Cenbank goes for printing money to support budget
Bangladesh Bank created fresh money of more than Tk50,000 crore in the July-December period for budget support, the highest in recent history. The interest rate on long-term government bonds shot up to 8.95% in the last auction called by the Bangladesh Bank on 28 December – at a time when the lending rate cap was 9%. The question then arises why banks would lend at 9% to the private sector when they can instead get the same rate by investing in government bonds. The climbing rate on government bonds is symptomatic of a liquidity crisis, a source at the central bank told The Business Standard. Normally, the government borrows money from commercial banks, but in this situation, the Bangladesh Bank has started to print taka to supply money to the government. The over Tk50,000 crore printed so far was the highest amount of freshly minted money in a single year in recent history. In the latest development, the central bank provided Tk500 crore to the government through a 20-year bond auction on 28 December when the bidding rate was 8.95%. Of the amount, Tk152.81 crore was collected from banks and the remaining Tk347.19 crore was supplied through fresh money printing.
China to fund potential Mongla port project
A major development it is being billed as China finally agrees to fund a $400-million project for upgrading the Mongla seaport that holds potential to promote sub-regional cooperation. Officials say in a letter sent to the Bangladesh government recently the Chinese side said in response to Bangladesh’s request, they decided to fund the ‘Expansion and Modernisation of Mongla Port Facilities’ through government concessional loan (GCL) as their feasibility study found the project “crucial to development of Bangladesh”. The project-funding GCL framework stipulates that the project will be implemented by a Chinese enterprise or by a consortium of Chinese companies selected by them. “The Bangladeshi side has kindly requested to fulfill the relevant business procedures in accordance with Chinese GCL policy including the selection of Chinese enterprises or a consortium led by Chinese enterprises as the implementing enterprise according to the procedures stipulated by the Bangladeshi laws, signing the business contract…,” the letter sent by the Chinese government reads. Under GCL, a framework agreement will be signed between the Exim Bank of China and the ERD of Bangladesh before the final loan agreement, which will last three years.
Oil price falls
Oil prices edged lower on Tuesday in volatile trade as weak demand data from China and a gloomy economic outlook weighed. Brent crude futures fell 46 cents, or 0.54 per cent, to $85.45 a barrel by 1017 GMT. US West Texas Intermediate crude was down 38 cents, or 0.47 per cent, at $79.88. Both contracts rose by over $1, and Brent dropped $1 in earlier trading. “Brent and WTI have recovered almost 15 per cent from the lows a few weeks ago as traders continue to price in stronger Chinese demand,” Craig Erlam, senior market analyst at OANDA, said. “The outlook remains highly uncertain though which should ensure oil prices remain highly volatile,” Erlam added. The Chinese government has raised export quotas for refined oil products in the first batch for 2023. Traders attributed the increase to expectations of poor domestic demand, as the world’s largest crude importer continued to battle waves of Covid-19 infections. In further bearish news, China’s factory activity shrank in December as surging Covid-19 infections disrupted production and weighed on demand after Beijing largely removed anti-virus curbs.
Local and Global Stock Indices *
|Index Name||Close Value||Value Change||Percentage Change|
|↓ 10.88 ||↓ 0.03%|
|FTSE100||$ 7,554.09 ||↑ 102.35||↑ 1.37%|
|Nikkei 225||$ 25,761.37 ||↓ 333.13|| ↓ 1.28%|
World Commodities *
|Commodity||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)||$ 76.69 ||↓ 0.24||↓ 0.31%|
|Crude Oil (Brent)||$ 81.95 || ↓ 0.15 ||↓ 0.18%|
|Gold Spot||$ 1,846.33||↑ 6.85 ||↑ 0.37%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 105.5000||BDT 107.0000|
*World Commodities & Local and Global Stock Indices data are taken from bloomberg.com<
* Exchange Rates are taken from BB website, as on latest update.<