Banks to lower interest rates
Both public and private banks have decided to lower lending rates to single digits from July 1 — a move that comes weeks after the government showered them with a raft of privileges, drawing criticism from different quarters. There will also be a cap on the deposit rates so that those remain in tune with the lending rates. Private banks have set the deposit rates at 6 percent while the public ones are yet to decide on it. A number of economists have welcomed the move but cast doubts on its implementation. They also pointed out that the cut in deposit rates will affect savers. The finance minister, at a meeting at his secretariat office, directed the chief executives of state-owned banks to keep the lending rates below 10 percent. According to meeting sources, the officials of the state banks told the minister that the government should fix the interest rates on government deposits with the banks, and also reduce the interest rates of up to 11 percent on savings instruments. At a separate meeting, the owners of private commercial banks decided to bring down the lending rate to 9 percent and deposit rate to 6 percent from next month. The decision came at an emergency meeting of Bangladesh Association of Banks (BAB) in the capital. Currently, private banks’ lending rates hover between 10 and 16 percent while savings deposit rates are below 6 percent. But the fixed deposit rates on schemes for three months to three years are between 5 and 10 percent. The rates are above 10 percent in a few banks. However, interest rates on all types of deposit schemes in state banks are between 3 percent and 6 percent. Their lending rates vary from 11 percent to 13 percent. The move will cost the government around Tk 1,000 crore in lost revenues.
Buying spree lifts stocks
The Dhaka stocks rose 0.74 percent yesterday thanks to a buying spree for undervalued shares. DSEX, the benchmark index of the premier bourse, gained 39.90 points before finishing the day at 5,384.87. The share price of many good companies is undervalued now, which has prompted big and foreign investors to be active in the market, the managing director of a leading merchant bank said requesting anonymity. The finance minister’s proposal to cut corporate tax for listed banks, financial institutions and insurance companies has encouraged many to invest in these companies’ shares. The Bangladesh Association of Bankers (BAB) has taken a decision to cut the interest rate for lending to a single digit from the next month, which may boost the capital market. Turnover, another important indicator of the market, also jumped 6.48 percent to Tk 676.97 crore, with 13.17 crore shares and mutual fund units changing hands on the DSE. Of the traded issues, 204 advanced, 90 declined and 43 closed unchanged on the premier bourse. Among the major sectors, the financial institutions increased 1.91 percent, followed by engineering that rose 1.31 percent, fuel and power 1.07 percent and the mutual funds 0.59 percent.
As market tumbles, low-profile stocks see abnormal rise
After the share prices of Monno Jute Stafflers Ltd had risen by 111 per cent in less than one month on the Dhaka Stock Exchange, market regulator Bangladesh Securities and Exchange Commission on April 23 formed an investigation committee to look into the unusual price hike. As the BSEC’s probe crawls, the share prices of the small-capitalised company rose by another 100 per cent in two months till Wednesday, taking the total rise in three months to 316 per cent. The BSEC’s probe also included unusual share price hike of three other companies — Renwick Jajneswar & Co, Stylecraft Limited and Alif Industries Limited, but the share prices of the companies are increasing continuously till now. The shares of Monno Jute Stafflers were traded at Tk 787.6 each on March 29 but with a sudden jump, the share prices of the company rose to Tk 1,658 on April 23 that prompted the BSEC to launch the probe. Monno Jute Stafflers is one of the 22 companies with low paid-up capital, which rose unusually in last three months when the DSE’s key index, DSEX, witnessed a relentless fall. Another Monno Group company, Monno Ceramics with Tk 25 crore in paid-up capital also witnessed huge rise in its share prices in April-June. Its share prices started rising steadily in October last year before jumping to Tk 252 on Wednesday from Tk 127 on April 30 this year. The DSE key index, DSEX, lost around 458 points from April 19 till Wednesday. Apart from the Monno companies, Eastern Lubricants (28 per cent), Legacy Footwear (58 per cent), Usmania Glass Sheet Factories (31 per cent), Renwick (18 per cent) and JMI Syringes & Medical Devices Ltd (23 per cent) soared in recent days without any price sensitive information. Libra Infusion witnessed a 102-per cent jump in its share prices in last eight consecutive sessions despite the fact that the company declared huge loss for the third quarter (January-March) with earnings per share standing at negative Tk 12.13 compared with that of Tk 4.10 in the same period in the previous year. The share prices of BD Autocars and Pharma Aid skyrocketed by 117 per cent and 50 per cent in last nine trading sessions. Besides, the share prices of low paid-up companies including Ambee Pharmaceuticals, Modern Dying, SinoBangla Industries soared more than 30 per cent in last month while the prices of Aziz Pipes, Style Craft, Kay & Que and Rahim Textiles advanced more than 20 per cent in the same period.
New partnership to bridge revenue data gap
The tax authorities are going to establish an institutional partnership for addressing the discrepancy in revenue collection data by the board and Controller General of Accounts (CGA) office. Recently, the National Board of Revenue (NBR) has formed a high-powered body to implement the plan. Earlier, the NBR had formed such reconciliation committee, which remains inactive. The gap between the NBR and the CGA data was widening almost every year. The gap was only Tk 29.23 billion during the fiscal year, 2010-11, which rose to Tk 126 billion during FY 2014-15. In fiscal 2015-16, the gap declined to Tk 73.73 billion before doubling during the fiscal year, 2016-17. The NBR recorded Tk 1.85 trillion aggregate revenue collection during FY 2016-17. In contrast, the CGA found the actual collection for the year to be Tk 1.71 trillion. The gap in revenue collection figure is hampering the government’s expenditure In the meeting, the NBR chief instructed all field-level commissioners to prepare final and reconciled revenue collection data for the outgoing fiscal year (FY), 2017-18, by June 27-28. In the meeting, the NBR has decided to send letters to the BB and Sonali Bank to ensure area-wise specific account code before receiving the tax. The committee will try to resolve the issues causing data mismatch between the two agencies.
Subsidy outlay to spiral 80pc
Subsidy expenditure is set to increase 80.26 percent to Tk 37,804 crore in fiscal 2018-19 as the government looks to bankroll lower gas and fuel prices keeping an eye on the national election due to be held at the end of this year. The government is planning to subsidize gas price for the first time next fiscal year as it is importing liquefied natural gas at a rate much higher than that of the locally produced gas. The first consignment of imported LNG has arrived and will be added to the national grid in a couple of weeks’ time. As soon as it is blended with local gas, the price will shoot up. The per unit cost of imported LNG is Tk 25.17; after adding tax and regasification charges the total cost comes to Tk 33.44, according to Petrobangla. The cost of production for per unit of gas would be Tk 14.64 when LNG and local gas are blended. The average retail price of gas supplied by Petrobangla from domestic sources is Tk 7.39 per cubic metre. The finance ministry has kept aside Tk 5,500 crore for subsidizing gas price, up from Tk 2,500 crore in the outgoing year. Next fiscal year, Tk 5,000 crore is being kept in the ‘other heads’ column if the Bangladesh Petroleum Corporation’s losses continue. BPC’s profit plummeted 45 percent in the first 10 months of the fiscal year to Tk 3,995 crore due to the government’s resistance to adjusting the domestic prices with that of the global market. Subsidies to the agriculture sector has been raised to Tk 9,000 crore from Tk 6,000 crore, while export and jute goods subsidy has been kept the same at Tk 4,500 crore. In the next fiscal year, food subsidy will be Tk 4,606 crore, which was Tk 2,729 crore this fiscal year.
Contract with Chinese consortium for Khulna 330 MW plant faces termination
Contract with a Chinese consortium for constriction of Khulna 330 MW dual-fuel combined cycle power plant is going to face termination as the contractor failed to arrange required fund for the project. According to official sources, the government signed a contract on November 17 in 2016 with the Chinese Consortium of Harbin Electric International Co. Ltd. (HEI), and Jiangsu Etern Co. Ltd., to set up the plant’s simple cycle unit within 15 months (450 days) and combined cycle unit within 30 months (900 days). The total cost of the project is about $400 million, equivalent to Tk 3,253 crore. Of this, the Chinese Exim Bank was supposed to provide $304 million, equivalent to Tk 2370 crore. As per the contract with the government, the bidder will have to arrange at least 85 per cent of the turnkey contract amount by its own initiative. The remaining Tk 1,240 crore will be financed by the Bangladesh government. The state minister for power and energy, decided to terminate the contract with Chinese consortium if it failed to arrange the Chinese Exim Bank’s promised loan of $281 million within 2 months. Following the decision of the meeting, the state-owned Power Development Board sent a letter to the Chinese consortium giving 10 days’ time to ensure the financing of the project by making the project’s financial closing within June 20. It was learnt that the Exim Bank sent a draft loan agreement which the Bangladesh government approved with some amendments and sent it back to the Exim Bank. The PDB also sent a letter to the bidder consortium to execute the loan agreement as per amendments.
Digital service providers demand tax holiday
Seven digital service related trade bodies yesterday termed the proposed budget unfriendly towards the sector and demanded full withdrawal of VAT along with the other taxes and surcharges from internet usage. The associations also called for reforming the tax structure for digital services and tax holidays for internet-related businesses for the next 10 years at least, which will help the sector flourish. Currently, there is a 21.75 percent tax on customers for internet usage. “To become a digital society this tax burden needs to be withdrawn.” The government is earning about Tk 1,100 crore from value-added tax on internet usage. If the amount is forfeited for two years it will yield the government about Tk 5,000 crore every year. On the budget day, the NBR issued a statutory regulatory order listing 10 conditions for assemblers, failing which a 15 percent VAT would be imposed on the handsets assembled. The total tax would be about 34.2 percent if the 15 percent new tax is added with 18.8 percent VAT that the local assemblers now pay. The import tariff for mobile handsets is 31.1 percent now.
Local and Global Stock Indices *
|Index Name||Close Value||Value Change||Percentage Change|
World Commodities *
|Commodity||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)||$65.50||↑0.68||↑1.05%|
|Crude Oil (Brent)||$74.34||↓0.91||↓1.21%|
Major Currencies Exchange Rates Movement in Last Seven Days *
|USD 1||BDT 84.11|
|GBP 1||BDT 110.67|
|EUR 1||BDT 97.24|
|INR 1||BDT 1.23|
*CURRENCIES AND COMMODITIES ARE TAKEN FROM BLOOMBERG.