Investment in national savings tools soars to BDT 264.9 billion in 10 months
The net investment in the national savings certificates and bonds in the first 10 months of the current financial year 2015-16 stood at BDT 264.9 billion and is set to surpass the revised (upward) annual target of BDT 280.0 billion at the end of the fiscal year due to the clients’ rush for the tools. Clients continue to invest heavily in the NSCs due to low bank deposit rates and sluggish business situation in recent months, an official of Directorate of National Savings told New Age on Sunday. In its fiscal budget for the FY16, the government had initially set a borrowing target of BDT 150.0 billion from the NSCs, but it revised the target in early April amid the clients’ rush for the instruments. The DNS data showed that the net investment in the national savings certificates and bonds increased by 9.77% in the July-April period of FY16 from BDT 241.3 billion during the same period of FY15. The savings instruments worth BDT 431.1 billion were sold through banks, national savings bureaus and post offices in the first 10 months of FY16 whereas the sales of the NSCs in the 10 months of FY15 were BDT 351.6 billion. In April this year, the net investment also increased by 12.05% to BDT 33.0 billion from that of BDT 29.4 billion in the same month a year ago. The net investment in the NSCs stood at BDT 32.97 billion in March, BDT 32.88 billion in February, BDT 33.1 billion in January this year and BDT 19.8 billion in December last year. The net investment in the savings tools posted record BDT 287.3 billion in last fiscal year as the clients invested a lot in the tools due to lower rate of interest on the banks’ deposit products, the DNS official said. The DNS official said that the net investment in the savings tools would make a fresh record in this fiscal year breaking the previous record of the FY15 if the existing trend continues in May and June. Banks are now offering interest rates ranging from 6.0% to 7.0% to their clients for the fixed deposit schemes. Due to the higher net investment in the national savings certificates and bonds, the government’s borrowing from the banking source decreased significantly in the first 10 months of FY16. The government made no net borrowing from the banking source in the July 1-May 17 period of FY16 but made net repayment of BDT 93.5 billion in the period.
Source: http://newagebd.net/232547/investment-in-natl-savings-tools-soars-to-BDT -26488cr-in-10-months/
Bangladesh Bank questions logic behind levying tax on banks’ commission income
The Bangladesh Bank (BB) has a fear that levying of 25.0% tax on commission for scheduled banks on sales of prize bond and different saving instruments would leave a negative impact on the government’s domestic borrowing. “It is not clear whether it is logical or legal to deduct 10% tax at source and 15.0% Value Added Tax (VAT) on commission the banks get on sales of savings tools and prize bonds,” BB Director General (DG) Md Awlad Hossain Chowdhury said in a letter to the National Board of Revenue (NBR) seeking a clarification. According to section XVII of the prize bond encashment policy, scheduled banks receive 1.0% and 0.50% commission on selling prize bonds and saving certificates respectively. However, the scheduled banks are paying corporate tax at 40.0% on their annual income that also includes earnings from the commission. With the deduction of 10.0% tax at source and 15.0% VAT, the banks are subjected to double taxation on their commission income, he said in the letter. The central bank requested the NBR to give clarification on the logic used for double taxation or double deduction of tax on commission for selling prize bonds or savings instruments. Sources concerned said the scheduled banks will be discouraged to sell prize bonds and saving tools if they are required to pay tax twice on the nominal commission income. Although all the banks are bound to sell savings instruments as per the existing policy, only a few banks are selling savings tools. The government is set to increase its borrowing target from savings instruments by 30.0% for the next fiscal year (FY) 2016-17 to finance its budget deficit.
Mega-projects to get BDT 187.0 billion
The government will announce a separate roadmap for the first time for 10 mega-projects, for which about BDT 187.0 billion will be allocated in the upcoming budget. The estimated total cost for the 10 projects is BDT 3.4 trillion, or USD 43.61 billion — which is equivalent to the proposed budget for next fiscal year. An 80-page document, “the Mega-Project – New Roadmap”, will give details of each project including the start and end dates, the economic impact of each project and the source of financing. The mega-projects’ allocations for the next three fiscal years will be specified in the budget, which will run into BDT 2.0 trillion, said a finance ministry official. The number of mega-projects may increase every year, he said, adding that the implementation status of the existing projects will be presented next fiscal year. Most of the government’s fast-track projects are included in the 10 mega-projects. Save for Padma Bridge, all other projects will be financed by bilateral and multilateral partners such as China, Japan and the Asian Development Bank. The Padma Bridge is being built with the government’s own funds, after the World Bank withdrew its USD 1.2 billion funding commitment over corruption allegations. For example, once implemented, the Padma Bridge and the Padma Rail Link projects would boost the country’s economic growth by 1.5-1.75% points. The LNG terminal project is expected not only to diversify the country’s primary energy sources but also ensure that the gas-based industries and installations do not face a sudden death in the near future. However, the project has not started in the last six years. Major infrastructure projects have a history of problems in Bangladesh, such as cost overruns, delays, failed procurement, unavailability of private financing. The WB said most overruns are foreseeable and avoidable, and many of the problems stem from a lack of professional, forward-looking risk management. Large infrastructure projects suffer from significant under-management of risk in practically all stages of the value chain and throughout the life cycle of a project.
Source: http://www.thedailystar.net/business/mega-projects-get-BDT -18700cr-1231492
Budget fixed at BDT 3.4 trillion with big pension fund allocation
The government has prepared a total budget figure of BDT 3.4 trillion for the upcoming fiscal year beginning from July keeping a sizable amount against the state liabilities including pension fund. A total of BDT 475.6 billion has been set aside with finance ministry as most of the fund will be used to fulfill the state’s various liabilities in the FY 2016-17, official sources disclosed to the Dhaka Tribune. They said the total budget size had been finalised at BDT 3.4 trillion as the budget documents had already been sent to the BG Press for printing. Finance Division officials said for the first time the pension funds would be kept with finance division under the non-development budget category. This is expected that corruption in the use of pension fund would ease due to creation of a pension fund which could be used in share markets and other business purposes. In the next fiscal year, the amount of pension fund will be BDT 173.8 billion increasing from the current fiscal’s BDT 115.8 billion. According to the budget documents, a total of 10 ministries and divisions will get 52.0% of total budget allocation while they will get 75.0% of the Annul Development Program outlay in the next fiscal year. The ministries and divisions include education, defense, home, local government, primary and mass education, health, power, railway and roads communication. “Next fiscal year’s (FY2016-17) budget outlay will be a big one, and the deficit could be nearly BDT 1.0 trillion.” According to the latest budget data, the budget deficit in next fiscal year will be BDT 972.5 billion and the interest payment will amount to BDT 382.4 billion. The highest allocation will go to the education sector as the education ministry will get BDT 268.6 billion and primary education ministry BDT 221.6 billion. It will be followed by defense ministry with BDT 221.2 billion plus BDT 291.4 million as allocation for Armed Forces Division, Local Government Division BDT 213.3 billion, Ministry of Home BDT 192.9 billion, Ministry of Health BDT 175.2 billion, Ministry of Agriculture BDT 136.7 billion, Ministry of Food BDT 120.9 billion and Power Division BDT 130.6 billion.
Nobody ready for VAT law yet: economists
Economists have thrown their weight behind the demand for implementing the new VAT law in phases and reducing rates as the businesses and the government are not fully ready to run with it from the upcoming fiscal year. Even if the government goes ahead with its plan to implement the law from fiscal 2016-17, the VAT rate should be reduced to 10% from the planned 15.0%, said AB Mirza Azizul Islam, a former finance adviser to caretaker government Framed at the prescription of the International Monetary Fund, the new law envisages a flat 15.0% value-added tax, replacing the existing disparate VAT rates. People may have to spend more for rod, edible oil and electricity, among others, as the VAT exemption for nearly 2,000 products and services as well as the privilege of reduced VAT rates would end, according to an analysis of the National Board of Revenue. The IMF approached Islam in 2008, when he was the finance adviser of the then caretaker government, offering technical assistance to reform the VAT law. He did not agree to the proposal as most businesses do not keep accounts properly. He even made mandatory the use of electronic cash register, but it was not much of a success. Zahid Hussain, lead economist of the World Bank Bangladesh, said they look forward to a clear stance on the implementation of the VAT and SD Act. Revenue collection fell short of the target for the third straight year in 2014-15, and may follow suit in the current fiscal year. Public expenditure is expected to be lower than the budget size in fiscal 2015-16, according to the WB’s latest update on Bangladesh. Inflation targets could not be reached in fiscal 2013-14 and fiscal 2014-15 before hitting the goal in the ongoing year. Although the government is saying that Bangladesh will achieve 7.05 economic growth, a number of economists have raised eyebrows. On the implementation side, major infrastructure projects have a history of problems in Bangladesh. Cost overruns, delays, failed procurement, or unavailability of private financing are common features. In the first seven months of the current fiscal year, actual spending under the annual development program was 28.4% of original planned allocation of BDT 970.0 billion, the lowest implementation rate since fiscal 2007-08.
Bangladesh Garment Manufactures and Exporters Association (BGMEA) to raise RTA issue at WTO
Bangladesh Garment Manufacturers and Exporters Association will raise its concern over regional trade agreements at the World Trade Organization today. The apex trade body for garment manufacturers said the regional trade agreements like Transpacific Partnership (TPP) signed bypassing the law of the WTO is an impediment to multilateral rules-based trading system. BGMEA will raise the issue at a meeting styled “WTO Dialogue with Business” to be held at Geneva today. The meeting is aimed at discussing the opportunities and challenges facing business people to conduct trade operations and how WTO can help deal with them. High-level representatives from a diverse range of sectors from across the world will find an opportunity to have their say. A three-member delegation led by BGMEA president Siddiqur Rahman reached Geneva to attend the business dialogue in response to the invitation of Roberto Azevedo, WTO Director General. The TPP is such an initiative recently taken by 12 developed countries representing nearly 40.0% of global GDP. The apex trade body of the apparel industry also will present the progress made so far following the collapse of Rana Plaza building to ensure workers safety and their rights. The RMG people think that the regional trade pact like TPP will limit the space for the Least Developed Countries (LDCs) and create an unfair competition. The United States remains the only developed country to deny duty-free market access to Asian LDCs though the Sub-Saharan and Caribbean LDCs enjoy duty-free market access to USA. RMG manufacturers opined that the inclusion of labour intensive manufacturing goods like apparel should be included in the 97.0% list of duty-free and quota-free products under the Hong Kong decision. The country’s RMG sector employ about 4.4 million workers.
Businesses to remain shut across country on Monday
Businesses will stay shut on Monday across Bangladesh if the government does not continue the existing package Value Added Tax provision in the new VAT act to be implemented from July 1. The leaders of business organizations have also sought Prime Minister Sheikh Hasina’s intervention in the matter. Abu Motaleb, general secretary of Baboshayee Oikko Forum, a platform of various business associations, came up with the announcement at a press conference in Dhaka on Saturday. The forum is aimed at putting pressure on the government to realise their longstanding demand for keeping the package VAT in the new VAT act. The parliament in 2012 passed the law to automate the overall VAT administration and increase revenue collection. The new law will be effective from July 1, 2016 and all levels of business have to pay a unique and single VAT rate at 15.0%. The law will have no provisions for package VAT or the truncated value-based VAT system with the introduction of the law. “If we could keep faith in Finance Minister AMA Muhith, we would not seek the prime minister’s intervention,” he said in response to a question. “If we do not get any positive response from the government on our seven-point demand, we will form human chains on May 30 [Monday], seeking intervention from Prime Minister Sheikh Hasina,” said Motaleb. All businesses will keep their business activists shut and stay in front of their respective business organizations across the country, he added. If the new VAT law is implemented, it will hurt the manufacturing sector while the import dependency will also rise due to the price hikes, said the leaders of the organisation. They also fear that harassment by the tax officials would increase as it would not be possible for small scale entrepreneurs to show their documents to get rebate on their VAT.
Muhith rules out unquestioned ‘black money’ investment in housing
Finance minister AMA Muhith on Sunday ruled out any investment of undisclosed money, widely known as black money, in the real estate sector without any question. He said there would be no change in provision of the income tax in the new fiscal year that would allow the undisclosed money holders to invest in real estate property without facing any question from the revenue board and the Anti-Corruption Commission. He said one-hour shop closing programme by the shop owners in protest against the propose VAT law was an exercise of right of the shop owners. He said he would announce his proposals for new VAT law on June 2 while delivering the budget speech. Muhith made the statement when leaders of the Real Estate and Housing Association of Bangladesh demanded amendment to the clause 19(B) of the income tax ordinance 1984 during a pre-budget parley at the secretariat. At present, the government has allowed investment of the undisclosed money in a number of sectors including real estate. But such investment is not beyond questions. Earlier, the realtors demanded that no question should be raised about investment of undisclosed money in the real estate sector for the next 5 years. They argued that huge amount of money was smuggled out of the country every year as the government did not allow investment of undisclosed money in the sector without any question. The REHAB leaders said tax collection would be bolstered if the investors are allowed to invest undisclosed money without facing any question from any government agencies. They also placed another dozen of demands including long-term recapitalization funds at single digit interest rate from Bangladesh Bank, reducing registration cost to 7.0%, cutting gain tax to 4.0% from existing 15.0%, reduction of income tax of the real estate businessmen and creation of fund for the public servants at low interest rate to be used for housing purposes.
NBFIs allowed to issue commercial paper to collect fund
Bangladesh Bank on Sunday set guidelines on the issuance of commercial paper by non-bank financial institutions so that they (NBFIs) can collect fund from banks, corporate groups and other NBFIs through issuing the instrument. The BB issued a circular on the day saying that the NBFIs were not allowed to receive demand deposit like banks and were not permitted to receive term deposits of less than 3 months and so they often faced difficulties in meeting short-term demand for fund. In order to meet the shortage of fund, the NBFIs depended on bank borrowing and call money market, the circular said. Now the NBFIs will be able to reduce this dependency by collecting fund directly from fixed income seekers through issuing commercial paper. The NBFIs will also be allowed to act as investor, guarantor and issuing and paying agent of commercial paper. According to the guidelines, the commercial paper is a promissory note with a maturity of not less than 30 days and not more than one year that is sold at a fixed rate of interest. To ensure the investors’ interest, commercial paper will be backed by guarantee given by a NBFI or a bank. A commercial paper is an instrument which is used by an NBFI to take loan from a bank, another NBFI or a corporate group while another bank or NBFIs has to act as a guarantor in favor of the commercial paper-issuing financial institution. The NBFIs which will purchase the commercial paper will receive the amount of loan from the IPA bank or NBFI, if the institution concerned fails to repay the loan in due time. The commercial paper provides a convenient financing method because it allows issuers to avoid the difficulties and expenses of business loans. Issuance of commercial paper will help to develop and broaden money market and will widen the option for investments. The guidelines said that the NBFIs would be able to collect fund at a lower cost from bank and financial institutions (NBFIs) that would also play a role in eliminating the short-term mismatch of assets and liabilities faced by the NBFIs. The total investment in commercial paper by any NBFI will not exceed 30.0% of its total capital, but no NBFI will invest more than 10.0% of its total capital in a single company’s commercial paper. The equity of the company, in which FIs intend to invest, will not be less than BDT 300.0 million. The NBFIs will have to obtain post-facto approval from the BB within 10 days after investing in commercial paper. The paid up capital of NBFIs, which will issue commercial paper, will be BDT 1.0 billion or more or as set by the BB from time to time, the guidelines said. The classified loans of the commercial paper-issuing NBFIs will not cross 5.0% and their CAMELS rating will be at least 3 for the last three consecutive half-yearly reports.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$49.34||+0.01||0.02%|
|Crude Oil (Brent)*||$49.21||(0.11)||(0.22%)|
|Dow Jones Industrial Average||17,873.22||+44.93||+0.25%|
|USD 1||BDT 78.33*|
|GBP 1||BDT 114.50*|
|EUR 1||BDT 86.98*|
|INR 1||BDT 1.17*|
*Currencies and Commodities are taken from Bloomberg.