The current account deficit reached $1.8 billion in the first ten months of the fiscal year on the back of the sliding remittance inflow and the slow export growth.In contrast, it was $3.53 billion in the surplus a year earlier, according to the central bank’s balance of payments data.The current account balance set foot into the negative territory for the first time in four years in the first quarter of fiscal 2016-17: the deficit was $504 million and it has been on the rise every month since.The last time the current account was in the deficit — of $447 million — was way back in fiscal 2011-12. Since then there had been no deficit in the current account balance at any point in time.A major source of foreign currency for the country in the last 10 to 12 years has been remittance sent by expatriate Bangladeshis, which also keeps the external balance sheet in a strong position.Strong import growth coupled with a moderate rise in export and a slowdown in remittance inflow contributed to the deficit, said a Bangladesh Bank official.During the July-April period of fiscal 2016-17, imports rose 11.73 percent while exports grew 3.93 percent, both of which resulted in further widening of the trade deficit. Trade deficit stood at $8.18 billion during the period in contrast to $5.4 billion a year earlier.However, the BB predicts that at the end of the fiscal year the current account deficit will come down to within $600 million on the back of a pick-up in remittance and export. Export is expected to pick up, with improving growth outlook in some advanced economies, said the latest monetary policy statement of the BB.
MA Mannan, state minister for finance and planning, yesterday hinted that the finance ministry may reconsider its proposal to hike the excise duty on account balance of more than Tk 1 lakh from fiscal 2017-18.“There is scope for the government to reconsider the proposal of increasing excise duty on bank accounts,” Mannan told the parliament during a discussion on the proposed budget for the upcoming fiscal year.The development comes following constant criticism on the proposed move.Finance Minister AMA Muhith while placing budget for fiscal 2017-18 on June 1 proposed raising the excise duty from Tk 500 to Tk 800 on accounts where the balance — whether debit or credit — exceeds Tk 1 lakh but stays less than Tk 10 lakh at any point of time during a year.Mannan told the parliament that the excise duty has been Tk 500 since 2009. “There have been discussions on the excise duty at the parliament for several days. I hope that we would be able to reach an acceptable solution regarding this.”Lawmakers also demanded that the finance minister reconsider the proposal of implementing a uniform 15 percent value-added tax rate, saying it would cause price hike of essentials. Mannan, however, disagreed: all the necessary items in one’s daily life have been kept out of the purview of VAT. “I want to ask why everybody is saying we are imposing VAT on necessary items,” he added.
The interest rate on the Bangladesh Government Treasury Bond (BGTB) bucked up Tuesday for less interest of commercial banks in buying the instrument ahead of Eid festival.The cutoff yield, generally known as interest rate, on 05-Year BGTB rose to 5.83 per cent on the day from 5.10 per cent of the previous auction held on February 14, 2017.According to officials, the government borrowed Tk 10 billion through re-issuing the BGTB at an auction held at the central bank headquarters in Dhaka to meet its budget deficit partly.”The interest rate on the BGTB has been fixed in line with the market requirement,” a senior official of the Bangladesh Bank (BB) told the FE.Also, the central banker hinted, the interest rates on otherBGTBs may rise ahead of the Eid festival.The auctions of 10-Year BGTB, 15-Year BGTB and 20-Year BGTB are scheduled to take place at the BB headquarters in the capital on June 20 and June 22 respectively, according to the ongoing auction calendar.
Eligibility for raising fund from capital market eased
The Bangladesh Securities and Exchange Commission has eased rules related to enterprises’ eligibility to raise fund from the capital market under the fixed price method of initial public offering. Under the relaxed rules, an entity would be eligible to raise fund from the capital market under the fixed price method with net profit after tax and positive net operating cash flow in the immediate preceding one year. The relaxation has been incorporated in the amended Bangladesh Securities and Exchange Commission (public issue) Rules, 2015, a BSEC press release said. The amendments to the public issue rules were finalised at a commission meeting held on Tuesday. BSEC chairman M Khairul Hossain presided over the meeting. ABSEC official said that the move was taken with a view to making it easier for companies to enter into the capital market for finance. Under the book building method, the profitability requirement for the companies, however, will remain unchanged — net profit after tax and positive net operating cash flow in the immediate preceding two years.
Govt weighing up alternatives to new VAT act execution
The government is examining the alternatives to the implementation of the much-debated VAT act in its existing form, mainly for the opposition from businesses, a highly placed source told the FE.The government may even postpone its implementation, the source said.In the process of a rethink, the government is weighing up the impacts of the new VAT rate on public life, especially those in limited-income bracket, and its repercussions ahead of next general election, said the source in the finance division. The value-added tax (VAT) act 2012 is scheduled to introduce a uniform 15 per cent VAT rate which many believe will raise the cost of living.
Bangladesh’s cotton import will creep up to 7.1 million bales in 2017-18, further consolidating its position as the world’s largest importer of the fibre, according to the United States Department of Agriculture.In 2016-17, 7 million bales are expected to be imported. One bale equals 480 pounds or 218 kg, and the cotton year begins on August 1 and ends on July 31.Local growers can only supply less than 3 percent of yearly demand, leading to the imports worth over $3 billion.Bangladesh has overtaken China after the latter stopped sourcing for having ample stocks of its own.The demand for the natural fibre is on the rise in Bangladesh as it is the only country that is still mainly dependent on raw cotton for making yarns and fabrics.The other countries have shifted to other manmade fibres like filament, polyesters and viscose, as a result of which the global consumption of cotton is on the decline in recent years. Currently, the ratio of cotton and manmade fibre use is 28:72 worldwide, with a pronounced tilt towards artificial fibres, due to its lower price, improved functionality and ease of use, according to International Textile Manufacturers Federation.However, the ratio is not applicable in Bangladesh yet as more than 90 percent of the yarns and fabrics are made from natural cotton in the country.
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