Banks’ excess liquidity falls slightly
The overall excess liquidity with the commercial banks decreased slightly in May, following the recent higher credit growth particularly in the private sector, officials said. The excess liquidity fell by nearly 2.0% to BDT 1.17 trillion in the first week of May from BDT 1.19 trillion two months ago, according to latest statistics of the Bangladesh Bank (BB). “The amount of excess liquidity has showed a declining trend recently, following increased credit flow to the private sector mainly due to lower interest rates on lending as well as political stability,” a senior official of the central bank told the FE on Thursday. He also said most of the excess liquidity has already been invested in the government-approved securities as a risk-free investment for banks. Besides, excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, came down to BDT 37.0 billion in May from BDT 39.0 billion, the BB data showed.
Bangladesh receives USD 1.2 billion remittances in May
The country received USD 1.2 billion in remittance in May this year. Bangladesh Bank statistics show that four state-owned commercial banks – Agrani, Janata, Rupali and Sonali – received USD 379.1 million from expatriate Bangladeshis while four state-owned specialised banks got USD 12.33 million. The maximum remittance came through private commercial banks as they received USD 797.1 million while the nine foreign banks USD 17.1 million, reports UNB. Among the private commercial banks, Islami Bank Bangladesh Limited (IBBL) led the chart as it received USD 279.4 million, followed by National Bank Limited (NBL) with USD 51.4 million. Of the four state-owned banks, Agrani Bank received USD 138.9 million, Sonali Bank USD 115.1 million, Janata Bank USD 105.5 million and Rupali Bank 19.7 million.
Only 25.0% of remittance goes to investment in 2015: BBS
The use of remittance in the unproductive sector continued with only 25.3% of the total remittance received in 2015 was invested in various sectors by the remittance receiving households, revealed a survey conducted by the Bangladesh Bureau of Statistics. Bangladesh received remittance worth USD 15.8 billion in 2015 while on an average each remittance receiving households got BDT 302,183 of which BDT 289,493 in cash and BDT 12,690 in valuables, showed the study. Planning minister AHM Mustafa Kamal unveiled the survey report ‘Investment from Remittance (SIR) 2016’ at the National Economic Council auditorium at Sher-e-Bangla Nagar in the city on Thursday. The report said while 25.3% of total remittance was invested in various sectors by the households, the lion’s share of the investment went to the construction sector. A significant share of total remittance, 10.9%, was used for repaying loans that were borrowed to meet the expenditure for going abroad. Of the total remittance received, a substantial portion, 9.1%, was used for land purchase. In case of investment, the lion’s share (74.8%) of the total remittance was invested in construction or reconstruction of mud or bamboo houses, semi-brick-built or brick-built houses, buildings, flats, boundary walls and personal roads.
Manufacturers line up for low-cost foreign currency loans
Manufacturers are rushing to take low-cost long-term foreign currency loans from the special World Bank-Bangladesh Bank fund, bankers said. Bangladesh Bank in collaboration with the World Bank took an initiative last year to channel long-term loans to the manufacturing sector at low interest rates. A USD 350.0 million fund was created and already 25 private commercial banks have signed deals with the central bank to disburse the loans for their clients. Loans under the scheme will cost a bank 3.25-3.5%, which, in turn, will charge its clients a maximum of 6.5% interest rate. The tenure of the loans will be at least three years and at most ten years. The project became effective on September 20 last year, with the BB setting up a department, named Financial Sector Support Project and Strategic Planning Department, to implement it.
Bangladesh Bank chief economist slams high interest on savings tools
The chief economist of the central bank yesterday came down heavily on the government for distorting the interest rate market by offering too high returns for savings instruments. If the trend continues, money will flow out of bank deposits and end up in savings schemes, meaning the government’s interest liability will go up. At present, commercial banks offer 5.5-6% for deposits whereas the rates for savings instruments are close to 12.0%. “Let the interest rates for savings instruments be the bond rate plus 100 basis points. That’s the market related rate,” said Biru Paksha Paul, chief economist of Bangladesh Bank. Paul’s comments came at a discussion on the proposed budget for fiscal 2016-17 and ways to boost private investment, organized by The Daily Star at its office in the capital. At present, the average return on five-year bond is 6.5%, so the yield on savings certificates should not exceed 7.5%.
Government mulls taking loan from the SAARC fund
The SAARC Development Fund (SDF) has come forward with a line of credit (LoC) for infrastructure projects in Bangladesh, officials said. It will finance projects in energy, power, transportation, telecommunications, environment, tourism, and other areas. SDF will also finance Micro, Small and Medium Enterprises (MSME) sector in the SAARC member states. Under the move, LoC is proposed to domestic banks and financial institutions for their on-lending to MSME sector. “SDF will be able to lend maximum USD 10 million per project at present, which could be enhanced in due course. We are actively soliciting projects from various agencies in Bangladesh,” SDF chief executive officer Dr Sunil Motiwal wrote in a recent letter to the Economic Relations Division (ERD).
Farm sector’s contribution to GDP wanes
Sectoral share of agriculture and its growth in terms of the gross domestic product (GDP) declined significantly in the outgoing financial year (FY’16) over that of its previous, the government data shows. Experts and officials said low prices of paddy in the harvesting season impacted the overall farm sector negatively. Crop, which comprises more than 70.0% of the overall farm sector, witnessed the biggest drop as the rice market was not better. The finance ministry’s latest data revealed that the agriculture sector’s share to GDP declined by 1.38 percentage points in FY’16. The share of farm sector, including crop, vegetables, livestock and forestry, was BDT 1.9 trillion in FY’16— 10.94% of the overall GDP of BDT 17.30 trillion in the outgoing fiscal.
Non-residents unwilling to invest in Bangladesh bonds
Non-resident investors are losing interest in less-rewarding Bangladesh treasury bonds as their holdings on the government borrowing tools are dwindling fast. Many believe this happens for lower yields on the instruments of government borrowing here and some say it is due to rise in the yields on US bonds. The proceeds from investment in Bangladesh bonds remained subdued for lesser government needs for development spending as the execution of the annual development program remained significantly low. The monthly outstanding held by the foreign investors in bonds stood at BDT 4.4 billion in May last, according to Bangladesh Bank. It [outstanding holdings] was BDT 4.7 billion in April, BDT 4.8 billion March, BDT 5.1 billion in February, BDT 6.3 billion in January, BDT 7.0 billion in December and over BDT 14.0 billion in June 2015.
Sponsor-directors’ minimum shareholding: BSEC order remains on paper since Nov 2011
A much hyped directive of the Bangladesh Securities and Exchange Commission regarding mandatory 30.0% shareholding by listed companies’ sponsor-directors remained on paper as 31 companies’ sponsor-directors are still holding less than the stipulated amount of shares. The capital market regulator came up with the directive on November 22, 2011 after the market crash in 2010-11 with a view to increasing sponsor-directors’ share purchasing for protecting market from more fall. According to statistics of the Dhaka Stock Exchanges, devaluation of shares have continued for months since the market crash as the market capitalization of the bourse continue to slide despite enlistment of new companies. The commission’s 2011 directive also made it mandatory for sponsors, directors and promoters of a listed firm to jointly hold a 30.0% stake in the firm. The BSEC then set a six-month timeframe for the sponsors, directors and promoters, who are now jointly holding less than 30.0% and individually 2.0% shares, to acquire the rest of the amount. A DSE data disclosed in December 2011 showed that 38 companies’ sponsors and directors jointly have less than 30.0% stakes in their own firms. Even after four-and-a-half years of the BSEC’s directive under section 2CC of Securities and Exchange Ordinance, 1969, 31 companies’ sponsor-directors are yet to comply with the directive. Only seven companies’ sponsor-directors have so far complied with the BSEC directive.
Bangladesh Securities and Exchange Commission approves ETF norms
Bangladesh Securities and Exchange Commission yesterday approved the guidelines on the Exchange Traded Funds (ETFs) to attract more investment to the capital market. The details, however, will be published soon as a gazette notification since the regulator has incorporated eligible public comments on draft ETF regulations. ETF is an open-ended investment funds listed and traded on a stock exchange. Under the draft norms, the regulator proposed that the initial fund size under the ETF will be at least BDT 500.0 million. The fund size, however, will be allowed to change through creation and redemption by authorized participants like stock dealer or broker. The fund will be formed through private placement from eligible investors. If the fund formation remains incomplete, even after the private placement, general investors will be allowed to participate into completing fund formation, but subject to the regulatory approval.
BSEC approves BDT 10.2 billion bonds of three companies
The securities regulator has approved three proposals of bonds worth BDT 10.2 billion to be issued by three listed companies, officials said. The approval came from the meeting of the Bangladesh Securities and Exchange Commission (BSEC) held in the city Thursday. At Thursday’s meeting, the regulator also approved the Bangladesh Securities and Exchange Commission (Exchange Traded Fund) Rules, 2016. The gazette notification of the rules will be published soon. As per the BSEC approval, United Airways (BD) will issue the Coupon Bearing Secured Cumulative Fully Redeemable Bond worth BDT 2.2 billion through private placement. The units of the bond will be issued to institutional investors and high net worth individuals, other than the existing shareholders.
Mobile companies to pay BDT 950.0 million in VAT
The Supreme Court (SC) has ordered the country’s six mobile-phone operators to pay to the government BDT 950.0 million in VAT against the rent they paid in last four years, reports bdnews24.com. An Appellate Division (AD) bench, headed by Chief Justice S K Sinha, delivered a verdict to this effect on Thursday. It vacated a High Court (HC) order that had stayed an instruction of the National Board of Revenue (NBR) to pay the tax. The stay order had come after the operators moved to HC, challenging the NBR directive. AD, however, ordered continuation of the hearing of a rule that HC had issued on the operators’ petition.
BEXIMCO begins exporting medicines to Kuwait soon
Beximco Pharmaceuticals Limited is set to start exporting medicines to Kuwait for the first time amongst the local pharmaceuticals companies, officials said. The pharmaceutical market of Kuwait is one of the most potential markets among the Gulf Cooperation Council (GCC). Total pharma market of GCC, which consists of six nations, is currently valued at around USD 9.0 billion and the pharma market of Kuwait is about USD 1.0 billion. To this effect, a launching ceremony was held on the factory premises of the Beximco Pharma at Tongi, Gazipur on Monday. Kuwait ambassador to Bangladesh Adel Mohammad A H Hayat, Vice Chairman of Beximco Group Salman F Rahman, Managing Director of Beximco Pharma Nazmul Hasan Papon, MP, chief operating officer of Beximco Pharma Rabbur Reza and high officials of the company were present on the occasion.
Government to lower target by 10,000MWs on JICA review
The government is set to slash by 16.7% or 10,000 megawatts (MWs) its electricity-generation target up to 2041 on JICA review of the draft master plan. Officials said the cutbacks on the lofty power-generation target, meant for Bangladesh as an aspired high-income country, is an outcome of the review of the proposed Power System Master Plan (PSMP)-2016. Japan International Cooperation Agency (JICA) is assisting Bangladesh in formulating the extensive and elaborative plan for catering electricity needs up to the year 2041. The mega-plan covers overall energy and electricity demand and supply situation, and tariff strategies to help achieve the country’s aspiration to become a high-income country.
Textile, clothing sector leaders for cut in source tax
Leaders of the country’s textile and clothing sector have urged the government to reduce the tax at source saying the industry might not survive if the proposed 1.5% source tax is implemented. They also demanded regulatory reform in the existing laws to impose tax either on CM (cutting and making) or on net profit for the sector. Terming the proposed source tax ‘contradictory’ to the government’s economic development and industrialization strategy, President of BGMEA (Bangladesh Garment Manufacturers and Exporters Association) Md Siddiqur Rahman said: “The government has proposed a 150.0% hike in source tax to 1.5% at a time when the sector is undergoing a critical time and it will hinder the usual growth of the sector.” The manufacturing sector contributes about 25% to the country’s GDP (gross domestic product) growth and so such tax burden on the largest manufacturing industry is not rational, he noted.
NBR offers duty cuts to spare parts of farm machinery
The National Board of Revenue has for the first time offered duty benefits for importing certain spare parts for agricultural machinery in a bid to encourage local assembly and production. The revenue authority said it will charge only 1% duty for importing some spare parts to support domestic manufacturing of power tillers, power threshers, power reapers and power seeders from next fiscal year based on fulfilment of certain conditions. Currently, agricultural machinery is subject to tax and duty of 10.05%, while their spare parts face duty and tax ranging from 20% to 60%, he said. The NBR’s duty benefit comes at a time when nearly 90.0% of the farm land is prepared by power tillers and tractors and more than 90.0% of the grains threshed by machines. In addition, a large portion of land is also irrigated by machines — a transition that has created an annual market of about BDT 100.0 billion for farm machinery and spare parts, according to stakeholders. Imported farm machinery meets most of the demand in the absence of adequate domestic manufacturing.
Petroleum tanker owners protest hike in VAT rate
Petroleum tanker owners have protested the government decision of raising value added tax on transportation of petroleum products. In the proposed budget for fiscal 2016-2017, the government has increased the rate of VAT to 4.5% from 2.25% now. The tanker owners, who supply petroleum products to oil depots and power projects across the country, will fall in trouble if the VAT is raised, according to a statement of Bangladesh Petroleum Tanker Owners’ Association. As most of the tankers were built with bank loans, many operators have become defaulters due to dull business amid competition and falling oil prices in the global market, it said. The hike in the VAT rate will push them towards the verge of collapse, said KM Zaman, president of the association.
Bangladesh, China sign deal to build special economic zone in Chittagong
The country’s first-ever special economic zone (SEZ) in Chittagong under G2G (government-to-government) initiative will be completely ready for Chinese investors by 2018, project insiders said. Aiming at fetching foreign direct investment (FDI) worth USD 1.0 billion, the China Economic and Industrial Zone (CEIZ) will be built on 774.0 acres of land at Anwara. It will house industries of different sectors and products, like – chemical, pharmaceutical, readymade garment, telecommunication, agricultural machinery, electronics, electrical, surgical instrument, plastic, and information technology (IT). For development of the special investment hub, Bangladesh Economic Zone Authority (BEZA) and China Harbor Engineering Company (CHEC) Ltd signed a MoU (Memorandum of Understanding) at a city hotel on Thursday.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$47.98||+1.77||+3.83%|
|Crude Oil (Brent)*||$49.17||+1.98||+4.20%|
|Dow Jones Industrial Average||17,675.16||(57.94)||(0.33%)|
|USD 1||BDT 78.37*|
|GBP 1||BDT 112.52*|
|EUR 1||BDT 88.37*|
|INR 1||BDT 1.17*|
*Currencies and Commodities are taken from Bloomberg.