The country’s business leaders and economists criticised the government heavily for hiking the excise duty on bank deposits in the proposed budget for next fiscal year. The increased excise duty would discourage people to use formal financial channels, said Nihad Kabir, president of Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI). The organisation claims the government always consults with the business leaders, but their proposals are not considered in the budget. In his proposed budget for fiscal 2017-18, Finance Minister AMA Muhith prescribed a 60 percent hike of excise duty on account balance between Tk 1 lakh and Tk 10 lakh — a move that will leave some savers with even negative returns from their deposits. The move drew huge criticism as the duty surged at the time when average interest rates on deposits came down at five percent and are mostly three to four percent.
Government improving SoBs’ asset quality to cut recapitalization
The government is trying to improve asset quality of the state-owned banks (SoBs) to reduce their dependency on public fund for recapitalisation, Bangladesh Bank (BB) Governor Fazle Kabir said. “We are trying to improve their (SoBs’) asset quality. No further recapitalisation will be needed then,” the BB governor said at a post-budget press conference at Osmani Auditorium in the capital. His remarks came in reply to a query by newsmen on how long the practice of using public money for recapitalisation of the state-owned banks will continue. Finance Minister A M A Muhith, in the budget for the upcoming fiscal year (FY), 2017-18, has proposed to keep BDT 20 billion for recapitalisation of the SoBs. A similar allocation was also made in the outgoing FY for recapitalisation of these banks. The governor said the SoBs’ capital shortfall is being met mainly from their own income surplus. Public fund is given to them to meet just a tiny portion of their recapitalisation needs.
Bangladesh’s capital market, which is still struggling to regain investor confidence after the crash of 2010, did not get any incentive from Finance Minister AMA Muhith in the proposed budget for fiscal 2017-18. In the lead-up to the budget announcement yesterday, the stockmarket leaders demanded continuation of tax exemption for five years as the stockmarket was going through the demutualization process. But, it did not get any attention in the proposed budget. In the budget speech, Muhith mentioned the measures that have already been taken but did not propose any new incentive for the bourses. As a result, the announcement of the largest ever budget in the country’s history had no noticeable impact on the market indices yesterday. DSEX, the key index of the Dhaka Stock Exchange, saw a moderate rise of 35.6 points to close the day at 5,438.7 points. Blue-chip index DS30 witnessed a gain of 17.6 points to end at 2,022.7 points. It is unfortunate that the stockmarket did not get any incentive in the budget, said Ahsanul Islam Titu, former president of the DSE.
The government wants to increase the investment ratio by 1.6% points to take the total investment at 31.9% of the GDP in the next fiscal year, which the private sector considers possible if they are given necessary support. Of the total investment, the finance minister proposes to increase the private sector investment to 23.3% from projected 23.0% and public investment to 8.6% of the GDP. Private investment remains almost stagnant and has been hovering around 23.0% over the years due to bottlenecks in infrastructures and perennial energy crisis in industrial units. If the government wants to achieve more than 8% economic growth per annum and be a middle-income country by 2021, it will need to create a business-friendly environment and different facilities for the businesses, said Abul Kasem Khan, president of Dhaka Chamber of Commerce and Industry. The government must ensure supply of gas to the industrial units on a priority basis to attract more investment — both domestic and foreign, Khan added.
The tax-free threshold for individual taxpayers, except persons with disability, and corporate tax rates for both listed and non-listed companies will remain unchanged in the next financial year, according to the proposed budget for 2017-18. For the physically challenged persons, tax exemption ceiling will be BDT 0.4 million, up from the existing BDT 0.375 million, Finance Minister AMA Muhith said in his budget speech in parliament on Thursday. The tax-exemption threshold has been fixed at BDT 0.25 million for general taxpayers and BDT 0.3 million for women and senior citizens aged 65 years and above. Tax exemption has been proposed for eight new IT sectors, including software or application customization, website development, website hosting, digital data analytics, software test lab services, overseas medical transcription, robotics process outsourcing and cyber security services.
At least 10.4% of the proposed BDT 4002.6 billion budget for the 2017-18 fiscal year has been allocated for interest payment, Finance Minister AMA Muhith said on Thursday. The amount to be paid for interests is estimated to be BDT 414.6 billion – 29.2% more than the allocation in the revised budget for the outgoing fiscal year. The amount of interest payment under the revised budget for 2016-17 fiscal year stands at BDT 328.6 billion, while the allocation was BDT 353.4 billion. The 2017-18 budget is the largest in the history of Bangladesh, the finance minister mentioned in his speech. The budget deficit is estimated to be BDT 1122.6 billion in 2017-18, which is 5.0% of the GDP. The deficit was BDT 978.5 billion in the outgoing fiscal year’s revised budget, the minister said. He further said the government would borrow BDT 603.5 billion from domestic sources to meet the budget deficit. There are plans to take borrow BDT 282.03 billion from banks, BDT 301.5 billion from savings instruments, and BDT 20.0 billion from other sectors. The rest of the deficit will be met with foreign debt, he added.
Overall deficit is set to widen nearly 15% in the BDT 4.0-trillion budget announced for next fiscal year (FY) 2017-18, compared to the current level. As stated by the finance minister in his budget speech Thursday in parliament, the bigger outlay of the budget is necessitated for footing the bill for higher spending on both development and revenue heads. The budget deficit is estimated to be BDT 1.123 trillion for the upcoming FY18 against BDT 978.53 billion of the original budget estimations for the outgoing FY17. Later in the passing fiscal, the government revised its budget deficit to be BDT 986.74 billion from BDT 978.53 billion. However, the proposed budget deficit in percentage of GDP (gross domestic product) remains unchanged within a 5.0% bracket.
The growth of country’s manufacturing sector declined in the outgoing fiscal year (2016-17) after two years of rise as entrepreneurs are lacking in confidence to set up new industrial units due to dull business climate, said economists and experts. According to the Bangladesh Economic Survey data released with budget documents on Thursday, the growth of manufacturing sector dropped to 10.96% in FY17 from 11.7% in FY16. The growth of industrial sector stood at 10.3% in FY15 and 8.8% in FY14. Economist Hossain Zillur Rahman told New Age on Friday that dull business climate was one of the major reasons for the decline in the share of industrial sector in the GDP in FY17. A stagnant situation has been persisting in the country’s private sector for long that has ultimately put an adverse impact on the industrial sector, he said. The economic survey data also showed that the growth of overall manufacturing sector fell mainly due to a fall in growth of large and medium industries sub-sectors (to 11.32% in FY17 from 12.26% in FY16). The growth of small industry sector, however, increased to 9.21% from 9.06%.
Deflating criticisms about big budget sans capacity building, Finance Minister AMA Muhith Friday said government’s budget-implementation capacity had enormously increased in recent years that would help out. He also observed that public investment had helped expand the economy until 2015 as private one shrank that time for some troubles on the domestic front. “More than 80.0% of the economy is led by private sector and the private investment was not satisfactory until 2015, and that time growth came from public investment,” he told reporters at a post-budget press conference. Mr Muhith said private investment is now picking up from its ‘stagnant’-like situation after 2015. Such ‘unfortunate’ situation came on the back of ‘political grounds’.
Country’s apex trade body Saturday demanded of the government not to levy any excise duty on bank-account balance. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) also stuck to its old demand—introduction of multiple VAT (value added tax) rates instead one single rate of 15.0% from the first day of next financial year (FY). The chamber put forward the demands while requesting the government to reconsider a raft of proposals laid down in the proposed budget for the fiscal year 2017-18. Finance Minister AMA Muhith placed a BDT 4.3 trillion national budget for the fiscal year 2017-18, up-raised 26.2% from the revised budget for the outgoing fiscal year. In the budget he proposed to increase excise duty on bank-account balance. Those who have a bank-account balance worth over BDT 0.1 million have to pay BDT 800.0 instead of BDT 500.0 a year for maintaining that bank account.
Foreign Investors’ Chamber of Commerce and Industry (FICCI) finds budget ‘highly challenging’
The Foreign Investors’ Chamber of Commerce and Industry (FICCI) finds Bangladesh’s proposed BDT 4.0 trillion-plus new budget ‘highly challenging’ and critically appreciates various fiscal measures. “The proposed budget of about BDT 4.27 trillion, which is 26.17% higher than that of the revised budget for the outgoing fiscal year, is highly challenging,” the chamber said in a press statement Friday. It thinks the GDP-growth target of 7.4% is achievable provided the GDP-investment ratio increases to the desired level. The trade body representing the foreign investors in Bangladesh appreciated an increase in allocations in the proposed budget for the fiscal 2017-18 for health services, transport and communications, primary and mass education and power and energy. However, the chamber expressed its concern about lower allocation for social security and agriculture. The FICCI also took exception to continuation of supplementary duty on locally manufactured products in the proposed budget for 2017-18 financial year, placed in parliament Thursday.
Garment accessories association demands 15.0% corporate tax like RMG companies
Hailing the proposed budget for the fiscal year 2017-18, the country’s garment accessories and packaging makers Saturday said that good governance would be necessary to implement the budget, which was big in size. In a statement, they appreciated the corporate tax cut for the readymade garments companies from 20.0% to 15.0%, but expressed dissatisfaction over keeping the tax at existing 35.0% rate in cases of the backward linkage industry of the RMG sector. Acting president of Bangladesh Garment Accessories and Packaging Manufacturers and Exporters Association (BGAPMEA) Md Moazzem Hossain Moti issued the statement, terming it ‘discriminatory’ and demanded the tax rate as proposed for the RMG sector. He also requested the government to keep the existing rate of 0.7% as source tax instead of the proposed 1.0%. Terming the sector a ‘rising industry’, he said that there was no incentive proposed for the industry and demanded incentive as given to other sectors. The association pointed out that the fire proof paint for pre-fabricated building with HS Code: 3208.90.20 is one of the most important among all other fire preventive equipments to make the factories safe, risk free, compliant and environment-friendly. But there was no duty-free import facility of the item in the proposed budget, Mr Moti said, demanding duty-free import of the fire proof paint to help set up environment-friendly industry.
Importers demand tax cut on handsets in proposed budget
The Bangladesh Mobile Phone Importers’ Association (BMPIA) has asked the government to keep the existing tax on foreign-made mobile handsets through withdrawing another 05% tax imposed in the proposed budget for the fiscal year 2017-18. According to a BSS report, they made the call at a post budget press conference held in a city hotel on Saturday. “The proposed tax structure will encourage the import of foreign-made handsets in unauthorised channel, resulting the government will loss huge amounts of revenue and importers will face hurdle to run businesses following an uneven competition,” said BMPIA president Ruhul Alam Al Mahbub. He urged the government to continue the existing tax structure for next fiscal as the establishment of assembling industry is time consuming with developing skill manpower.
Government revises down FY ’17 budget to BDT 3.17 trillion
The government has revised down the national budget for the outgoing financial year (FY 2016-17) by 7.0% to BDT 3.17 trillion as it will fail to spend the entire outlays in the remaining period of the year. Finance Minister AMA Muhith Thursday proposed the supplementary budget for the current FY2017 while he was announcing the national budget for the next FY2018 in the parliament. In the outgoing FY2017, the government has cut its budget spending target by BDT 234.31 billion to BDT 3.17 trillion (16.2% of GDP) from its original allocations of BDT 3.40 trillion (17.4% of GDP). The government has forced to cut the budget spending target due to reduction in non-ADP (Annual Development Programme) spending amid lower revenue income compared to target.
Bangladesh to sign MoU with Eurasian Economic Union
Bangladesh is set to sign a memorandum of understanding (MoU) with the Eurasian Economic Union (EEU) for getting duty-free market access of country’s products to the former Soviet republics. Russian Federation, Armenia, Belarus, Kazakhstan and Kirgizstan are the members of EEU. “Bangladesh export will increase significantly after signing of the MoU with the EEU. The EEU countries will also be able to purchase our products with competitive prices,” commerce minister Tofail Ahmed said while delivering his speech as a panelist in the International Economic Forum in Saint Petersburg in Russia Thursday.
Bangladesh Petroleum Corporation (BPC) set to import 1.5m tonnes of diesel, jet fuel under term deal
State-run Bangladesh Petroleum Corporation (BPC) is eyeing to import refined petroleum products under a term deal through negotiations with oil suppliers from July, said a senior BPC official. He said the BPC has planned to import around 1.5 million tonnes of diesel (0.05% sulfur gasoil) and jet fuel (A-1) under term deal during July-December 2017. The quantity is around 155.0% higher compared to what was imported during the same period last year. The petroleum products to be imported from July to December 2017 include 1.31 million tonnes of diesel and 190,000 tonne of jet fuel, he said. The Kuwait Petroleum Corporation (KPC) alone would provide around 510,000 tonne of diesel and 90,000 tonne of jet fuel under term deal during H2, 2017, the official said. The BPC would import the remaining 800,000 tonne of diesel and 100,000 tonne of jet fuel from nine other suppliers. These are Malaysia’s Petco Trading Labuan Company, Emirates National Oil Company, PetroChina Singapore, Chinese Zhenhua Oil Company Ltd, Petrolimex Singapore of Vietnam, Philippine National Oil Corporation, Indonesia’s Bumi Siak Pusako, Unipec Singapore, and Oman Trading International under term deal during July-December 2017.
The government goes into an immediate-action mode to hike fuel prices in sync with global oil prices. But consumers do not get any benefit when the prices of fuel come down in the international market. People in power defend their move to increase prices, saying that the state-owned corporation has been counting losses, no matter if it is due to corruption, mismanagement or inefficiency. But they don’t reduce the prices. After a long gap, the government has been making huge profits by selling petroleum products such as diesel, petrol and octane for several years. According to the data of Bangladesh Petroleum Corporation (BPC), it is going to make a profit of Tk 7,334 crore this fiscal year ending on June 30, down from a whopping Tk 9,040 crore a year ago. In the last three years the BPC made profits of Tk 20,500 crore.
Lagging five years behind schedule, the government is finally expecting to import Liquefied Natural Gas (LNG) from Qatar from the end of next year to meet Bangladesh’s never-ending gas supply shortfall. As per yesterday’s budget speech, once the country starts importing LNG and begins supplying it to the national grid, the government may have to increase gas prices in the country. That is because the cost of LNG import would depend on the international price. But with some massive gas price hikes already taken place in two installments this year (the latest one taking place yesterday), the nation may not face any significant gas price hike with the use of LNG. When the government in 2010 initiated a move to import 500 million cubic feet per day (mmcfd) LNG — which is a little less than one fifth of the country’s present gas demand — it was very costly at the international market. Back then the price hovered around USD 15.0 per mmcfd. Luckily, the price of LNG has gone down significantly since 2013. It is hovering around USD 3.0 to USD 4.0 in recent times. The average gas sales rate in Bangladesh as of yesterday was BDT 221.7 per mmcfd. This price is BDT 20-30 lower than LNG of same quantity. Therefore, the need for price adjustment after LNG import would not be very significant.
The government has a plan to install 42 more power plants having 11,124 MW capacity as sustainable development of power generation, transmission and distribution system is one of the priority areas in the country, reports BSS. Finance Minister A M A Muhith said this while delivering his budget speech for 2017-18 in the Jatiya Sangsad on June 1. “In addition, 33 power plants having 11,214 MW capacity are now under construction as part of the power sector master plan,” he said. Placing the country’s highest ever budget on Thursday in the Jatiya Sangsad, he proposed Taka 21,118 crore for Power, Energy and Mineral Resources Ministry for 2017-18 fiscal year. “Country’s 80 per cent population is now under electricity coverage and the rest 20 per cent will enjoy this facility ahead of 2021,” Muhith said. Referring to Prime Minister Sheikh Hasina’s initiative, electricity in every house, he said the government is implementing the power sector master plan, while the people are already enjoying the fruits of these endeavours.
Among the 45 state-owned enterprises (SOEs), the Power Development Board (PDB) has incurred the highest loss of Tk 71.35 billion in the outgoing fiscal 2016-17 year while the total loss of the SOEs is Tk 86.30 billion, reports UNB. The PDB shares 84.39 per cent of the total loss incurred by the 45 SOEs. This was revealed in a budget document ‘Budget-Brief of SOEs of 2016-17’ published by the Monitoring Cell of the Finance Division of the Finance Ministry. Such a document on the budgetary framework of the SOEs was published by the government for the first time. As per the document, the PDB loss has increased by Tk 8.97 billion from the previous fiscal year when it incurred a loss of Tk 62.37 billion. The PDB has been the prime organisation in the power sector responsible for power generation across the country.
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