Department of Economics -EUB

🏛️ Economist of the Day | Day 21

Friedrich Hayek, born in Vienna in 1899, was the twentieth century's most eloquent and rigorous defender of individual liberty, free markets, and spontaneous social order. A student and colleague of Ludwig von Mises, Hayek won the Nobel Memorial Prize in Economics in 1974. His most celebrated popular work, The Road to Serfdom (1944), warned that central economic planning inevitably leads to political tyranny. His economic contributions include business cycle theory, the dispersed knowledge problem, and the concept of spontaneous order. In his landmark essay The Use of Knowledge in Society (1945), Hayek argued that the price system is an irreplaceable mechanism for transmitting dispersed information that no central authority could replicate. His ideas profoundly shaped the economic policies of Thatcher and Reagan.

📌 Department of Economics, EUB

📅 June 20, 2026 | Economic Update

A budget that gives with one hand and takes with the other: Bangladesh's exporters are discovering that the FY2026-27 Finance Bill contains a tax burden far heavier than the headline incentive suggests.

On June 12, Finance and Planning Minister Amir Khosru Mahmud Chowdhury presented the national budget for fiscal year 2026-27 in parliament. One headline measure drew immediate attention from the export community: a reduction in withholding tax on export incentives from 10 percent to 5 percent. On paper, it looked like relief. In practice, it masks a sharp increase in the effective tax burden.

The reason lies in a structural change to Bangladesh's tax framework. The Finance Bill 2026 proposes to amend Section 163 of the Income Tax Act, removing the minimum tax provision. Under the current system, the withholding tax deducted on export incentives is treated as the final tax. An exporter receiving a Tk 10 million incentive payment currently pays Tk 1 million in tax and that is the end of the matter. Under the new framework, the 5 percent withholding becomes only an advance tax payment. The remaining liability is then settled at the standard corporate tax rate of 27.5 percent. The same exporter would now owe Tk 2.75 million in total an effective increase of 175 percent in the tax burden on that incentive income.

This is a critical issue for Bangladesh because export income and export incentive income are treated differently under the Income Tax Act. RMG exporters currently enjoy a preferential corporate tax rate of 10 to 12 percent on export income. But government cash incentives do not qualify as export income under the law. They fall under general corporate income, which is subject to the standard 27.5 percent rate. Removing the minimum tax provision therefore strips away the protection that had kept the effective tax rate manageable for years.

The timing compounds the difficulty. Many export-oriented companies close their accounts in December or June. Those with June year-ends have fewer than 15 days remaining in the fiscal year. The change arrives mid-stream, applying retroactively to income already earned in FY2025-26. Industry experts, including SMAC Advisory Services Director Snehasish Barua, have warned that this will create significant additional pressure on companies that have already completed most of their financial planning for the year.

The broader context makes the stakes clearer. Bangladesh's RMG sector accounts for more than 80 percent of total export earnings. The sector has faced export volume declines in recent months. Global demand from key markets in Europe and North America remains subdued. Simultaneously, Bangladesh is approaching its graduation from the Least Developed Country (LDC) category in November 2026, which will reduce preferential trade access in several markets. Any additional cost burden on exporters at this moment risks weakening the competitiveness of an industry that employs over 4 million workers, the vast majority of them women.

The National Board of Revenue has set an ambitious revenue collection target of Tk 604,000 crore for FY27, an increase of Tk 1 trillion from the current year. The removal of the minimum tax provision is clearly one mechanism to close that gap. The challenge for policymakers is to balance fiscal consolidation with the health of the export sector that underpins Bangladesh's foreign exchange earnings, employment base, and development trajectory. Industry analysts have called for an impact assessment and stakeholder consultation before the Finance Bill is finalised.

📌 Sources: (bdnews24.com, The Daily Star, Textile Today)

🏛️ Economist of the Day | Day 20

John Maynard Keynes, born in Cambridge, England in 1883, is arguably the most influential economist of the twentieth century. His General Theory of Employment, Interest and Money (1936), written in response to the Great Depression, revolutionized macroeconomics by arguing that aggregate demand, not supply, is the primary driver of economic output and employment. Keynes challenged the classical view that markets automatically return to full employment, showing that economies can settle into prolonged recessions. He advocated for active government fiscal policy, public investment, and counter-cyclical spending to stabilize the economy. Keynes also played a central role in designing the post-World War II international monetary system at Bretton Woods in 1944. Modern macroeconomics remains deeply Keynesian in its foundations.

📌 Department of Economics, EUB

📅 June 19, 2026 | Economic Update (This Day in History)

Seventy-nine years ago today, two foreign ministers sat down in Europe and sent out an invitation that would reshape the world economy. On June 19, 1947, British Foreign Secretary Ernest Bevin and French Foreign Minister Georges Bidault issued a joint communiqué inviting twenty-two nations to Paris. Their goal was to design a coordinated response to a crisis unlike any before it. What followed became the Marshall Plan.

The backdrop was catastrophic. World War II had left Europe in ruins. Cities were bombed out. Agricultural output had collapsed. Industrial production in many countries had fallen well below prewar levels. Millions faced hunger. Governments were running out of foreign exchange. Trade had nearly stopped. Without urgent intervention, economists and policymakers feared a full-scale economic and political breakdown across the continent.

The idea had been proposed just two weeks earlier, on June 5, 1947, when U.S. Secretary of State George C. Marshall delivered a brief but historic address at Harvard University. He called on European nations to come together, design their own recovery programme, and count on American assistance to fund it. The June 19 communiqué was Europe's answer. Sixteen countries ultimately joined the Paris Conference in July. The Soviet Union declined and pressured its Eastern European satellites to stay away. What emerged was the European Recovery Program, formally signed into law by President Harry Truman on April 3, 1948.

The scale and impact of the Marshall Plan were extraordinary. Over four years, the United States provided approximately $13 billion in aid, equivalent to well over $100 billion today. Industrial production in recipient countries jumped from 87 percent of prewar levels in 1947 to 135 percent by 1951. Agricultural output recovered. Trade barriers fell. The initiative also laid the groundwork for the Organisation for European Economic Cooperation, a body that later evolved into the OECD, one of the world's most influential economic institutions.

For Bangladesh, the lessons of the Marshall Plan carry real relevance. Bangladesh today faces its own moment of economic pressure: low growth, high inflation, rising debt, and a post-LDC transition that threatens to reduce preferential trade access. The Marshall Plan showed that coordinated multilateral effort, paired with domestic policy reform, can turn economic crisis into sustained recovery. It also showed that trade liberalisation and institutional building matter more than aid alone. Bangladesh currently benefits from EU duty-free access for garment exports under the Everything But Arms arrangement, a mechanism shaped by the same logic of preferential market access that the Marshall Plan introduced for postwar Europe.

The June 19 communiqué was not the Marshall Plan itself. It was merely an invitation. But that invitation set in motion one of the most successful acts of economic statecraft in modern history. It reminds us that in economics, timing, political will, and cooperation can turn devastation into a springboard for growth.

📌 Sources: (Library of Congress, Britannica, EveryCRSReport)

🏛️ Economist of the Day | Day 19

Joseph Schumpeter, born in Triesch, Moravia in 1883, was one of the most creative and wide-ranging economists of the twentieth century. His most celebrated contribution is the theory of creative destruction, the idea that capitalism advances through the constant disruption of old industries and technologies by new innovations. This concept, developed in Capitalism, Socialism and Democracy (1942), remains the most powerful framework for understanding technological change and entrepreneurship. Schumpeter placed the entrepreneur at the heart of economic development, arguing in The Theory of Economic Development (1911) that entrepreneurial innovation, not mere capital accumulation, drives long-run growth. He also made major contributions to business cycle theory and the history of economic analysis. His work profoundly influences innovation economics and policy today.

📌 Department of Economics, EUB

📢 CALL FOR SUBMISSIONS: Slide & Demo Presentation on the National Budget

Attention Students of the Department of Economics, European University of Bangladesh (EUB),

The Department of Economics invites students from all batches and semesters to participate in an academic and policy-oriented initiative: Slide & Demo Presentation on the National Budget.

This is a premier opportunity to engage with contemporary macroeconomic policy, sharpen your analytical skills, and showcase your presentation capabilities on a platform of critical national importance.

🌟 EXCLUSIVE OPPORTUNITY: Students who successfully deliver their demo presentations will earn the prestigious opportunity to present their analysis at the official, upcoming National Budget Seminar of the Department of Economics!

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📋 Participation Guidelines

• Eligibility: Open to all students currently enrolled in the Department of Economics, EUB (all batches/semesters).
• Scope: Select a specific topic or sector of your choice related to the recent National Budget and prepare your presentation slides accordingly.
• Presentation Limit: Maximum of 20 minutes per presenter (no restriction on the total number of slides).
• Nature of Event: Participation is entirely voluntary. (Note: Recognition via certificates or prizes is currently under consideration).

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📨 How to Submit

To register your topic and submit your presentation details, please fill out the official online submission form via the link below:

🔗 https://forms.gle/jA56N4QWGpqKAAD87

🗓️ Critical Dates & Contact

• Submission Deadline: Monday, June 22, 2026

For any further administrative or academic queries regarding the submission process, please contact:

👤 Afif Ibn Munir
Lecturer, Department of Economics, EUB
📞 01788302021
📧 [email protected]

We encourage all students to leverage this opportunity to dissect real-world economic data, refine their professional presentation skill sets, and secure a spot at the department's main seminar.

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📅 June 18, 2026 | Economic Update

Nearly six taka out of every ten lent by Bangladesh's banks is now trapped in some form of financial distress. That single statistic, released in Bangladesh Bank's Financial Stability Report 2025 on June 16, captures the scale of a banking crisis that is no longer looming but has fully arrived.

The report places total risky loans in the banking sector at approximately Tk 10.87 trillion, equivalent to 59.73 percent of all outstanding loans of Tk 18.2 trillion. Bangladesh Bank classifies three categories of loans as risky: defaulted loans, written-off loans, and rescheduled loans. By the end of December 2025, defaulted loans stood at Tk 5.57 trillion, written-off loans at Tk 834.79 billion, and rescheduled loans at Tk 4.47 trillion. The combined total has surged roughly 44 percent compared to the Tk 7.57 trillion recorded at the end of 2024.

The sheer size of this number demands context. The Tk 10.87 trillion in distressed loans is larger than the proposed national budget for the upcoming fiscal year. It reflects not just unpaid debts but a pattern of weak lending governance, politically connected borrowing, and inadequate regulatory enforcement built up over many years. Bankers and economists point to one structural turning point: from early 2025, Bangladesh Bank reinstated international loan classification standards, reducing the threshold for classifying a loan as non-performing from 180 days overdue to 90 days. This stricter standard revealed defaults that had previously been hidden or postponed through repeated rescheduling.

The consequences for the banking sector are severe. Banks are required to maintain loan-loss provisions to protect depositors in case of default. As of December 2025, the required provision stood at Tk 4.41 trillion. Banks had managed to set aside only Tk 2.49 trillion. The resulting provision shortfall of Tk 1.91 trillion means that depositor funds remain exposed to significant risk. The sector's capital adequacy ratio, which measures a bank's capacity to absorb losses, turned sharply negative, falling from 3.08 percent in 2024 to negative 2.64 percent in 2025. Only 42 of the country's 61 banks met the minimum capital requirement. The sector recorded a combined net loss of Tk 1.37 trillion in 2025, the first annual loss of this magnitude in the country's banking history.

The implications reach well beyond individual banks. A fragile banking sector constrains the flow of credit to businesses and households. Private credit growth has already slowed to around 6 percent. If banks cannot lend, investment stalls. If investment stalls, GDP growth suffers. Bangladesh is already navigating a fragile recovery, with GDP growth of 4.14 percent in FY2025-26 and inflation still running above 9 percent. A dysfunctional banking sector makes the government's target of 6.5 percent growth for FY2026-27 considerably harder to achieve. The Policy Research Institute estimates that distressed assets may now total as much as Tk 9.5 trillion under its own assessment methodology.

Reform, not rescue, is what economists are calling for. Experts stress the need for a dedicated, system-wide resolution mechanism for non-performing loans, stricter enforcement of single-borrower exposure limits, and genuine independence in lending decisions. Bangladesh Bank has taken initial steps by tightening classification standards and increasing scrutiny of large borrowers. But the scale of the problem suggests those steps, while necessary, are far from sufficient.

The banking sector is both the engine of credit creation and the foundation of economic confidence. When nearly 60 percent of its loan book is under stress, the entire engine runs at reduced power. Fixing it is not a technical exercise. It requires political will, institutional reform, and time.

📌 Sources: (The Business Standard, New Age BD)

🏛️ Economist of the Day | Day 18

Ludwig von Mises, born in Lemberg, Austria-Hungary, in 1881, was the most systematic and uncompromising defender of free market capitalism and the most formidable theorist of the Austrian School in the twentieth century. His 1920 essay on economic calculation in socialism launched the Socialist Calculation Debate, arguing that without market prices for capital goods, rational economic planning is impossible. His monumental treatise Human Action (1949) presented a comprehensive science of human choice, which he called praxeology, rooting all of economics in the logic of purposeful human action. Forced to flee Europe due to N**i persecution, Mises spent his later years at New York University, where he continued writing and mentoring economists, including Friedrich Hayek. His ideas profoundly shaped libertarian economic thought.

📌 Department of Economics, EUB

📅 June 17, 2026 | Economic Update

Global economic growth is heading for its weakest year since the COVID-19 pandemic. The World Bank's latest flagship report paints a sobering picture for developing economies and Bangladesh is directly in the frame.

The World Bank released its Global Economic Prospects report on June 11, 2026. The findings are stark. Global GDP growth is now forecast at just 2.5% for 2026, down from 2.9% in 2025. This marks the lowest growth rate since the pandemic-era collapse of 2020. Forecasts for two-thirds of all economies have been revised downward since January. The primary driver is the prolonged conflict in the Middle East, which has disrupted energy markets, pushed up commodity prices, and tightened financial conditions worldwide.

The economic damage is not evenly spread. Developing economies are bearing the heaviest burden. Emerging market and developing economies (EMDEs) are now projected to record their weakest per capita income growth since the pandemic. The World Bank warns that by 2028, developing economies outside China and India will have made almost no progress in closing the income gap with advanced economies over a full decade. That is a troubling milestone for countries still struggling to lift people out of poverty.

South Asia stands out as the fastest-growing region in 2026. But even it is not immune. Regional growth is expected to slow from 7% in 2025 to 6.3% in 2026. Bangladesh, in particular, faces a difficult outlook. The World Bank projects Bangladesh's GDP growth at just 3.9% in FY26. The report flags persistent challenges including elevated inflation, a stressed banking sector, weak revenue collection, and subdued private investment. The Middle East conflict adds further pressure through higher energy import costs, shrinking fiscal space due to rising energy subsidies, and the risk of weaker remittance flows.

Remittances are a lifeline for Bangladesh, contributing over 5% of GDP. Any disruption to migrant workers in the Gulf and Middle East region could significantly squeeze household incomes. Bangladesh's foreign exchange reserves, while recovering, remain thin. The World Bank stresses that the country has limited capacity to absorb a prolonged external shock, especially given the fragile state of the banking sector and ongoing monetary tightening.

Looking further ahead, the World Bank projects a modest global recovery to 2.8% growth in 2027, contingent on easing Middle East tensions and stabilizing energy prices. But the report cautions that the 2020s are on track to be the weakest decade for global growth since the 1960s. For countries like Bangladesh, the message is clear: structural reforms in banking, revenue mobilization, and investment climate are not optional. They are urgent.

The World Bank's June 2026 report is a timely reminder that global macroeconomic shocks do not stop at national borders. For an export-dependent, energy-importing economy like Bangladesh, understanding these global forces is not merely academic, it is essential.

📌 Sources: (World Bank Global Economic Prospects June 2026, The Tribune, World Bank Bangladesh Development Update April 2026)