The Policy Dispatch #9 [23th March 2025]

This week marked 5 years since the first lockdowns in a number of developing countries.

⏱️ In Today’s Dispatch:

 🌍️ Developing countries posture vis-a-vis Trump

 🇧🇩 Bangladesh’s turnaround

 📰 Policy News recap

🌍️ How developing countries should react to Trump’s policies ?

Trump’s foreign policies have so far been aimed at Canada, European countries, Latin America and a few Asian countries. African countries, not major exporters to the US, have so far been spared. As in the first Trump’s administration, a number of African countries figure on the draft list of travel ban.

So far, the prevailing wisdom is that developing countries should not take sides in US affairs - similar logic being used with regards to the Ukraine War. This posture though is unsustainable in the long run for a few reasons.

• Developing countries remains disproportionately affected by Climate Change and will require major financial investments from developed countries to implement mitigating policies. A neutral posture will leave developing countries vulnerable to any cuts without any possible alternatives.

• Developing countries have long called for an alternative to the neoliberalism. By being on the sidelines, Trump’s America will push in a new ideology based on military strength without having a voice (Not that they have much of a voice now, but at least there is a semblance of participation). Any reforms to Bretton Woods institutions will bypass the voice of developing countries.

• Worse, Trump’s foreign policy may go further and reform the international financial system but integrating some sort of stable cryptocurrency. Greater reliance on USD-backed stablecoins may undermine local currencies, especially in economies already struggling with inflation or weak monetary policies. This could reduce central banks’ control over monetary policy. If stablecoins become dominant in African markets, it could increase dependency on U.S. financial systems, potentially exposing countries to U.S. economic shocks or political decisions. If stablecoin issuers fail or if stablecoin values fluctuate unexpectedly, this could destabilize economies that rely too heavily on them.

• 🔗 Adam Tooze's essay explores the emerging concept of a "Mar-a-Lago Accord," inspired by the 1985 Plaza Accord, where the U.S. coordinated to devalue the dollar. This proposed policy aims to tackle U.S. trade deficits, fiscal imbalance, and deindustrialization by weakening the dollar and restricting foreign investment.

  • A planned U.S. dollar devaluation could reduce the purchasing power of developing countries holding dollar reserves, impacting savings and economic stability.

  • If U.S. imports become costlier, exporters in developing markets — particularly those reliant on U.S. demand — could face reduced competitiveness.

  • Developing countries with heavy dollar-denominated debt may find repayments more manageable if the dollar weakens. However, this benefit could be offset by rising interest rates or reduced capital inflows.

  • The proposed halt on foreign investment in the U.S. may redirect global capital, possibly benefiting emerging markets — but with unpredictable consequences.

  • The coercive nature of the accord may disadvantage developing economies if global trade becomes politicized or fragmented.

That does not mean that developing countries should take an opposing posture vis-a-vis the Trump’s administration. They should however speak with one voice. The only negotiating tool that Trump understands is strength. Developing countries should take the lead and start building alternative institutions to Bretton Woods institutions before it is imposed on them.

The European route has been to rearm and to have more pan-European investments. In the same vein, building of the African Union institutions should be accelerated with an African investment fund aimed at pan-African investments in key sectors and negating with one voice.

The trap is to think that Trump’s ideas will vanish by the end of his term. The MAGA ideology is here to stay. Developing countries will do well to prepare rather than react.

🇧🇩 Bangladesh’s turnaround

​In the aftermath of political upheaval in August 2024, Bangladesh faced soaring inflation rates, with general inflation reaching 10.87% in October and food inflation surpassing 12%. To combat these challenges, the interim government implemented a series of strategic measures which improved the situation:

• Monetary Policy Tightening

  The central bank raised the key interest rate by 0.5 percentage points to 10% in October 2024, marking the fourth increase that year. This tightening aimed to reduce money supply and curb inflationary pressures. ​

• Exchange Rate Adjustments

  In August 2024, the government expanded the inter-bank foreign exchange currency band from 1% to 2.5%, enhancing liquidity and allowing banks to offer more competitive rates. This move aimed to stabilize the currency and mitigate imported inflation. ​

• Market-Based Reforms

  Transitioning to a market-based exchange rate reduced under-invoicing and money laundering, leading to a 58% increase in remittances during August–September 2024. This influx of foreign currency bolstered reserves, strengthening economic stability. ​

• Fiscal Measures

  The government rationalized non-priority capital spending to focus resources on essential sectors, aiming to control inflation without hindering growth. ​

• International Support

  Engagements with international financial institutions, including the IMF and World Bank, provided financial aid and technical assistance, reinforcing domestic efforts to stabilize the economy. ​

• Energy Sector Initiatives

  In a move that had energy moguls buzzing, Bangladesh revamped its LNG procurement policy. By approving nearly two dozen firms, including giants like Shell and BP, as suppliers, the nation is set to diversify and save big on energy costs.Talk about a power move! ​

Much more remains to be done though to keep the economy growing, keep down inflation and reduce inequality.

📰 Policy News recap

🇨🇩 Cobalt Chronicles: DRC's Export Ban Shakes Up Global Markets

• Cobalt Conundrum: The Democratic Republic of Congo (DRC) imposed a four-month cobalt export ban to address oversupply and plummeting prices. ​

• 💵 Price Surge: Following the ban, cobalt prices surged, reflecting market volatility and supply chain concerns. ​

• Strategic Moves: The DRC plans export quotas and a partnership with Indonesia to stabilize the cobalt market. ​

📉 Bangladesh : GDP Overestimations

• GDP Overstatement: A white paper reveals Bangladesh's GDP growth has been overstated since 1995, prompting calls for accurate data.​

• Economic Implications: The overestimation raises concerns about policy decisions and economic planning in Bangladesh.​

🇵🇭 Philippines' Power Puzzle

• The country's electricity rate subsidy system is in disarray, sparking debates on sustainable energy policies.​ These subsidies, intended to assist vulnerable populations, are not funded by the government but are instead cross-subsidized by non-subsidized consumers, leading to increased electricity costs for the general populace. 

• This system has sparked debates on sustainable energy policies and the need for a more equitable approach to supporting disadvantaged groups. ​

🇧🇩 Bangladesh distancing itself from India

• Bangladesh Railway Hiccups: India freezes funds and recalls workers, leaving Bangladesh's railway projects in limbo.​

• Bangladesh-China Talks: Chief Adviser Yunus plans to visit China for discussions with President Xi, strengthening bilateral ties singling further distancing from India.

• Nigeria-Bangladesh Cooperation: Nigeria plans to enter defense, agriculture, and military cooperation with Bangladesh.​

• Iranian Investments in Bangladesh: Bangladesh seeks Iranian investment to boost its agriculture sector.​

🌍️ African Geopolitics

• Turkey's African Ambitions: Turkey strengthens ties with Africa, marking a strategic return to the continent.​

• More Emirati companies are investing in Africa.

• China’s growing interest in African seaports. It is also investing in its railways.

🏃 Run away from DEI & Climate movement

• UK Watchdogs Retreat: Financial regulators in the UK drop diversity and 'name and shame' reforms, sparking debates.​

• Japan's Climate Exit: Japan's largest bank plans to exit a major climate alliance, raising environmental concerns.​

🌐 Global Policy Highlights: A Quick Spin Around the World

• Indonesia's Military Expansion: Controversial law passes, expanding the military's role in Indonesia's governance.​

• China's AI Clampdown: New laws target AI-generated content and social media influencers in China.​

• South Africa's Rate Pause: The Reserve Bank hits pause on rate cuts, eyeing a potential May resumption.​

• Strict Smoking Laws: South Africa pushes ahead with tough new smoking regulations to promote public health.​

• South Africa's Electricity Hike: A significant electricity price increase gets the green light, affecting consumers nationwide.​

• Brazil's Bankruptcy Spike: More Brazilian listed companies seek bankruptcy protection amid economic challenges.

• Japan's Fiscal Frustrations: Rare economic protests emerge in Japan, highlighting public dissatisfaction with fiscal policies.​

• Thailand's Tourist Tweak: Visa-free stays cut from 60 to 30 days to tackle illegal businesses in Thailand.​

• EU Lifts Syrian Sanctions: The EU suspends sanctions on Syria's energy, transport, and banking sectors to aid the country's reconstruction. Expect contracts for european companies to be announced soon 😄 💶 

• Uganda's Solar Surge: Uganda explores policy tweaks and financial tools to brighten its solar energy sector.​

• Kenya's Digital Lending Boom: Kenyans favor digital lenders and mobile loans over traditional banks and SACCOs.​

• India's Highway Havens: Proposals for cattle shelters along highways aim to improve road safety and animal welfare in India.​

📖 Goodreads

• Congo vs. Apple: Legal showdown as Congo takes on Apple in a high-stakes lawsuit.​

• Sudan's Import Ban: Sudan bans Kenyan imports, stirring trade tensions in the region.​ To understand the situation better, this article is a goodread.

🚀 International Space Station

Finally, do you know what astronauts do at the International Space Station? This week two stranded astronauts returned to earth after 9 months! Below is a summary of examples of research done in space 🌌 with real implications on earth 🌏️