Important Business News Extracts – February 05 2017
Private sector credit flow rises in December after three months
Private sector credit growth increased slightly in December 2016, after experiencing a falling trend in the previous three consecutive months, due to higher trade financing for settling import payment obligations, bankers said. The growth in credit flow to private sector rose to 15.6% in December 2016 on a year-on-year basis, which, however, was lower than the Bangladesh Bank (BB)’s earlier projection. It was 15.0% in November, according to the central bank’s latest statistics, released on Thursday.
Bank lending rate goes down for 24th month in a row
Scheduled banks cut their rates of interest on lending further in December, the 24th month in a row, as the businesspeople were still reluctant to borrow from banks amid a dull business situation in the country, said Bangladesh Bank officials. The rates of interest on lending declined to 9.93% in December from 9.94% in November, 2016. BB data showed that the average rate of interest on lending dropped below 10.0% in November for the first time in the country’s banking history. The central bank began logging the weighted average interest rates on lending and deposit in 1975 and the interest rate was never seen declining below 10 per cent before November last year. A BB official told New Age on Thursday that the banks were forced to lower the lending rates due to a sluggish credit demand from the businesspeople. He said that the majority of the banks had recently cut their rates of interest both on deposits and lending in the face of dull business.
30.0% of Rupali Bank’s NPLs belong to 20 top defaulters
Over 30 per cent of the non-performing loans (NPLs)s belong to 20 top defaulters of Rupali Bank, according to governor of Bangladesh Fazle Kabir. “These defaulters should be closely monitored and pursued by the Rupali Bank as per policy and law,” governor Kabir said while speaking as the chief guest at the annual business conference of Rupali Bank at the Krishibid Institution in Dhaka Saturday last. Speakers told the conference that the state-owned commercial banks were lagging behind as far as the competition with their private sector counterparts is concerned due to various reasons, including lack of good governance, ignorance and stubbornness.
Finance Minister asks BB to explain as IDB president expresses dismay
Finance Minister AMA Muhith asked on Thursday the central bank governor to place a report to him regarding the Islamic Development Bank (IDB) president’s claim that the recent changes in the Islami Bank Bangladesh Ltd (IBBL) did not take place in consultation with foreign shareholders of the bank. New president of the IDB Dr Bandar M H Hajjar reportedly in a recent letter to Mr Muhith expressed his dismay over the recent changes brought to the IBBL board and top management. The IDB and foreign shareholders from the Kingdom of Saudi Arabia and Kuwait now own 52.0% share of the country’s largest private sector bank. On January 05 this year, former secretary of the government Arastoo Khan was elected chairman of board of directors and Abdul Hamid Miah was named as managing director of the bank in a meeting of the board of directors. Later, Mr Muhith told newsmen that the changes in the IBBL were made at the will of the foreign shareholders of the bank and under their pressure On Thursday, replying to a query, he said, “If I take it as a serious matter, my impression was very different. They have told me that there is no basis of the statement you made.”
The import of cash dollars, necessitated by a surge in demand, is unlikely after the National Board of Revenue has refused to provide the 29.0% duty waiver on the purchase. The country experienced a cash dollar crunch last month after the stock came down to USD 7.0 million from USD 17.0 million in March last year. Subsequently, Bangladesh Bank directed Standard Chartered Bank to bring in USD 10.0 million in cash and asked the NBR last month to extend the tax waiver. Earlier in 2011, the BB imported USD 15.0 million through Standard Chartered. The revenue authority is unwilling to give the tax waiver as it says the law does not permit it.
Inter-bank dollar transaction declines to USD 53.5 million
Local foreign exchange market faced upward shifts in exchange rates in the week ended Thursday as well. The exchange rate of the dollar was BDT 79.12 in the inter-bank market. Bangladesh Bank continued to buy dollars from the market. The average daily inter-bank USDBDT transaction volume was about USD 53.5 million against USD 57.9 million of the preceding week. Most of the banks kept their USD/BDT rates unchanged for customers this week. The USD/BDT selling rates for importers of major foreign and private banks was at 79.30-80.05, while USD buying rates from exporters were at 78.30-79.05. For non- commercial payments such as Telegraphic transfer as donations, wage earners remittance, dollar drafts etc, the average T.T buying rate was in the range of 77.20-78.65 while average T.T selling rate was at 79.79 on the last working day.
Investment in national saving tools marches past BDT 230.0 billion in H1
The net investment in the national savings certificates and bonds in the first half of the current financial year 2016-17 increased by 76.4% to BDT 234.7 billion from BDT 133.1 billion during the same period a fiscal year ago. Economists and Bangladesh Bank officials say clients continue to invest heavily in the savings tools in the recent period due to a lower rate of interest on the banks’ fixed deposit scheme. Lack of investment opportunities amid sluggish business is also forcing the clients to invest in the government tools, they say. The huge net investment in the savings certificates and bonds has already created a risky situation for the country’s macroeconomic situation as the government will have to face a budget mismatch, the experts observe.
The high interest rates on government savings certificates are deterring the development of a much-needed bond market and turning investors into savers in Bangladesh, experts said. Bangladesh Bank Governor Fazle Kabir also pointed out the matter while announcing the monetary policy on Sunday. Yet, there has been no action from the government to adjust the interest rate, for which its liabilities are swelling every year. The continued high interest rates on savings certificates hold back the development of a bond market, said Anis A Khan, managing director of Mutual Trust Bank and chairman of the Association of Bankers Bangladesh.
A proposal for launching the planned sovereign wealth fund for supporting mega-projects may be placed before the cabinet this week. People familiar with the matter at the Ministry of Finance spoke about the latest developments on the proposed fund, which, however, drew some reservations about its ground reality. Those who disapprove of such move at different levels both in government and private sectors point out that there is such kind of fund under the Ministry of Finance, named ‘Bangladesh Infrastructure Finance Fund’, which should be revamped instead.
The national anti-graft body recommends allowing unaccounted- for money to be invested in flats or lands under a legal measure ‘once for all’. In giving such a view the Anti-Corruption Commission (ACC) noted that granting legal cover to such undisclosed income-better known as ‘black money’-breeds corruption. Official sources said with the ACC acquiescence in hand the government authorities are likely to incorporate into the budget documentation for fiscal year (FY) 2017-18 the provision of what commonly passes for ‘whitening black money’ through payment of penal tax.
The finance ministry has revived a plan to cut prices of petroleum products, especially heavily used diesel and kerosene, to pass on the benefits of the lower global oil prices to domestic consumers. It sent the proposal for price cuts to the energy ministry last week for opinion. After getting the feedback from the energy ministry, Finance Minister AMA Muhith will discuss the matter with Prime Minister Sheikh Hasina. The finance ministry has proposed cutting prices of four products — diesel, kerosene, petroleum and octane — by 5.0% to 8.0%. Bangladesh cut the prices of petroleum products for the first time in about eight years in April 2016 — octane and petrol by BDT 10.0 a litre and diesel and kerosene by BDT 3.0 — to pass on the benefits of low global prices to local consumers.
The government estimate of fiscal deficit for the year is BDT 978.5 billion. Of the figure, an amount of BDT 58.9 billion has been met in the July-November period. In the last fiscal year, the budget surplus was BDT 7.2 billion than in the same period a year ago. The state borrowed 63.01% of total estimate in the form of selling saving instruments within five months of the current fiscal year. According to the latest data, the sales of National Savings Deposit stood at BDT 131.0 billion during the period. This is also 43.30% lower than that in the same period in FY2015-16. During July-November period of the last fiscal year, the net borrowing through NSD certificates totaled BDT 193.0 billion. A Finance Division official said Bangladesh budget expenditure pattern has not come out of the “May- June syndrome” yet as most of budget expenditure happened at the last couple months of the fiscal year.
Acreage of high yielding varieties of rice has increased in the last three decades, replacing hundreds of local varieties. HYVs and other modern rice varieties are now grown on 85 percent of land under gross cultivation area of rice a year, which was 32 percent in fiscal 1987-88 — a transformation that has raised the country’s rice output. Modern rice varieties now account for 99 percent of boro areas, 73 percent of aman areas and 80 percent of aus areas. Improved varieties including hybrids accounted for 92 percent share of the 3.47 crore tonnes of rice produced in fiscal 2015-16, up from 50 percent of total rice output nearly three decades ago, according to Bangladesh Bureau of Statistics.
Three Indian firms were vying to bag a contract for supplying re-gasified liquefied natural gas (LNG) to the proposed 750-800 megawatts (MW) power plant project in Bangladesh’s southern Khulna region, said officials. The firms – H-Energy Pvt Ltd, GAIL (India) Ltd and Adani Group – would supply the fuel from three separate terminals to be built inside India. Bangladesh’s state-run North-West Power Generation Company Ltd (NWPGCL) will be the implementing agency of the project.
Ashok Leyland opens a new assembly plant in collaboration with IFAD Autos in Bangladesh
Indian commercial vehicles manufacturer Ashok Leyland, in a media release announced the opening of its new assembly plant in Dhaka, Bangladesh, reports economictimes.com Thursday. Built over a period of 15 months, the plant is spread over an area of 37 acres. The plant is a strategic joint collaboration/tie-up between Ashok Leyland and IFAD Autos Limited, Bangladesh.
Bangladesh Railway proposes two projects for fund from 3rd Indian LoC
Bangladesh Railway has proposed two projects to get fund from the 3rd line of credit (LoC), which India has recently proposed to Bangladesh. The projects are Monsur Ali station at Sirajganj (next to Bangabandhu Bridge) to Bogra dual-gauge track development project and Darshana-Iswardi Inland Container Depot development project, sources said. They said the Indian authorities had earlier rejected the first project from the list of eligible projects under the 2nd LoC. The BR was, however, trying to get fund from the European Investment Bank (EIB).
Bangladesh-China FTA feasibility study yet to begin
A joint feasibility study on a bilateral free-trade area (FTA) between Bangladesh and China has yet to begin even after the lapse of three and a half months of signing an accord. The two nations signed the Memorandum of Understanding (MoU) in this regard in mid-October during Chinese President Xi Jinping’s Dhaka visit. Earlier in September last year, China in a letter had formally proposed conducting the study to examine the suitability of formation of a free-trade area. Beijing then forwarded a draft of the MoU which was inked in October.
Financing regional traffic, trade on Bangladesh wish list
Bangladesh may seek extended support for strengthening regional connectivity and trade from the Asian Development Bank (ADB) during a top ADB executive’s tour. Officials said Saturday the government might also want increased financial support for modernization Bangladesh’s railway system and enhancing the energy-supply efficiency across the country. Policymakers and bureaucrats would sit with Vice President (Operation 1) of the ADB Mr Wencai Zhang in Dhaka this week during his 4-day visit from tomorrow (Monday).
The Bangladesh Investment Development Authority (BIDA) called for amending some relevant laws Thursday for attracting more local and foreign investment in the country. These are customs act, companies act, contract law, arbitration act and insolvency act. BIDA executive chairman (EC) Kazi Md Aminul Islam made the plea at a meeting with law, justice and parliamentary affairs minister Anisul Huq at the latter’s Secretariat office. The BIDA, in its suggestions, said some clauses of the laws are years-old and not entirely investment-friendly.
Major Currencies Exchange Rates Movement in Last Seven Days
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