Spread in bank interest rates widens further
The existing spread between interest rates in the country’s banking sector widened further as the commercial banks cut interests on public deposits far deeper than on lending, bankers said. Such imbalance in rate adjustments, according to economists, is meant for keeping banks’ profit margins higher. The weighted average spread between lending and deposit rates offered by the commercial banks rose to 4.86% in March 2016 from 4.81% in the previous month, according to the central bank’s latest statistics. The spread was 4.84% in January 2016. On the other hand, the weighted average rates on deposits came down to 5.92% in March from 6.10% in the previous month while interest rates on lending dropped to 10.78% from 10.91%.
IMF lowers GDP growth forecast for Bangladesh for FY2016
After the World Bank, this time the International Monetary Fund has lowered its economic growth forecast for Bangladesh for this year. In the latest Regional Economic Outlook: Asia and Pacific report released yesterday, IMF projected 6.6% GDP (Gross Domestic Product) growth for this year from 6.8% as forecasted in its October World Economic Outlook report. It said the growth in frontier economies and small states has, on average, been relatively robust and steady over the past couple of years though there have been variations. The report said frontier economies and small states are expected to continue to record steady growth. “Bangladesh’s growth is expected to accelerate to 6.6% in 2016 and 6.9% in 2017, helped by lower commodity prices and strong investment in the manufacturing sector.” Last month, the World Bank had downgraded economic growth to 6.3% from 6.7% as forecasted in January for the country. The IMF projection, however, is closest to the Asian Development Bank’s forecast of 6.7% but far from the government’s 7.05%. In sharp contrast, the government has revised its upward GDP growth forecast to 7.05% from 7% for this fiscal year as it claimed that the GDP growth has already exceeded 7% in the first nine months of the current fiscal year.
Inflation down in April by BBS count
Inflation on point-to-point basis declined marginally in April as the country witnessed a consumer price index (CPI) fall both in food and non-food categories, an official count showed. Bangladesh Bureau of Statistics (BBS) data, unveiled by Planning Minister AHM Mustafa Kamal Tuesday in Dhaka, showed the month-on-month inflation having fallen in April to 5.61% from the previous month’s 5.65%. After the day’s ECNEC meeting, the minister said inflation fell last month due to falling prices of rice, and other food prices alongside some noon-food items, too. At the national level, the BBS data showed, point-to-point non-food inflation dropped 0.02%age points to 8.34% in April from 8.36% in March. Inflation on account of food items also fell 0.05%age points to 3.84% compared to previous month’s rate of 3.89. Mr Kamal said the trend of inflation would see a downturn in the coming months with the inflation rate hovering around the targeted 5.50%age points.
VAT default by four state-owned oil firms: Legal proceedings begin to freeze their bank accounts
The National Board of Revenue (NBR) has started legal proceedings relating to the freezing of bank accounts of four companies under Bangladesh Petroleum Corporation (BPC) for non-payment of VAT arrears worth BDT 26.89 billion. As a part of the process, officials said, the Value Added Tax (VAT) wing of the NBR has served two notices on the state-owned companies to clear the overdue tax or face legal action. Under section 56 of the existing VAT law 1991, VAT officials can get bank accounts of a company frozen for non-payment of arrears. Before freezing the bank accounts, the VAT officials have to serve two notices on the company in default. The Chittagong Customs, VAT and Excise Commissionerate issued a final notice recently on each of the four oil companies to pay the dues within this week to avoid the freezing of their bank accounts. Padma Oil Company, Meghna Petroleum, Jamuna Oil and Standard Asiatic Oil Company Limited owe an aggregate amount of BDT 20.18 billion to the state exchequer. The arrears were found having accumulated in the period between July 2013 and June 2015. The oil-marketing companies also had defaulted on payment of BDT 6.71 billion until February of the current fiscal year.
New VAT law to fuel living costs
Prices of many goods and services will soar, while various local industries will face increased competition with imported goods once the new VAT and supplementary duty law comes into effect in July. Framed at the prescription of the International Monetary Fund, the new law envisages a flat 15% value-added tax, replacing different rates of VAT. The revenue authority shared the views in a document presented to the government high-ups, including Finance Minister AMA Muhith, citing the challenges of the new law. However, the new law will boost the state’s revenue collection by as much as 20.0% from BDT 322.8 billion in fiscal 2014-15, finance ministry officials said. People may have to spend more for MS rod, edible oil and electricity, among others, after the VAT exemption for nearly 2,000 products and services as well as the privilege of reduced VAT rates end. Under the new law, the VAT waiver benefit will be limited to certain products such as basic foodstuffs, selected life savings drugs, public transport, public health, education and farming.
Electricity production starts at Summit’s Barisal plant
Summit Barisal Power Ltd, an associate company of Summit Power Limited, started commercial production of electricity in April, two months before the schedule. Summit started the BDT 575-crore project to produce 120MW of power in the first private power plant in Barisal in March last year, said Muhammed Aziz Khan, chairman of Summit Power Ltd. The plant will supply 110MW of electricity to the national grid, he said. The main power generation machinery of the plant was imported from Wartsila Finland, said SM Ali Ahsan, plant manager of Summit Barisal Power Ltd. The plant will help reduce outages, said Abdul Wadud, managing director of Summit Power Ltd.
World Stock and Commodities
|Index Name||Close Value||Value Change||Percentage Change|
|Crude Oil (WTI)*||$43.57||(0.08)||(0.18%)|
|Crude Oil (Brent)*||$44.88||(0.09)||(0.20%)|
|Dow Jones Industrial Average||17,750.91||(140.25)||(0.78%)|
|USD 1||BDT 78.40*|
|GBP 1||BDT 113.88*|
|EUR 1||BDT 90.03*|
|INR 1||BDT 1.18*|
*Currencies and Commodities are taken from Bloomberg.