IMF team to visit Bangladesh this week to discuss USD 4.5b loan request

[mb444]

You guys really need to understand the basics.

Economics is a hard subject.

You are spouting bond rates of different countries - whilst ignoring the currency and inflation.

Let’s take your stupid comparison of yen based bond rate and taka based bond rate

Japan’s inflation is running at 3%. Whilst BD inflation is at 10%.

Neither is giving a real term return! Bond holder is losing roughly the same on both.

Now let’s look at the IMF interest rate at 2%. US inflation is at 5.5%. Again, IMF is lending way below inflation.

@UKBengali you are the only one who understands economics in this miserable forum.



This dude has no understanding of economics.

Watches a few YouTube videos by cranks - and thinks he is Paul Krugman

So what is your point regarding the bond rate? The different bond rates were quoted to simply point out they have all risen. Bond rates takes into consideration inflation.

Yes lets do take Taka and Yen bond rates. Taka bonds will give negative real rate of return using your 10% inflation rate. Yen will give even lower rate of return, its bond rate is around 0.26% with its national interest rate set at -0.1% and inflation rate running at as you say 3%.

They are not really comparable, yen bonds are sold in open market, taka bonds are not.

What is IMFs interest got to do with US inflation? IMF issues its own bonds, they have no reference to Federal reserves or US policies.

If your position is 2% is a good deal again what are you comparing it to? Global inflation, BDs own inflation? A loan from IMF to tide over a liquidity issue can not be compared to bonds that are reflective of long terms trends.

BD internal inflation has bugger all to do with a loan taken in USD. You are making the mistake in thinking BD USD loan value in real term will magically depreciate by the rate of US inflation rate. It will not. It would have done so if the loan was in Taka.

BD will have to pay the loan in USD it earns via trade or remittances in absolute terms.

It is also not known at the moment what the term of the loan is. BD is not taking a long term loan but rather a very short term one. 2% may not be an annual cost. IMF is a collective, it does not loan money with a view to making a real term loss.

 

[VikingRaider]

China loan is related to project where their company will do it and using their own sourced material. So in essence, they are pouring the money to buy their own company service and products.

So it's clear that BAL looters at least couldn't loot Chinese loan money!

@UKBengali you are the only one who understands economics in this miserable forum.

That means you also don't know the economics right? If @UKBengali is the only one who understands economics in this miserable forum!

 

[Indos]

High cost of financing makes it is more costly in issuing USD bond at current moment. USD is going up to its source in USA, the ones still want to get bond from non US bond will seek premium price.

Country that has high budget deficit will suffer from curret situation, this is why the best strategy is to do fiscal consolidation where Indonesia is the best example of it. After lifting budget deficit from its conservative 3 % of GDP from early 2000 into 6 % in 2020 due to helping the economy as also being done by almost all countries from around the world ( India budget deficit in its 2020/2021 fiscal period is 9.3 percent of its GDP), Indonesia Finance Minister starts gradual fiscal consolidation since 2021 as Covid is getting more controlled due to vaccine availability, now the target is coming back into below 3 % next year.

Malaysia budget deficit in 2022 is still high at 6 % of GDP. Issuing USD bond in financial market ( buyers will be institutional like banks and retail buyers like individuals ) at this moment can help the currency strength and give much confident on the currency if they can get relatively cheaper price with all the issuanced bond is fully absorbed (showing market confident on the economy).

 

[Indos]

So it's clear that Baal looters at least couldn't loot Chinese loan money!


That means you also don't know the economics right? If @UKBengali is the only one who understands economics in this miserable forum!

Well Chinese can give some money directly if bribing did take place.

Basically this that make Indonesia doesnt really get much of China loan. Our infrastructur is mostly built by our SOE using Government money and SOE bond issuance in financial market, some of them do IPO as well to finance infrastructure projects.

The reason Indonesia takes China loan in our Jakarta - Bandung HSR is because unlike Japan, China loan is in the form of investment of their own SOE, so our government dont need to pay it. But 51 % of investment comes from our SOE that also participate on the project. This 51 % coming from our SOE comes from Chinese loan, so our SOE has to pay it but with much long term payment. Anyway the China investment is set at BOT scheme ( Built, Operate, Transfer ), after some time ( 20 years ), China stake will be owned by our SOE automatically.

This scheme that makes Jokowi approve the project despite our Transportation Minister is against it since he thinks Indonesia doesnt need HSR ( which I am aggree )

Our SOE will learn the construction of Jak-Bandung HSR and will likely use the knowledge to build more profitable and longer route between Jakarta into Surabaya which will cover end to end in Java island. We are inshaAllah making medium speed train instead and one HSR train prototype developed by our SOE, universities, and research instituion ( BRIN ) consortium is planned to be launched in the end of 2023

 

[Indos]

We can see on how our SOE learn MRT construction from Japan in Jakarta MRT project and then use the knowledge to build Greater Jakarta LRT that is much more lenghty and use our SOE to build the train, electronic system, and the construction as well. LRT project are funded by our own SOE. This is why we can use our own developed train on the route, unlike Jakarta MRT that uses Japanese train.

 

[PadmaBridge]

So what is your point regarding the bond rate? The different bond rates were quoted to simply point out they have all risen. Bond rates takes into consideration inflation.

Yes lets do take Taka and Yen bond rates. Taka bonds will give negative real rate of return using your 10% inflation rate. Yen will give even lower rate of return, its bond rate is around 0.26% with its national interest rate set at -0.1% and inflation rate running at as you say 3%.

They are not really comparable, yen bonds are sold in open market, taka bonds are not.

What is IMFs interest got to do with US inflation? IMF issues its own bonds, they have no reference to Federal reserves or US policies.

If your position is 2% is a good deal again what are you comparing it to? Global inflation, BDs own inflation? A loan from IMF to tide over a liquidity issue can not be compared to bonds that are reflective of long terms trends.

BD internal inflation has bugger all to do with a loan taken in USD. You are making the mistake in thinking BD USD loan value in real term will magically depreciate by the rate of US inflation rate. It will not. It would have done so if the loan was in Taka.

BD will have to pay the loan in USD it earns via trade or remittances in absolute terms.

It is also not known at the moment what the term of the loan is. BD is not taking a long term loan but rather a very short term one. 2% may not be an annual cost. IMF is a collective, it does not loan money with a view to making a real term loss.

Nice to see you accept the silliness of comparing yen based bond rate with taka based bond rate.

To your question about dollar based bond rate and US inflation…

It’s an indication of the real rate of return…

2% interest will definitely not give a real return. BD will be effectively paying less than it borrowed in real terms.

No one will lend ANYONE dollars at a lower rate.

 

[mb444]

Nice to see you accept the silliness of comparing yen based bond rate with taka based bond rate.

To your question about dollar based bond rate and US inflation…

It’s an indication of the real rate of return…

2% interest will definitely not give a real return. BD will be effectively paying less than it borrowed in real terms.

No one will lend ANYONE dollars at a lower rate.

Yeah, cute.....Dude you have no idea what I said the first time nor the second time.

Just because you think you know what inflation is does not make it so. Let me lay it out for you in the simplest way I can.

In BD only currency that devalues by the rate of inflation is the taka.

USD loan to be paid in USD does not get devalued by any kind of rate of inflation.

Inflation can be a monetary policy tool but its jurisdiction is only within the remit of national border.

For a developing country such as BD, lets say it borrows $100 and needs to pay back $102 including interest.

Well BD does need to pay back $102, no ifs, no buts and not in taka.

Inflation in BD or US or mars has no relevance. Your hypothesis that in real term the value of dollar will fall is just gibberish. What is real term? Do you mean BD taka to USD rate? Well even if USD is equal to 200 taka BD still has to pay $102 back.

The are only three sources of USD for BD. Export, remittance or loan.

I wont complicate this example by talking about relative impact of BD and foreign fiscal or monetary policies but the point I reiterate is that a country like BD which can not print USD there is no real term devaluation of USD all things being equal.

So you are completely incorrect, BD absolutely will not effectively be paying less than it borrowed in real term.

Regarding the 2% rate quoted by @Black_cats is just conjecture. We do not know the timescale of the loan and for what purposes it would be used for and any other condition that may be attached. Whether it is a good deal or not can not be judged yet. Your pronouncement is premature

 

[Destranator]

Nice to see you accept the silliness of comparing yen based bond rate with taka based bond rate.

To your question about dollar based bond rate and US inflation…

It’s an indication of the real rate of return…

2% interest will definitely not give a real return. BD will be effectively paying less than it borrowed in real terms.

No one will lend ANYONE dollars at a lower rate.

Yeah, cute.....Dude you have no idea what I said the first time nor the second time.

Just because you think you know what inflation is does not make it so. Let me lay it out for you in the simplest way I can.

In BD only currency that devalues by the rate of inflation is the taka.

USD loan to be paid in USD does not get devalued by any kind of rate of inflation.

Inflation can be a monetary policy tool but its jurisdiction is only within the remit of national border.

For a developing country such as BD, lets say it borrows $100 and needs to pay back $102 including interest.

Well BD does need to pay back $102, no ifs, no buts and not in taka.

Inflation in BD or US or mars has no relevance. Your hypothesis that in real term the value of dollar will fall is just gibberish. What is real term? Do you mean BD taka to USD rate? Well even if USD is equal to 200 taka BD still has to pay $102 back.

The are only three sources of USD for BD. Export, remittance or loan.

I wont complicate this example by talking about relative impact of BD and foreign fiscal or monetary policies but the point I reiterate is that a country like BD which can not print USD there is no real term devaluation of USD all things being equal.

So you are completely incorrect, BD absolutely will not effectively be paying less than it borrowed in real term.

Regarding the 2% rate quoted by @Black_cats is just conjecture. We do not know the timescale of the loan and for what purposes it would be used for and any other condition that may be attached. Whether it is a good deal or not can not be judged yet. Your pronouncement is premature

In layman's terms: 2% interest imposed by lender means di*ck if Taka continues to devalue. For example, if Taka devalues, since taking out the loan, from 100 to 120 against USD, you pay back 20% extra for this devaluation alone on top of interest.

 

[PadmaBridge]

In layman's terms: 2% interest imposed by lender means di*ck if Taka continues to devalue. For example, if Taka devalues, since taking out the loan, from 100 to 120 against USD, you pay back 20% extra for this devaluation alone on top of interest.

BD is earning dollars via remittance and exports. And pays interests from that. The higher the dollar inflation the higher the income will be. Because the goods and services it exports will fetch more.

BD government doesn’t convert taka to dollars to pay interests

people who are hurt by depreciation of taka are:

1. People who are paid in taka - majority of workers in BD.

2. People who take money out of the country - crooks.

3. Importers - am mostly unsympathetic

Winners of taka depreciation:

1. People whose incomes are in one of the big reserve currencies e.g. families of expatriates

2. Exporters

3. Import substitute-rs

 

[UKBengali]

Yeah, cute.....Dude you have no idea what I said the first time nor the second time.

Just because you think you know what inflation is does not make it so. Let me lay it out for you in the simplest way I can.

In BD only currency that devalues by the rate of inflation is the taka.

USD loan to be paid in USD does not get devalued by any kind of rate of inflation.

Inflation can be a monetary policy tool but its jurisdiction is only within the remit of national border.

For a developing country such as BD, lets say it borrows $100 and needs to pay back $102 including interest.

Well BD does need to pay back $102, no ifs, no buts and not in taka.

Inflation in BD or US or mars has no relevance. Your hypothesis that in real term the value of dollar will fall is just gibberish. What is real term? Do you mean BD taka to USD rate? Well even if USD is equal to 200 taka BD still has to pay $102 back.

The are only three sources of USD for BD. Export, remittance or loan.

I wont complicate this example by talking about relative impact of BD and foreign fiscal or monetary policies but the point I reiterate is that a country like BD which can not print USD there is no real term devaluation of USD all things being equal.

So you are completely incorrect, BD absolutely will not effectively be paying less than it borrowed in real term.

Regarding the 2% rate quoted by @Black_cats is just conjecture. We do not know the timescale of the loan and for what purposes it would be used for and any other condition that may be attached. Whether it is a good deal or not can not be judged yet. Your pronouncement is premature

You forget that as inflation takes hold in US, then the dollar itself will buy less both in the US and in international markets.

This means that BD exporters can ask for more dollars for the same amount of goods over time.

Say inflation is 4% in US and then the same amount of goods that BD sold to US initially at 100 US dollars would fetch 104 dollars. Now if the interest rate of a dollar loan that BD obtained was 2% then that means that it would pay back less in real terms as its dollar reserves would grow faster than the principle + interest on its dollar loans.

 

[Indos]

You forget that as inflation takes hold in US, then the dollar itself will buy less both in the US and in international markets.

This means that BD exporters can ask for more dollars for the same amount of goods over time.

Say inflation is 4% in US and then the same amount of goods that BD sold to US initially at 100 US dollars would fetch 104 dollars. Now if the interest rate of a dollar loan that BD obtained was 2% then that means that it would pay back less in real terms as its dollar reserves would grow faster than the principle + interest on its dollar loans.

BD export I believe will be decreasing or at best stay stable since BD export are mostly for Western market. US and Western countries are experiencing tough economic condition with some of them have been in recession like USA, England, and Germany.

Nope, BD cannot dictate the price, there is competition going on in US and Western market. There is garment produced by China, Vietnam, Turkey, and Indonesia targeting US market. Recession and inflation going on in US and Western countries will decrease their appetite to buy garment products as much as in usual economic condition, thus with declining demand from US than I doubt the garment producer even try to hike the price of their garment to US market as you suggested

 

[UKBengali]

BD export I believe will be decreasing since BD export are mostly for Western market. US and Western countries are experiencing tough economic condition with some of them have been in recession like USA, England, and Germany.

Nope, BD cannot dictate the price, there is competition going on in US and Western market. There is garment produced by China, Vietnam, Turkey, and Indonesia targeting US market. Recession and inflation going on in US and Western countries will decrease their appetite to buy garment products as much as usual, thus with declining demand from US than I doubt the garment producer even try to hike the price of their garment to US market as you suggested

Actually BD exports to the US are exploding.

It was running at around 1 billion US dollars a month over the last 6 months and we shall have to see how much decline there is if any now. Remember BD generally exports "essentials" and they are generally immune from tough economic conditions.

You are correct that there are price pressures for sure but in general domestic inflation extends to what you can buy both overseas as well as domestically. We need to average it over the whole economic cycle and not just a specific period like a recession.

 

[Destranator]

BD government doesn’t convert taka to dollars to pay interests

This is not correct. The government does not "own" the forex reserve held by Bangladesh Bank - Bangladesh Bank is the custodian of forex on behalf of the people. When the finance ministry makes foreign loan repayments, they buy dollars from Bangladesh Bank in exchange for Taka.

Depreciation of taka increases fiscal pressure on the government to set aside more money in Taka terms for buying USD to service foreign loans.

Govt’s foreign loans: Weak taka makes repayment costlier

The government’s foreign debt repayment has become costlier owing to the sharp depreciation of the taka against the US dollar in recent months.

www.thedailystar.net

 

[bluesky]

When the finance ministry makes foreign loan repayments, they buy dollars from Bangladesh Bank in exchange for Taka.

Yes, it is exactly so. And to pay back the loan money, the GoB has to allocate a certain amount of money in its annual budget. The Taka allocated in the budget buys dollars from the BB and this dollar is used to repay the lenders.

 

[BananaRepublicUK]

This is not correct. The government does not "own" the forex reserve held by Bangladesh Bank - Bangladesh Bank is the custodian of forex on behalf of the people. When the finance ministry makes foreign loan repayments, they buy dollars from Bangladesh Bank in exchange for Taka.

Depreciation of taka increases fiscal pressure on the government to set aside more money in Taka terms for buying USD to service foreign loans.

Govt’s foreign loans: Weak taka makes repayment costlier

The government’s foreign debt repayment has become costlier owing to the sharp depreciation of the taka against the US dollar in recent months.

www.thedailystar.net

Once the forex is deposited into BB.

A fair chunk of it ends up in the government’s coffers. More than enough to service debt.

Yes, it is exactly so. And to pay back the loan money, the GoB has to allocate a certain amount of money in its annual budget. The Taka allocated in the budget buys dollars from the BB and this dollar is used to repay the lenders.

Stop talking rubbish.

You have been predicting doom for years.

We are all fed up of your nonsense now.

Actually BD exports to the US are exploding.

It was running at around 1 billion US dollars a month over the last 6 months and we shall have to see how much decline there is if any now. Remember BD generally exports "essentials" and they are generally immune from tough economic conditions.

You are correct that there are price pressures for sure but in general domestic inflation extends to what you can buy both overseas as well as domestically. We need to average it over the whole economic cycle and not just a specific period like a recession.

Thanks for the explanation.

Too many YouTube scholars here