
which shows the actual growth of Bangladesh economy is diminishing day by day.

★Inflation

When the general price level rises,each unit of currency buys fewer goods and services,
consequently, Inflation corresponds to a reduction in the purchasing power of money.
In Bangladesh, Inflation rate (CPI) of 2024 is 11.73%.
★Poverty Line

Poverty line is the minimum level of income that is deemed adequate in a particular
country.
Population below Poverty line in Bangladesh is 23.5% and people living in extreme
poverty is 12.8% in 2024.

★Labor Force by Occupation

According to estimates for 2017, people working in different sectors are:

In Agriculture sector:40.6%,
In Industry :20.4%,
and in the service sector :39.6%.

➤In 2024,Unemployment rate is 12%.

★Main Industries of Bangladesh

1) Textiles, 2) Pharmaceutical Products

3) Electronics 4) Shipbuilding
5)Automobile 6)Bicycle 7)leather
8) Jute 9) Glass 10) Paper 11) Plastic 12) Food & Beverage 13) Cement 14) Tea 15)
Rice 16)Natural Gas and crude petroleum 17) iron, and 18) Steel.

External Factor

Bangladesh Exports Goods

The top exports of Bangladesh are knit T-shirts ($7.06B), Non-Knit Men's Suits
($6.68B), Knit Sweaters ($6.32B), Non-Knit Women's Suits ($5.41B), and Knit Women's
Suits ($3.54B), exporting mostly to United States ($8.72B), Germany ($8.36B), Spain
($3.6B), United Kingdom ($3.29B), and Poland ($2.94B).

In 2021, Bangladesh was the world's biggest exporter of Non-Knit Men's Shirts
($1.72B), Jute Yarn ($550M), Jute and Other Textile Fibers ($161M), and Textile Scraps
($123M)
Bangladesh Imports Goods

The top imports of Bangladesh are Refined Petroleum ($5.48B), Raw Cotton ($2.8B),
Non-Retail Pure Cotton Yarn ($2.26B), Wheat ($1.92B), and Light Rubberized Knitted
Fabric ($1.83B), importing mostly from China ($24.1B), India ($14.1B), Singapore
($3.53B), Indonesia ($2.92B), and United States ($2.3B).

In 2021, Bangladesh was the world's biggest importer of Heavy Pure Woven Cotton
($1.42B), Heavy Mixed Woven Cotton ($1.06B), Light Pure Woven Cotton ($787M), Pile
Fabric ($535M), and Non-Retail Synthetic Staple Fibers Yarn ($523M)

Here are the top trading partners for Bangladesh in 2022–23:

United States: Exports: $8.72 billion; Imports: $3.13 billion

Germany: Exports:$4.67 billion;, Imports: $1.47 billion
United Kingdom: Exports:$3.50 billion;, Imports: $1.10 billion
India: Exports: $2.68 billion; Imports: $6.18 billion
China: Exports: $2.57 billion; Imports: $10.34 billion
Spain: Exports: $1.84 billion; Imports: $582 million
France: Exports: $1.75 billion; Imports: $555 million
Singapore: Exports: $1.24 billion; Imports: $441 million

Bangladesh External Debt

According to Bangladesh Bank data, the total external debts were $98,935.47 million at
the end of June 2023 and of that amount, the public sector took $76.67 billion ($64.57
billion was borrowed directly by the government and the rest by various government
institutions) in foreign credit and short-term foreign loans.

Public Finance

Budget Balance

The Bangladesh government unveiled a record 7.62 trillion taka ($71 billion) national
budget for the 2023-24 fiscal year starting in July. The government projected economic
growth of 7.5 percent in the annual budget. With a focus on tackling inflation, job
creation, the fourth industrial revolution and "Smart Bangladesh", Finance Minister AHM
Mustafa Kamal presented the budget to Parliament.
As the total size of the expenditure budget has been estimated at 7.62 trillion taka, the
outlay is 15.2 percent of the South Asian country's gross domestic product (GDP). For
this purpose, the minister said the budget for the next fiscal year has set a higher target
of raising public investment to 6.3 percent of GDP.
According to the budget proposal, Bangladesh is targeting an average inflation rate of
6.5 percent in the next fiscal year. Kamal said there has been a recent spike in prices,
mainly due to external factors. According to the proposal, the overall budget deficit will
be 2.58 trillion taka, which is 5.2 percent of GDP.
On the expenditure side, he said, the size of the Annual Development Program (ADP)
for the next fiscal year will be 2.78 trillion taka, with transport, power, infrastructure, rural
development, and education sectors getting the biggest chunk of money.

This is the largest-ever budget for Bangladesh, a long way from the first budget of 7.86
billion taka for the 1972–73 fiscal year.

The theme of the budget has been shaped by the idea of "Smart Bangladesh"
envisioning a 100-percent digital economy, science and technology-based literacy, and
a paperless and cashless society.

Govt. Debt

Bangladesh's government debt from 1991 to 2022 was between $9.8 billion and $179.9
billion, with a 2022 high of $180 billion. In 2022, Bangladesh's government debt to GDP
was 28.2%, with an average of 36.95% from 1995 to 2022. In 2002, the debt to GDP
reached an all-time high of 50%, and in 2018, it reached a record low of 25.7%.

The main sources of domestic debt in Bangladesh are the Bangladesh Bank, Deposit
Money Banks, and non-banks. The Bangladesh Bank and Deposit Money Banks buy
government securities and Treasury bills to finance budget deficits.

Revenue

Government revenues refer to all receipts the government gets, including taxes,
customs duties, revenue from state-owned enterprises, capital revenues, and foreign
aid. Government revenues are part of the government budget balance calculation.
The total revenue budget is estimated to be BDT 5,00,000 crore, which is 15.4 percent
higher than the FY 2022–23 budget. The main source of revenue is the NBR (86
percent). Value added tax (VAT) accounts for the majority of the NBR’s total estimated
revenue (38.1 percent). Tax-GDP ratio in FY 2023-24 is estimated to be 10 percent,
which was 9.8 percent in the revised FY 2022–23 budget. In addition to this income tax,
profit and capital receipts will be responsible for the rest 35.6 percent of the revenue
collection.

Expenses

Expenditure refers to the sum of government expenses, including spending on goods

and services, investment and transfer payments like social security and unemployment
benefits. Fiscal expenditure is part of the government budget balance calculation.
Conventionally, the budget’s main expenditure has been operating expenses and
development costs. The operating cost of the FY 2023–24 budget is 14 percent higher
compared to FY 2022–23’s revised budget (Figure 3). The estimated size of the
development budget is BDT 2,77,582 crore, which is 36.4 percent of the total budget.
The development budget’s main component is “Annual Development Programme
(ADP)," and its related expenses are 94.7 percent The revised development budget for
FY2022-23 was 5.4 percent of GDP, which has increased to 5.5 percent for FY 2023-24.
The budget's main sectoral allocations are education and technology, agriculture, local
government and rural development, electricity and fuel, health, defense, public
administration, transportation and communications, and social safety and welfare.

Credit Rating

Credit rating is an independent assessment of a company's or government entity's

creditworthiness in general terms or with respect to a particular debt or financial
obligation. Credit ratings are issued by organizations such as S&P Global, Moody's, or
Fitch Ratings. They differ from credit scores, which are assigned to individuals.
Standard & Poor's credit rating for Bangladesh stands at BB with a negative outlook.
Moody's credit rating for Bangladesh was last set at B1 with a stable outlook. Fitch's
credit rating for Bangladesh was last reported at BB with a negative outlook. In general,
a credit rating is used by sovereign wealth funds, pension funds, and other investors to
gauge the credit worthiness of Bangladesh, thus having a big impact on the country's
borrowing costs. This page includes the government debt credit rating for Bangladesh
as reported by major credit rating agencies.

Agency Rating Outlook Date

S&P BB negative 2023

Moody's B1 stable 2023

Foreign Reserve

Foreign Exchange Reserves are the foreign assets held or controlled by the country
central bank. The reserves are made of gold or a specific currency. They can also be
special drawing rights and marketable securities denominated in foreign currencies like
treasury bills, government bonds, corporate bonds and equities and foreign currency
loans.

Foreign Exchange Reserves in Bangladesh decreased to 25111.90 USD Million in

January from 27130 USD million in December of 2023. Foreign exchange Reserves in
Bangladesh averaged 24900.42 USD million from 2008 until 2024, reaching an all time
high of 48060.00 USD Million in August 2021 and a record low of 7470.90 USD Million
in June 2008. source: Bangladesh Bank.

Finally, Bangladesh's economy demonstrates resilience, propelled by a thriving services

sector, remittances, and a strong garment industry.Challenges include infrastructure
development and managing external debt, but ongoing reforms aim to enhance
economic sustainability and inclusive growth.
Question-2: What are the constraints on the way of economic progress in
Bangladesh?

Answer

Bangladesh is seeing significant economic growth, but there are a number of obstacles
in its way. Enduring economic development is impeded by obstacles like insufficient
infrastructure, unstable political environments, susceptibility to climate change, and
enduring problems in the banking industry. This introduction lays the groundwork for a
more thorough examination of the limitations influencing Bangladesh's economic
situation.

Some of the constraints are:

Overpopulation

With a population density among the highest globally, Bangladesh faces immense
pressure on resources, infrastructure, and services. Overpopulation strains the
availability of land, water, and housing, leading to environmental degradation and urban
congestion. Scarce resources are diverted towards meeting basic needs rather than
investment in productive sectors. Moreover, overpopulation exacerbates poverty and
inequality, limiting access to education and healthcare, and reducing productivity levels.

Unemployment

High levels of unemployment, particularly among youth and women, indicate

underutilization of human capital and contribute to economic inefficiency. Limited job
opportunities result from factors like inadequate investment, lack of skills matching
market demands, and barriers to entrepreneurship. Unemployment leads to income
inequality, social unrest, and increased dependency on informal and low-paying jobs,
hindering long-term economic growth and stability.
Labor Intensity

While Bangladesh's garment industry has thrived on cheap labor, excessive reliance on
labor-intensive sectors constrains overall productivity and innovation. Labor-intensive
industries face challenges in scaling up due to limited access to capital, technology, and
skilled labor. Moreover, labor-intensive practices often perpetuate poor working
conditions, low wages, and exploitation, hindering social development and attracting
negative attention from international stakeholders.

Underdeveloped agriculture

In Bangladesh it can constrain economic progress in several ways-

*Low Productivity

Outdated farming techniques and lack of modern technology lead to low productivity,
limiting the output of agricultural goods.

*Dependency on Weather

Bangladesh is vulnerable to natural disasters like floods and cyclones, which can
devastate crops, leading to food insecurity and economic losses.

*Land Fragmentation

Small landholdings due to land fragmentation make mechanization difficult and hinder
economies of scale in agriculture.

*Lack of Infrastructure

Inadequate transportation, storage, and market infrastructure limit farmers' ability to

access markets and get fair prices for their produce.

*Limited Access to Credit

Small-scale farmers often face challenges in accessing credit, hindering their ability to
invest in modern inputs and technologies.
Underdeveloped industry

It poses several constraints on economic progress in Bangladesh:

*Limited Diversification

Bangladesh’s industrial sector is heavily reliant on the ready-made garment (RMG)

industry, which accounts for a significant portion of exports. Over-reliance on a single
industry makes the economy vulnerable to external shocks and limits diversification
opportunities.

*Low Value Addition

The industrial sector in Bangladesh is characterized by low value addition and

dependence on low-skilled labor-intensive manufacturing processes. This limits the
country’s ability to move up the value chain and generate higher incomes.

*Infrastructure Deficit

Inadequate infrastructure, including power shortages, poor transportation networks, and

limited access to finance, hampers industrial growth and competitiveness.

*Policy and Regulatory Challenges

Complex regulatory procedures, bureaucratic hurdles, and inconsistent policies create

barriers to entry and hinder investment in the industrial sector.

*Skills Gap

The lack of skilled labor and technical expertise limits the adoption of advanced
technologies and innovation in industries, hampering productivity and competitiveness.

Money inflation

It can act as a constraint on economic progress in Bangladesh in several ways-

*Purchasing Power Erosion

When prices rise consistently, the purchasing power of money decreases. This can
reduce the real income of individuals and households, especially those with fixed
incomes, leading to a decline in their standard of living.

*Uncertainty and Planning Challenges

High inflation rates create uncertainty in the economy, making it difficult for businesses
to plan investments, set prices, and make long-term decisions. This uncertainty can
hinder economic growth and productivity.

*Distorted Resource Allocation

Inflation can distort resource allocation by encouraging speculative activities and

reallocating resources away from productive sectors of the economy. This can lead to
misallocation of resources and inefficiencies in the allocation process.

*Interest Rate Volatility

Central banks may respond to inflationary pressures by raising interest rates to curb
inflation. This can increase the cost of borrowing for businesses and consumers,
dampening investment and consumption spending, which are essential drivers of
economic progress.

*Income Inequality

Inflation can exacerbate income inequality, as those with assets that appreciate in
value, such as real estate or stocks, may benefit, while those relying on fixed incomes
or wages may see their purchasing power eroded.

Political Instability

*Disrupts market activity and labor relations

Frequent political unrest and uncertainty can deter businesses from investing, leading to
reduced production and job creation.
*Discourages foreign investment

Investors are hesitant to put their money in a country with a volatile political climate due
to the risk of policy changes, disruptions, and potential losses.

*Hinders long-term planning

Businesses and individuals struggle to plan for the future due to the unpredictable
nature of the political landscape, hindering economic growth.

Price Instability

*Discourages consumption and investment

Unpredictable fluctuations in prices, especially for essential goods, can erode consumer
confidence and make it difficult for businesses to plan their budgets and make
investment decisions.

*Increases poverty and income inequality

Price instability can disproportionately affect low-income households that struggle to

cope with rising costs of essential goods.

*Discourages foreign investment

Similar to political instability, unpredictable price fluctuations create a risky environment

for foreign investors, deterring them from entering the market.

Underdeveloped Infrastructure

*Hinders transportation and logistics

Poor infrastructure, such as inadequate roads, bridges, and ports, creates bottlenecks
in transporting goods, increasing costs and hindering efficient trade and distribution.

*Limits access to essential services

Lack of proper infrastructure, like reliable electricity and sanitation, can lead to health
problems, hinder education, and reduce productivity, impacting the overall workforce
and economic activity.

*Discourages investment in certain regions

Businesses might be hesitant to invest in areas with poor infrastructure due to the
added cost and challenges of operating there.

Lack of skilled manpower

The lack of skilled manpower in Bangladesh is evident from statistics such as a 36%
underutilization rate in the workforce, a 12% youth unemployment rate, and over 60% of
employers in the manufacturing sector citing skill shortages as a growth constraint. This
gap is estimated to result in a 1.7% annual reduction in productivity growth, impacting
economic development. Despite a low allocation of around 2.4% of GDP to education
and training, addressing this constraint requires increased investment, collaboration
between industry and academia, and targeted reskilling initiatives to unlock
Bangladesh's economic potential.
Farooq Ahmed, Secretary General and CEO of the Bangladesh Employers Federation,
highlights a crucial constraint hindering economic development: the lack of skilled
manpower. Despite the private sector's significant contribution to skill development in
Bangladesh, the initiative remains primarily driven by the public sector. The Skill
Development Policy 2023 identifies various implementing agencies, yet fails to
sufficiently engage the private sector, creating a significant gap in the system. Ahmed
proposes a transformative approach, advocating for the private sector to take the lead in
providing skill development training, while the government assumes a regulatory role.
He emphasizes the need for a dual approach to skill development, focusing on both
general skills and employment-targeted training. Additionally, Ahmed underscores the
urgent need to address the deficiency in training facilities for supervisors and mid-level
managers, crucial roles often overlooked in the quest for skilled manpower.
LACK OF CAPITAL

The lack of capital presents a substantial constraint on economic development in

Bangladesh. Around 50% of SMEs cite access to finance as a growth impediment, with
an estimated credit gap of $15 billion. High non-performing loans (NPLs), at
approximately 9% of total loans hinder banks' ability to extend credit. Despite increasing
FDI inflows averaging $3 billion annually, more significant investment is needed to
address infrastructure deficiencies, requiring approximately $8 billion annually.
Overcoming this challenge demands efforts to enhance financial inclusion, strengthen
the banking sector, and attract more substantial investment to stimulate economic
growth and development.

CORRUPTION

Corruption significantly impedes economic development in Bangladesh, as reflected in

its consistently low Transparency International Corruption Perceptions Index (CPI)
score, typically around 26–29 out of 100. This perception is corroborated by various
indices, including the World Bank's Ease of Doing Business Index, where Bangladesh
ranks poorly due to corruption-related challenges. Such corruption undermines trust in
institutions, increases business costs, and may reduce GDP growth by 1-2% annually,
according to the World Economic Forum. Despite anti-corruption efforts, including
initiatives like the Anti-Corruption Commission, challenges persist due to factors such as
political interference and weak enforcement. Addressing corruption demands sustained
efforts to strengthen institutions, enhance transparency, and foster integrity across
sectors to promote economic growth and development.

To sum up, Bangladesh faces constraints in economic development such as

infrastructure deficiencies, limited access to finance, and governance issues.
Addressing these challenges requires sustained efforts in policy reform, investment
promotion, and fostering an enabling environment for businesses, ultimately paving the
way for more inclusive and sustainable economic growth.
The End