ACU
1974
Asian Clearing Union ANNUAL REPORT 2015
Submitted to: The 45th Meeting of the ACU Board of Directors held by Central Bank of Myanmar Nay Pyi Taw- Myanmar June 04, 2016 ANNUAL REPORT 2015
Board of Directors at the 44th ACU Meeting
June 13, 2015 Dhaka - Bangladesh
II Board of Directors at the 44th ACU Meeting ANNUAL REPORT 2015
Participants at the 44th Meeting of the ACU Board of Directors
June 13, 2015 Dhaka - Bangladesh
III Participants at the 44th ACU Meeting ANNUAL REPORT 2015
Board of Directors
Atiur Rahman Dasho Penjore* Raghuram Rajan Governor1, Governor, Governor, Bangladesh Bank Royal Monetary Reserve Bank of India Authority of Bhutan
* From 07.12.2015
Valiollah Seif Azeema Adam Kyaw Kyaw Maung Governor, Governor, Governor, Central Bank of I.R. of Iran Maldives Monetary Central Bank of Myanmar Authority
Chiranjibi Nepal* Ashraf Mahmood Arjuna Mahendran* Governor, Wathra Governor2, Nepal Rastra Bank Governor, Central Bank of Sri Lanka
* From 19.03.2015 State Bank of Pakistan * From 26.01.2015 1 H.E. Mr. Fazle Kabir acts as Director since 20.03.2016. 2 H.E. Mr. Indrajith Coomaraswamy acts as Director since 04.07.2016. IV Board of Directors ANNUAL REPORT 2015
Alternate Directors
Shitangshu Kumar Eden Dema Shri S.K. Bal Sur Chowdhury Deputy Governor, Chief General Manager1, Deputy Governor, Royal Monetary Authority Reserve Bank of India Bangladesh Bank of Bhutan
Gholamali Kamyab Mariyam Hussein Didi Set Aung Vice Governor, Assistant Governor, Deputy Governor, Central Bank of I.R. of Iran Maldives Monetary Central Bank of Myanmar Authority
Bhisma Raj Dhungana Saeed Ahmad R.A.S.M. Dayaratne* Acting Executive Director, Deputy Governor, Director2, Nepal Rastra Bank State Bank of Pakistan Central Bank of Sri Lanka
* From 06.03.2015 1 Mr. Rudra Narayan Kar acts as Alternate Director since 06.05.2016. 2 Mr. D. Kumaratunge acts as Alternate Director since 20.04.2016.
V Alternate Directors ANNUAL REPORT 2015
Offi cers-in-Charge
Kazi Sayedur Rahman Jai Narayan Pradhan Shri N. Senthil Kumar General Manager1, Director2, Deputy General Manager3, Bangladesh Bank Royal Monetary Reserve Bank of India Authority of Bhutan
Rasoul Sajjad* Aishath Nadhiya Than Than Swe* Director, Manager, Acting Director General, Central Bank of I.R. of Iran Maldives Monetary Central Bank of Myanmar
* From 19.08.2015 Authority * From 24.11.2014
Ramesh Sharma* Saleem Ullah A M Gunathilake Assistant Director, Director, Deputy Director, Nepal Rastra Bank State Bank of Pakistan Central Bank of Sri Lanka
* From 26.11.2015
1 Mr. Md. Azizur Rahman acts as Offi cer-in-Charge since 20.07.2016. 2 Ms. Rinzin Lhamu acts as Offi cer-in-Charge since 01.07.2016. 3 Mr. K Vijayakumar acts as Offi cer-in-Charge since 06.05.2016. VI Offi cers-in-Charge ANNUAL REPORT 2015
Contents
Administrative Organization, 2015 ...... 1 Board of Directors, 2015 ...... 2 Offi cers-in-Charge, 2015 ...... 3 Letter of Transmittal to the Board of Directors ...... 4 Global Economic Prospects and Challenges ...... 5 Economic Highlights of ACU Member Countries ...... 17 Country Performance ...... 30 Bangladesh ...... 30 Bhutan ...... 42 India ...... 53 Iran ...... 73 Maldives ...... 92 Myanmar ...... 99 Nepal ...... 107 Pakistan ...... 119 Sri Lanka ...... 143 Auditor’s Report ...... 157 ACU Operations ...... 158 Clearing Operations ...... 158 Credit Positions ...... 159 Debit Positions ...... 159 Net Credit/Debit Positions ...... 160 Interest Received/Paid ...... 160 Swap Facility ...... 161 Cotribution to Growth ...... 161 Measures and Achievements ...... 161 Tables ...... 164 Acronyms and Abbreviations ...... 187
VII Contents ANNUAL REPORT 2015
Asian Clearing Union Administrative Organization, 2015
Atiur Rahman Chairman of the Board of Directors Governor of Bangladesh Bank
Lida Borhan-Azad Secretary General
Secretariat Office Address: No. 47, 7th Negarestan Alley, Pasdaran Ave., P.O. Box 15875/7177 Tehran, Islamic Republic of Iran Phone: (+98 21) 22842076, 22854509 Fax: (+98 21) 22847677 Swift: BMJIIRTHACU E-mail: [email protected] Website: www.asianclearingunion.org
Agent Bank Central Bank of Islamic Republic of Iran
1 Administrative Organization, 2015 ANNUAL REPORT 2015
Asian Clearing Union
Board of Directors, 2015
Bangladesh Bank Dr. Atiur Rahman Governor, (Director) Mr. Shitangshu Kumar Sur Chowdhury Deputy Governor, (Alternate) Royal Monetary Authority of Bhutan Mr. Dasho Penjore* Governor, (Director) * From 07.12.2015 Ms. Eden Dema Deputy Governor, (Alternate) Reserve Bank of India Dr. Raghuram Rajan Governor, (Director) Mr. Shri S.K. Bal Chief General Manager, (Alternate) Central Bank of Islamic Republic of Iran Dr. Valiollah Seif Governor, (Director) Mr. Gholamali Kamyab Vice Governor, (Alternate) Maldives Monetary Authority Dr. Azeema Adam Governor, (Director) Ms. Mariyam Hussein Didi Assistant Governor, (Alternate) Central Bank of Myanmar Mr. Kyaw Kyaw Maung Governor, (Director) Mr. Set Aung Deputy Governor, (Alternate) Nepal Rastra Bank Dr. Chiranjibi Nepal* Governor, (Director) * From 19.03.2015 Mr. Bhisma Raj Dhungana Acting Executive Director, (Alternate) State Bank of Pakistan Mr. Ashraf Mahmood Wathra Governor, (Director) Mr. Saeed Ahmad Deputy Governor, (Alternate) Central Bank of Sri Lanka Mr. Arjuna Mahendran* Governor, (Director) * From 26.01.2015 Mrs. R.A.S.M. Dayaratne* Director, (Alternate) * From 06.03.2015
2 Board of Directors, 2015 ANNUAL REPORT 2015
Asian Clearing Union
Officers-in-Charge, 2015
Bangladesh Bank Mr. Kazi Sayedur Rahman General Manager, Forex Reserve and Treasury Management Dept. Royal Monetary Authority of Bhutan Mr. Jai Narayan Pradhan Director, Payment and Settlement Systems Dept. Reserve Bank of India Mr. Shri N. Senthil Kumar Deputy General Manager, External Investments and Operations Dept. Central Bank of Islamic Republic of Iran Dr. Rasoul Sajjad* Director, International Dept. * From 19.08.2015 Maldives Monetary Authority Ms. Aishath Nadhiya Manager, Foreign Exchange Section Central Bank of Myanmar Ms. Than Than Swe* Acting Director General, Financial Supervisory Dept. * From 24.11.2014 Nepal Rastra Bank Mr. Ramesh Sharma* Assistant Director, Foreign Exchange Management Dept. * From 26.11.2015 State Bank of Pakistan Mr. Saleem Ullah Director, Finance Dept. Central Bank of Sri Lanka Mr. A. M. Gunathilake Deputy Director, Payments and Settlements Dept.
3 Officers-in-Charge, 2015 ANNUAL REPORT 2015
Letter of Transmittal to the Board of Directors
June 04, 2016
The Honorable Mr. Kyaw Kyaw Maung Chairman of the Board, Governor, Central Bank of Myanmar, Yangon, Myanmar
Dear Mr. Chairman,
I have the honor to present to the Board of Directors, the Annual Report of the Asian Clearing Union (ACU) for the year 2015, duly signed by me, in accordance with Chapter III, Article VIII, Section 3(c) of the Agreement Establishing the Asian Clearing Union.
Yours sincerely,
Lida Borhan-Azad Secretary General, ACU
4 Letter of Transmittal to the Board of Directors ANNUAL REPORT 2015
Global Economic Prospects and Challenges1
An overview
The world output growth remained Commodity prices (oil and non-fuel) dropped moderate in 2015 as a result of steady sharply. As oil and non-fuel prices fell by growth in advanced economies and slower USD 47.20 and 17.50 in 2015. It is estimated pace in emerging market and developing that the sluggish trend to moderate in 2016. economies. In 2015, growth rates were 1.90 and 4.00 percent for advanced economies, World trade volume (goods and services) and emerging market and developing reflects 2.80 percent growth rate in 2015. economies, respectively. Global output stood Based on a projection, it will increase by at 3.10 percent in 2015, 0.30 percentage 3.10 percent in the next year. The growth of points more than the previous year. Global exports and imports in advanced economies is Gross Domestic Product (GDP) is expected predicted to be around 3.40 and 4.30 percent to increase slightly to 3.20 percent in 2016. in 2015. Emerging markets and developing Although it is forecast that the trade volume economies experienced sharp fall in both will shrink in advanced economies, but bright exports and imports over the year. outlook of trade volume for emerging markets and developing economies could stimulate Economic outlook varies across economies. the global output. The growth performance in the United States (U.S.), Euro area and Japan led to increase in Inflation rate declined in advanced the advanced economies growth as it reached economies by 0.30 percent in 2015 compared to 1.90 percent in 2015, compared to 1.80 to 1.40 percent in the last year. In contrast, percent a year ago. The economic activity in emerging market and developing economies emerging markets and developing economies encountered with 4.70 percent inflation rate grew to 4.00 percent in 2015, which is 0.60 in 2015, unchanged relative to the preceding percentage points less than the prior year. year.
1 This summary report is based on World Economic Outlook (WEO-April 2016), International Monetary Fund.
5 Global Economic Prospects and Challenges ANNUAL REPORT 2015
Consumer prices dropped remarkably to in the U.S.. Emerging market economies is 0.30 percent, from 1.40 percent in 2014, expected to face with a stronger performance in advanced economies. Over the same in 2017. Prediction reflects a return back to period, the rate remained unchanged at 4.70 positive growth in both Latin America and percent in emerging market and developing the Commonwealth of Independent States economies. (CIS) and a substantial pickup in growth in Sub-Saharan Africa (SSA). These Global Prospects and improvements offset the expected ongoing slowdown in China. Across the advanced Challenges economies, growth is forecast to increase slightly as a result of fall in Japan’s growth. The global output is estimated to grow by 3.20 and 3.50 percent during 2016/17. The U.S. is expected to grow by 2.40 percent Emerging market and developing economies during 2016/17. The moderate pace in growth will still have the higher share in world comes mainly from strengthening balance growth, as their growth rate is forecast to sheets, no further fiscal drag in 2016 and be around 4.10 and 4.60 percent over these improving housing market. In 2016, it is a years. Weakness in oil-exporting countries; a forecast that inflation rate will rise to 0.80 moderate slowdown in China (0.40 percentage percent from 0.10 percent in a year ago amid point), where growth continues to shift away a tightening labor market; even though the from manufacturing and investment; and a US Dollar appreciation and pass-through still-weak outlook for exporters of non-oil from lower oil prices are posing downward commodities, including in Latin America, pressure on prices. following further price declines; are the most important factors for the modest growth of In the Euro area, the projection of output emerging market and developing economies. growth remains at 1.50 and 1.60 percent over 2016/17. Estimations of inflation rate in Euro Oil-importing emerging market economies area, reflects an upward trend of 0.40 percent gain from terms-of-trade but in some cases in 2016 and 1.10 percent in the year after, face with tighter financing conditions compared to 0.00 percent in 2015. and weakness in external demand, which dampen the positive effect of the terms-of- In Japan, economic activities are expected trade on domestic demand and growth. The to remain at 0.50 percent in 2016, prior to moderate growth in advanced economies is turning to negative growth of 0.10 percent in mainly driven by lower energy prices and 2017. The slowdown comes from the recent accommodative monetary policies and the appreciation of the Yen and weaker demand expected gradual Federal Reserve tightening from emerging market economies. Inflation
6 Global Economic Prospects and Challenges ANNUAL REPORT 2015 rate is forecast to decline by 0.20 percent in percent in 2016, declining to 3.30 percent 2016, owing to lower energy prices and the in the next year. The region’s activity has strengthening of the Yen. benefited from lower oil prices and gradual recovery in the euro area, but risen corporate The UK observes a growth rate of 1.90 and debt adversely affected private investment. 2.20 percent during 2016/17, due to positive The economic activity is forecast to grow by effect of domestic private demand led by 3.80 percent in 2016, in Turkey. Hungary’s lower energy prices and a buoyant property growth is expected to be moderate as the market. effects of the high absorption of European Union funds gradually dissipate by 2.30 Amongst advanced economies, Canada is percent in 2016. estimated to grow by 1.50 percent in 2016, compared to 1.20 percent in the previous Projections for Latin America and the year. Caribbean (LAC) economies indicate a negative growth of 0.50 percent in 2016 The outlook for the CIS will not be promising, which is 0.40 percentage points lower than because of the recession in Russia and its the prior year. Brazil’s economy will pick adverse effects on the region as well as the up by 3.80 percent in 2016, while Mexico is effect of lower oil prices on oil-exporting anticipated to grow at a modest pace of 2.40 countries. In Russia, growth is projected to be percent in 2016. negative at around 1.80 percent in 2016. Other CIS economies will experience a positive The Middle East, North Africa, Afghanistan performance, as the growth rate is expected to and Pakistan (MENAP) region adversely be 0.90 and 2.30 percent during 2016/17. affected mainly by sharp fall in oil prices. GDP growth for the region is estimated to In the emerging and developing Asia, China’s reach 3.10 and 3.50 percent over 2016/17. growth is forecast to be 6.50 percent in 2016, Saudi Arabia and United Arab Emirates are which is 0.40 percentage points lower than projected to observe lower GDP growth rate the last year. Private consumption caused by in 2016. In contrast, expectations of economic lower energy prices and higher real income activities for Iran and Iraq depict a positive as well as recovery of private investment performance. are drivers of promising outlook for India. It is anticipated that India will grow by 7.50 The perspective for SSA is predicted percent in 2016 and a year after. to remain weak at 3.00 percent in 2016, led by unfavorable external In the emerging and developing Europe, GDP conditions, decline in commodity prices is predicted to remain steady at around 3.50 and tighter global financing conditions.
7 Global Economic Prospects and Challenges ANNUAL REPORT 2015
Oil-exporting countries are forecast to grow predicted to be about 2.00 percent, adversely at 2.00 and 3.40 percent during 2016/17. affected by an aging population and low total The impact of the decline in oil prices on factor productivity growth. oil-importing countries has been smaller. In 2016, inflation in the U.S. is projected to In 2016, performance differs across the Asian increase to 0.80 percent, compared to 0.10 Clearing Union (ACU) member countries. percent a year ago amid a tightening labor The economic growth for Bangladesh, market, even though Dollar appreciation Bhutan, India, Iran, Maldives, Myanmar, and pass-through from lower oil prices are Nepal, Pakistan and Sri Lanka is expected to causing prices to fall. Over the medium-term, be around 6.60, 8.40, 7.50, 4.00, 3.50, 8.60, Consumer Price Index (CPI) is projected to 0.50, 4.50 and 5.00 percent, respectively. pick up to 2.25 percent. Growth perspective in 2017 will be promising for the ACU countries. Bangladesh, Bhutan, In the U.S., an expansion of the earned Maldives, Myanmar, Nepal and Pakistan will income tax credit; an increase in the federal grow faster. minimum wage; stronger family benefits (including child care assistance); and a Regional Economic comprehensive, skills-based immigration reform are required to enhance the labor Outlook supply. Enhanced infrastructure spending and innovation incentives are necessary for The United States and Canada boosting investment in the short-term and productivity in the medium-term. Growth is forecast to remain in the U.S. at a moderate pace, driven by sound balance The increase in the federal funds rate in the sheets, no further fiscal drag in 2016, and an middle of December reflected a stronger improving housing market. These factors are U.S. economy. A broad range of indicators likely to offset the drag to net exports led by depict a notable improvement in the labor the strengthening of the Dollar and slower market, along with signs of firming wage growth in trading partners, the decline in and price pressures. The pace of further rate energy investment, weaker manufacturing, increases should be gradual. and tighter domestic financial conditions for some sectors of the economy (for example, The bipartisan budget agreement of oil and gas and related industries). In 2016, December 2015 diminished immediate growth is expected to be 2.40 percent, with a risks related to fiscal risk-taking, but further modest pickup in the year after. The outlook fiscal efforts are required to stabilize the for growth are weaker, with potential growth debt-to-GDP ratio over the medium-term as
8 Global Economic Prospects and Challenges ANNUAL REPORT 2015 interest rates gradually rise and the country’s and eroding skills due to high long-term demographic transition intensifies. unemployment), aging effects, and slow total factor productivity growth. In Canada, growth is anticipated to improve to 1.50 percent in 2016, with the drag from GDP in the euro area is forecast to grow by the energy sector offset partially by a more 1.50 percent in 2016 and 1.60 percent in competitive currency and an expected increase 2017 and remain around 1.50 percent in the in public investment, before it rises to 1.90 medium-term. Growth is expected to rise percent in 2017. slightly in Germany (to 1.60 percent by 2017), France (to 1.10 percent in 2016 and 1.30 Inflation rate in Canada, observed a downward percent in 2017), and Italy (to 1.00 percent trend during 2014/15, from 1.90 to 1.10 in 2016 and 1.10 percent in 2017). Growth in percent. The trend appears to be going in the Spain is projected to soften (to 2.60 percent reverse direction over the next two years, as in 2016 and 2.30 percent in 2017). Activity it is expected to pick up from 1.30 to 1.90 is forecast to decelerate in Portugal (to 1.40 percent. percent in 2016 and 1.30 percent in 2017), while Greece is expected to return to growth Among advanced economies, the U.S. faced in 2017 after contracting further this year. In with growing current account deficit from the United Kingdom (UK), growth (forecast negative 2.20 to 2.70 percent of GDP during at 1.90 percent in 2016 and 2.20 percent in 2014/15. Predictions indicate the higher 2017) is expected to be driven by domestic deficit of negative 2.90 percent of GDP in private demand supported by lower energy 2016. In Canada, the ratio of current account prices and a buoyant property market, balance to GDP was negative 3.30 percent in which help to offset headwinds from fiscal 2015, while it is forecast to reach negative consolidation and heightened uncertainty 3.50 percent in the year after. ahead of the June referendum on European Union membership. Europe Commodity-exporting advanced economies During 2016/17, the euro area is projected continue to adjust to reduced income and to continue recovery, with weakening resource-related investment. In Norway, GDP external demand outweighed by the favorable growth is expected to soften to 1.00 percent effects of lower energy prices, a modest in 2016 as the decline in oil prices weighs on fiscal expansion, and supportive financial investment and consumption and to recover conditions. It is expected that potential growth gradually afterward. to remain weak, because of crisis legacies (high private and public debt, low investment, In emerging and developing Europe, output
9 Global Economic Prospects and Challenges ANNUAL REPORT 2015
growth is projected to remain stable at 3.50 The ECB’s asset purchase program in the euro percent in 2016 and 3.30 percent in the next area has supported the recovery by increasing year. Activity in the region has been supported confidence and financial conditions. But low by lower oil prices and the gradual recovery in inflation and suppressed growth suggest the the euro area, but increased corporate debt is ECB to take accommodative policy, meet the hindering private investment. need for price stability, improve bank funding conditions, and strengthen bank balance Headline inflation in the euro area, is sheets. expected to reach 0.40 percent in 2016 (from about zero in 2015) and to rise further In Euro area, the ratio of current account to 1.10 percent in 2017, benefiting from balance to GDP was 3.00 percent in 2015, monetary policy easing by the European which is 0.60 percentage points more than the Central Bank (ECB). Over the medium-term, last year. Based on projections for 2016, this inflation is forecast to pick up gradually. CPI ratio is expected to approach 3.50 percent. in Switzerland is projected to fall during 2016/17 due to the appreciation of the currency In 2015, the current account balance to GDP last year. In 2016, some emerging markets, ratio in Germany, Italy and Spain stood at especially in central and southeastern Europe 8.50, 2.10 and 1.40 percent, while predicted such as Hungary and Poland, are estimated to remain positive in the next year. France to observe headline consumer price inflation registered negative 0.10 percent for the ratio well below target. in 2015, but projected to resume as the ratio will rise to 0.60 percent in 2016. In the euro area, priorities differ across countries. With high youth unemployment The U.K. is expected to observe a negative rates in many countries, skill erosion is the ratio of current account balance to GDP of area of concerns. Lowering disincentives around 4.30 percent in 2016, unchanged to employment—including the labor compared to that of in the previous year. tax wedge—and putting in place better- targeted active labor market policies For Japan, the same ratio is likely to increase would be critical to enhance demand and from 3.30 percent in 2015 to 3.80 percent in diminish the unfavorable effect of long-term the year after. unemployment. Macroeconomic policy support can raise actual output while Commonwealth of Independent improving the benefits of structural States reforms. Monetary policy should remain accommodative where output gaps are The economic perspective for the CIS negative and inflation is too low. remains very weak, as a result of the recession
10 Global Economic Prospects and Challenges ANNUAL REPORT 2015 in Russia and its regional spillovers, as of nominal exchange rate depreciations to well as the effect of lower oil prices on oil- domestic prices, especially in countries with exporting countries. In the region, growth is strong depreciations, such as Russia, and expected to drop further by 1.10 percent in more recently, Kazakhstan. 2016. A recovery is expected to take hold in 2017, with growth forecast at 1.30 percent. Russia’s current account balance to GDP ratio Russia’s growth is anticipated to be negative rose notably from 2.90 percent in 2014 to 5.00 1.80 percent in 2016, (following a contraction percent in the next year. In contrast, other CIS of 3.70 percent last year) because of countries, encountered with a growing deficit international sanctions, lower oil prices, and for the ratio, as it shifted away from negative structural weaknesses. Ukraine’s economy is 0.30 percent in 2014 to negative 2.80 percent forecast to resume positive growth in 2016, in the next year. It is predicted that the ratio driven by improving consumer and investor will remain negative at 4.20 percent in 2016. confidence, rising real incomes, and easing Overall, this ratio for the CIS region was 2.80 of credit conditions. The persistent fall in oil percent in 2015, expected to diminish to 2.00 prices, Russia’s recession, and the slowdown percent in the year ahead. of China’s economy adversely affect the growth in the Central Asia and Caucasus Asia region. Among other advanced economies in Asia, The region’s growth prediction has been the slowdown of China’s imports in 2015 downgraded to 1.20 percent in 2016, due to has been an important drag. In 2016, the weak external demand, lower oil production, prediction indicates that growth will soften and weak confidence in Kazakhstan, to 1.80 percent in Singapore and 2.20 percent weaker public investment in Azerbaijan and in Hong Kong Special Administrative Turkmenistan, and lower remittances in the Region (SAR). The output appears to pick up oil-importing countries. It is projected that moderately in Korea, reaching 2.70 percent GDP growth to recover slightly, reaching 2.50 and more noticeably in Taiwan Province of percent in 2017. China to 1.50 percent, after the sharp drop to 0.70 percent in 2015. Forecast for 2017 Inflation in Russia is estimated to diminish reveals that growth in these economies is from 15.50 percent in 2015 to 8.40 percent in expected to increase from 2017 onward, the year after. owing to recovery of China’s import demand.
In emerging market economies, the Population aging is posing pressure on downward pressure from lower oil prices is potential growth in these economies, offset to varying degrees by the pass-through particularly in Korea and Singapore. China’s
11 Global Economic Prospects and Challenges ANNUAL REPORT 2015
output is predicted to slow to 6.50 and fiscal measures are expected to increase 6.20 percent during 2016/17, as a result of growth. The private demand is expected to announced policy stimulus. The downside be supported by adequate measures including risk comes from a further weakening of the negative interest rates on marginal excess industrial sector. Services sector growth reserve deposits. Japan’s medium- to long- should be strong as the economy continues to term growth outlooks remain weak, reflecting rebalance from investment to consumption. a declining labor force. High income growth, solid labor market, and structural reforms are predicted to support In India, monetary conditions remain consumption and to keep the rebalancing consistent with achieving the inflation target process on track over the period. of 5.00 percent in the first half of 2017, although an unfavorable monsoon and an In other economies of emerging and expected public sector wage increase pose developing Asia, activity remains strong. upside risks. Japan’s inflation is expected to In India, growth is expected to reach 7.50 be negative 0.20 percent in 2016. Over the percent in 2016–17. Growth will continue medium-term, inflation is forecast to pick to be supported by private consumption, as a up to 1.00–1.50 percent. In China, inflation result of lower energy prices and higher real is expected to remain low at 1.80 percent incomes. The growth is forecast to improve, in 2016, led by lower commodity prices, stemming from the revival of sentiment, the real appreciation of the Renminbi, and rise in industrial activity, and recovery of weaker domestic demand. private investment. In 2016, among the ASEAN-5 economies (Indonesia, Malaysia, China’s current account balance to GDP Philippines, Thailand, Vietnam), growth will ratio was 2.70 percent in 2015, projected ease in Malaysia and Vietnam to 4.40 and to decline to 2.60 percent in the next year. 6.30 percent, respectively. It will increase Predictions for India indicate negative 1.50 modestly in Indonesia, the Philippines, and percent for the ratio in 2016, reflecting 0.20 Thailand to 4.90, 6.00, and 3.00 percent, percentage points less than that of in the respectively. Growth in the ASEAN-5 is previous year. In the ASEAN-5, the ratio observed to improve in 2017 and thereafter. improved from 1.10 percent in 2014 to 1.80 In Japan, growth is projected to remain percent in the next year. Based on projection, at 0.50 percent in 2016, before turning to the ratio will be 1.10 percent in 2016. The negative 0.10 percent in the next year. The ratio of current account balance to GDP for activity appears to restrain output due to the emerging and developing Asia elevated from Yen appreciation and weaker demand from 1.40 percent in 2014 to 1.90 percent in the emerging market economies during the first year after, while expected to decline slightly half of 2016, but lower energy prices and to 1.70 percent in 2016.
12 Global Economic Prospects and Challenges ANNUAL REPORT 2015
Latin America and the Venezuela’s forecast indicates a severe Caribbean recession in 2016, as output projected to shrink by 8.00 percent, because of political In LAC, output growth is expected to be uncertainty, the decline of the oil price which negative 0.50 percent in 2016, but across has worsened macro-economic imbalances all countries in the region, economic and intensified an average inflation rate by performance is projected to improve in the around 500.00 percent in 2016. next year, as growth rising to 1.50 percent. The situation varies notably across regions The outlook in Argentina improved over and countries. While South America remains the medium-term, but the adjustment is under pressure from the fall in commodity probably to lead to a mild recession in 2016. prices, Mexico, Central America, and the The prolonged fall in the price of copper Caribbean benefit from the U.S. recovery and tighter financial conditions deteriorate and, in most cases, lower oil prices. In fact, Chile’s outlook, with growth dropping to most countries in the region continue to 1.50 percent in 2016, from 2.10 percent in grow, even if moderately. the last year.
Prediction for Mexico indicates that output Average inflation in Brazil, is expected to grow at a modest pace, 2.40 and 2.60 percent fall to 8.70 percent in 2016 as the effects over 2016/17, driven by sound private of the large administered price adjustments domestic demand and spillovers from a and currency depreciation in 2015 decline. strong U.S. economy. In Brazil, output appears to restrain by a further 3.80 percent In emerging market economies, the in 2016, as the recession pose pressure on downward pressure from lower oil prices is employment and real incomes and domestic offset to varying degrees by the pass-through uncertainties restrain the Government’s of nominal exchange rate depreciations to ability to implement policies. However, domestic prices, particularly in countries GDP is projected to turn positive during with strong depreciations, such as Brazil 2017; though, output on average will likely and Colombia. remain unchanged from a year ago. In LAC, current account balance to GDP Among oil-exporting South American ratio was negative in 2015; predictions reveal countries, the activity in Colombia is the same trend in the next year, with small expected to diminish from 3.10 percent in improvement from negative 3.60 percent 2015 to 2.50 percent in the next year, due to in 2015 to negative 2.80 percent in 2016. low oil prices, as well as tightening macro- Among LAC countries, Brazil and Mexico economic policies and financial conditions. registered negative 3.30 and negative 2.80
13 Global Economic Prospects and Challenges ANNUAL REPORT 2015
percent respectively for the ratio in 2015, and tighter monetary and fiscal policy. In predicted to recover to negative 2.00 and Zambia, the effect of the drought on electricity negative 2.60 percent in 2016. production and downward pressure from low copper prices lead growth to restrain at 3.40 Sub-Saharan Africa percent, lower than 3.60 percent in the last year. In Ghana, it is predicted that growth Growth in SSA appears to remain weak in rises to 4.50 percent in 2016. 2016, reaching 3.00 percent, about 0.50 percentage point lower than the previous In many other oil importer countries, year. Growth prediction in 2017, indicate it inflationary pressures driven by the pass- rises to 4.00 percent, supported by a small through of a strong US Dollar (which recovery in commodity prices and timely notably limited the decline of fuel prices policy execution. The continued slowdown in domestic-currency terms) and high food is caused by unfavorable external conditions: prices have also offset to some extent the resource-intensive countries have suffered positive effect of lower oil prices. However, from the fall in commodity prices, while continued investment in infrastructure and the region’s frontier markets are adversely strong consumption in countries such as affected by tighter global financing Côte d’Ivoire, Kenya, Rwanda, Senegal, conditions. SSA’s oil-exporting countries are and Tanzania are projected to drive growth expected to grow at 2.00 and 3.40 percent at rates of 6.00–7.00 percent or more in over 2016/17. In 2016, output growth is 2016 and the year after. By contrast, drought predicted to decline to 2.50 percent in adversely affected Ethiopia’s economy, as Angola, from 3.00 percent in 2015 and 2.30 GDP expected to diminish notably, reaching percent in Nigeria, from 2.70 percent growth 4.50 percent, compared to 10.20 percent in a year ago, as the adverse effect of lower 2015. oil prices is intensified by deteriorations in private sector activity through exchange rate The ratio of current account balance to GDP restrictions. for the SSA is projected to be negative 6.20 percent in 2016, while it was negative 5.90 The impact of the decline in oil prices on percent in the previous year. The same ratio the region’s oil-importing countries has for South Africa was registered at negative been smaller than expected, as many of 5.40 percent in 2014, while it improved to these economies export other non-renewable negative 4.40 percent in 2015, predicting to resources whose prices have also declined. In be unchanged in the year ahead. South Africa, GDP growth is forecast to drop to 0.60 percent in 2016, as a result of lower export prices, increased policy uncertainty,
14 Global Economic Prospects and Challenges ANNUAL REPORT 2015
Middle East and North Africa and the aggregate growth rate of oil-exporting Pakistan MENAP countries to reach 2.90 percent in 2016 and 3.10 percent in the next year. The activity across MENAP region has deteriorated substantially, due to further In oil-importing MENAP countries, GDP’s declines in oil prices and elevating conflicts prediction indicate that it will remain and security risks. In the region, growth diminished as benefits from political stability, predicted at 3.10 percent in 2016 and 3.50 economic reforms, reduced drag from fiscal percent in the next year. consolidation, and lower oil prices are offset by spillovers from security disruptions, With prediction of oil prices to remain low for social tensions, and spillovers from regional longer, oil-exporting MENAP countries have conflicts, and slowdowns in member countries taken measures to curb government spending, of the GCC. cut subsidies, and raise revenues. In spite of these measures, fiscal deficits are forecast to In MENAP, current account balance to GDP rise in 2016. Growth in the member countries ratio has been volatile during 2014/15, as of the Cooperation Council for the Arab States it shifted away from positive ratio of 5.50 of the Gulf (GCC) is predicted to fall from percent in 2014 to negative 3.60 percent in 3.30 percent in 2015 to 1.80 percent in 2016 2015, predicting to remain negative 6.90 and rise to more than 2.00 percent over the percent in the next year. medium-term. However, it is anticipated that
15 Global Economic Prospects and Challenges ANNUAL REPORT 2015
World Economic Outlook (Percent change unless noted otherwise) Year Projections 2014 2015 Item 2016 2017 World Output 3.40 3.10 3.20 3.50 Advanced Economies 1.80 1.90 1.90 2.00 United States 2.40 2.40 2.40 2.50 Euro area 0.90 1.60 1.50 1.60 Japan 0.00 0.50 0.50 -0.10 United Kingdom 2.90 2.20 1.90 2.20 Canada 2.50 1.20 1.50 1.90 Other Advanced Economies (excl. the G7 and euro area 2.80 2.00 2.10 2.40 countries) Emerging Market and Developing Economies 4.60 4.00 4.10 4.60 Commonwealth of Independent States 1.10 -2.80 -1.10 1.30 Emerging and Developing Asia 6.80 6.60 6.40 6.30 Emerging and Developing Europe 2.80 3.50 3.50 3.30 Latin America and the Caribbean 1.30 -0.10 -0.50 1.50 Middle East, North Africa, Afghanistan, and Pakistan 2.80 2.50 3.10 3.50 Sub-Saharan Africa 5.10 3.40 3.00 4.00 South Africa 1.50 1.30 0.60 1.20 European Union 1.40 2.00 1.80 1.90 World Trade Volume (goods and services) 3.50 2.80 3.10 3.80 Imports Advanced economies 3.50 4.30 3.40 4.10 Emerging market and developing economies 3.70 0.50 3.00 3.70 Exports Advanced economies 3.50 3.40 2.50 3.50 Emerging market and developing economies 3.10 1.70 3.80 3.90 Commodity prices (USD) Oil -7.50 -47.20 31.60 17.90 Nonfuel (average based on world commodity export weights) -4.00 -17.50 -9.40 -0.70 Consumer prices Advanced economies 1.40 0.30 0.70 1.50 Emerging market and developing economies 4.70 4.70 4.50 4.20 London Inter Bank Offered Rate (percent) On U.S. Dollar deposits (six month) 0.30 0.50 0.90 1.50 On Euro deposits (three month) 0.20 0.00 -0.30 -0.40 On Japanese Yen deposits (six month) 0.20 0.10 -0.10 -0.30 Source: World Economic Outlook, IMF, April 2016, Page 3
Source: World Economic Outlook, IMF, April 2016, Pages 17-22, 28-30, and 184
16 Global Economic Prospects and Challenges ANNUAL REPORT 2015
Economic Highlights of ACU Member Countries
Bangladesh
The economy of Bangladesh remained of the deficit financing in 2014/15 was resilient and recorded a 6.50 percent growth Tk. 260.20 billion (1.70 percent of GDP). The of Gross Domestic Product (GDP) in foreign financing component of the budget 2014/15, which was 6.10 percent in 2013/14. deficit (including grants) was Tk. 215.80 billion (1.40 percent of GDP). Annual average Consumer Price Index (CPI) inflation (2005/06=100) declined to 6.40 Total export earnings recorded 3.30 percent in 2014/15 from 7.40 percent in percent growth during 2014/15 compared 2013/14. to 12.00 percent growth in 2013/14 while import payments recorded higher Bangladesh Bank (BB) pursued a cautious growth of 11.30 percent during 2014/15 but growth supportive monetary policy compared to 8.90 percent growth stance in 2014/15. The objectives of the in 2013/14. The overall Balance of monetary policy were to attain the target Payments (BOP) registered a surplus of growth as well as to maintain price and USD 4,373.00 million in 2014/15 compared macro-economic stability. Broad Money to a surplus of USD 5,483.00 million in (M2) recorded lower growth of 12.40 percent 2013/14. in 2014/15 against 16.50 percent targeted under the program and 16.10 percent actual The workers’ remittance inflows increased growth in 2013/14. by 7.70 percent to USD 15,170.00 million in 2014/15 compared to USD 14,116.00 million The budget deficit (excluding grants) in the in 2013/14. revised budget increased by 59.50 percent to Taka (Tk.) 763.00 billion (5.00 percent of The nominal exchange rate depreciated GDP) in 2014/15 from Tk. 478.40 billion in by 0.22 percent and stood at Tk. 77.80 2013/14. The domestic borrowing component as of the end of June 2015 compared to
17 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
TK. 77.63 as of the end of June 2014. Bangladesh’s desire to become middle The Nominal Effective Exchange Rate income country by 2021 and an upper (NEER) of TK., calculated against a trade middle income country by 2030 is likely weighted 10 currency basket (2010/11=100) to be possible if there is good governance appreciated, by 9.16 percent in 2014/15. in financial and fiscal sectors, political The Real Effective Exchange Rate (REER) stability and development of infrastructural of Tk. also appreciated by 14.03 percent in facilities. 2014/15. Bhutan The gross Foreign Exchange (FX) reserves of BB stood at USD 25,021.00 million at the Bhutan’s real GDP growth increased to end of 2014/15 which is sufficient to meet 5.46 percent in 2014/15 from 2.14 percent more than 7 months of import cover (in Free in 2013/14. Amongst the major economic on Board (fob) term). sectors, the tertiary sector recorded the highest contribution with 3.79 percentage Total transactions of Bangladesh under points followed by secondary sector with ACU increased slightly in terms of volume 1.35 percentage points, while of the primary during 2014/15 compared to the preceding sector with 0.31 percentage points. Sectors year. Receipts significantly increased from that performed relatively well and contributed USD 79.70 million to USD 115.50 million to the overall growth in 2014/15 were hotels and import payments slightly increased from and restaurants (26.57 percent); wholesale USD 5,706.90 million to USD 5,748.90 and retail trade (24.16 percent); mining and million with the ACU member countries quarrying (20.86 percent); and transport, during 2014/15. storage and communications (17.35 percent). At the sectoral level, the tertiary sector Bangladesh’s economy is on a stable path constituted 42.68 percent of GDP followed with a positive near to medium-term by the secondary and primary sectors with macro-economic outlook. GDP growth in 40.55 and 16.77 percent, respectively. Bangladesh has been continuing to grow at a stable rate, despite political agitation For the quarter ending June 2015, Bhutan’s in early 2015 that adversely affected annual inflation was recorded at 5.15 transport services, exports, and investment. percent, down by 3.40 percentage points The GDP growth forecast for 2015/16 is from 8.55 percent in 2014 (Year-on-Year revised somewhat higher by 7.00 percent. (YoY)). The fall in the prices of food items Bangladesh categorized to the position of has mainly contributed to the decrease in a lower middle income country from the the CPI inflation in the quarter ending June low income country in 2014/15. However, 2015. A significant decrease in the prices of
18 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015 food commodities was registered with food were outstanding Indian Rupee loans. The inflation at 2.92 percent in the second quarter Government of India remains Bhutan’s of 2015, compared to 12.33 percent during the largest creditor with 67.83 percent of overall same quarter last year. external debt at Nu. 80.20 billion or 98.78 percent of total Rupee outstanding The annual growth of M2 averaged 15.10 debt followed by the Asian Development percent in the past five years fueled by Bank (ADB) with USD 259.17 million, the transferable deposits, which comprises World Bank with USD 165.36 million and of current and savings deposits of the the Government of Austria with USD 80.99 commercial banks. On the other hand, among million. the counterparts of M2, domestic credit growth has contributed to the growth in M2. According to the revised budget for 2014/15, the overall fiscal policy stance of the The performance of the banking sector has Government continued to be progressive, been progressive as the total assets increased with total expenditure increasing by 16.97 by 7.63 percent from Nu. 80.54 billion as of percent (from Nu. 33.52 billion in 2013/14 June 2014 to Nu. 86.69 billion as of June to Nu. 39.21 billion) during the year. 2015. The increase was on account of growth in spending for both current and capital Bhutan’s current account deficit increased expenditures, which grew by 22.87 percent from 28.18 percent of GDP in 2013/14 to and 10.17 percent, respectively. 30.18 percent of GDP in 2014/15 from Nu. 29.69 billion to Nu. 36.09 billion. While India the trade deficit widened in the year, by 6.65 percent, reaching Nu. 26.02 billion or 21.77 Real GDP (at market prices) growth picked percent of GDP in the year. In exchange up to 7.60 percent during 2015/16 (7.20 rate developments, the Ngultrum averaged percent in 2014/15) largely contributed by Nu. 62.05 per USD in the fiscal year, private consumption demand and supported depreciating by 0.93 percent from the by fixed investment. previous year. Increased food grains production during Bhutan’s total outstanding external debt 2015/16 was achieved despite the two main increased to an equivalent of USD 1.85 seasons of rainfall, namely, South-West billion as of June 2015. Of this, an equivalent Monsoon (SWM) and North East Monsoon of USD 581.21 million was outstanding (NEM) being acutely deficient on the back of on convertible currency loans and the an equally acute deficiencies during 2014/15 remaining Indian Rupee (INR) 81.18 billion as also reservoir levels down to more than a
19 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
decade low for most part of the two seasons. the corresponding period of the previous year. Industrial output numbers improved to 3.10 percent during April-December 2015, despite Iran the YoY contraction in December 2015, compared to 2.60 percent growth during In 2014/15, the second year after the 11th April-December 2014. The pickup in Government of hope and prudence got industrial activity during the period was elected, the adoption of economic policies mainly driven by manufacturing, particularly aimed at non-infl ationary exit from the consumer durables on the back of deep recession and the tightly disciplined advantageous base effects. monetary and fi nancial policies stabilized macro-economic conditions of Iran. The Union Budget 2016/17, which was Moreover, the initial positive outcome presented against the backdrop of of Iran negotiation with P5+1 countries on deceleration in global growth, turbulent nuclear issue and the optimistic views on financial markets and shrinking global the ultimate agreement with P5+1 trade, has adhered to the path of fiscal strengthened economic recovery. consolidation. Iranian economy, which showed eight The performance of the Indian banking quarters of negative growth in 2012/13 and sector remained subdued during 2014/15. 2013/14 and experienced a full recessionary The banking sector experienced a slowdown cycle during these two years, turned into a in balance sheet growth, a trend that had set positive performance of 3.00 percent GDP in since 2011/12. The moderation in assets growth in 2014/15. The GDP growth of growth of Scheduled Commercial Banks 2014/15, combined with a sharp decline of (SCBs) was mainly attributed to slow infl ation by 19.10 percentage points to 15.60 expansion in bank credit growth that at percent in 2014/15 from an extremely high the end of December 2015 was running at level of 34.70 percent in the year before, 11.10 percent YoY, slightly higher than last strengthened economic conditions in Iran year. and put the national economy on a non-infl ationary sustainable growth path. Inflation in terms of all India CPI remained moderate during 2015/16 so far with some In 2014/15, spot price of Iran’s medium uptick in the third quarter of 2015/16. The crude oil decreased by 21.10 percent on average inflation during April-January average to USD 83.10 per barrel. Moreover, 2015/16 at 4.90 percent remained international crude oil prices followed an considerably lower than 6.60 percent during upward trend until June 2014 and then
20 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015 reversed. In 2014, the price of Organization decreased employment opportunities for rural of Petroleum Exporting Countries (OPEC) dwellers. basket1 of crude oil decreased by 9.20 percent on average to USD 96.20 per barrel, In 2014/15, government general revenues compared with USD 105.90 per barrel rose 36.30 percent to Rls. 978.00 trillion, in 2013. Price of other types of crude oil representing 96.80 percent realization followed similar trends in 2014. Furthermore, compared with the approved fi gure. Share Iran’s crude oil exports decreased by 16.40 of tax revenue in total revenues was 72.60 percent, on average, and reached 1.30 mb/d percent and that of other government and the exports of oil products amounted to revenues, 27.40 percent compared with the 119.00 thousand b/d in 2014/15, indicating respective fi gures of 2013/14 (68.90 and 20.00 percent increase compared with the 31.10 percent). year before. Expenses (current expenditures) rose by In 2014/15, Iran’s population grew by 1.20 20.10 percent to Rls. 1,438.30 trillion in percent to 77.80 million. The share of men 2014/15, showing 97.10 percent realization in total population reached 50.40 percent. compared with the approved fi gure. The In this year, 72.50 percent of the population growth rate of government expenses in the (56.40 million) dwelled in urban and the year before was 34.60 percent. In 2014/15, remaining in rural areas. Furthermore, the national and provincial expenses accounted gender ratio (the number of males per 100 for 96.50 and 3.50 percent of government females) was 101.50 in 2014/15, lower than expenses, respectively. the respective fi gure in 2011/12 (101.80). Considering the performance fi gures of According to the Statistical Center of Iran revenues and expenses in 2014/15, the (SCI), in 2014/15, the unemployment rate government operating balance ran Rls. 460.40 increased by 0.20 percentage point to 10.60 trillion defi cit, down by 4.10 percent compared percent. Unemployment rate in urban areas with the previous year. decreased by 0.20 percentage point to 11.60 percent. In rural areas, however, this rate In 2014/15, value of exports (through reached 7.90 percent, up by 0.90 percentage Customs) increased by 15.90 percent to point compared with 2013/14. Continued USD 36,555.00 million compared with drought in Iran over the past years has the respective fi gure of the previous year. raised unemployment rate in rural areas and Moreover, the volume (weight) of exports
1 Includes Arab Light (Saudi Arabia), Basra Light (Iraq), Merey (Venezuela), Bonny Light (Nigeria), Ess Sider (Libya), Iran Heavy (Islamic Republic of Iran), Kuwait Export (Kuwait), Qatar Marine (Qatar), Murban (U.A.E), Saharan Blend (Algeria), Oriente (Ecuador), and Girassol (Angola).
21 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
rose by 0.70 percent to 81,634.00 thousand with 2013/14. tons, compared with the previous year. Rise in the value of exports (through Customs) was Liquidity amounted to Rls. 7,823.80 mainly attributable to the increase in the value trillion in March 2015, showing 22.30 of exports of chemical and petrochemical percent growth compared with March 2014. products. Accordingly, the price of each ton Comparing the liquidity growth in this year of exported goods reached USD 448.00 in with the 38.80 percent liquidity growth in 2014/15, showing a rise of 15.10 percent 2013/14 is indicative of 16.50 percentage compared with the previous year. points decrease.
Review of the exported goods, in terms of In March 2015, share of money in liquidity value, reveals that gas and oil products, reached 15.40 percent, showing 3.30 organic and inorganic chemicals and rubber percentage points decline compared with and plastic products had the lion’s share in the preceding year. Moreover, share of total as in previous years. sight deposits in liquidity decreased by 2.60 percentage points to 10.90 percent compared The value of imports went up by 7.80 percent with March 2014. to USD 53,569.00 million in 2014/15, compared with the preceding year and the Monetary base surged by 10.70 percent, volume (weight) of imports rose by 27.70 indicating 10.70 percentage points decrease percent to 43,016.00 thousand tons. Higher compared with the growth fi gure of 2013/14 increase in the volume of imported goods (21.40 percent). compared with their value reduced the unit value (price of one ton) of imported goods In line with system development and by 15.60 percent from USD 1,476.00 in the implementation of electronic payment year before to USD 1,245.00 in 2014/15. system and the adoption of standard Decline in the international prices of imported risk-based system-wide oversight on goods and lifting of some import restrictions electronic payment system, Central Bank were among factors that led to a decrease of Iran (CBI) prepared the foundation in the per ton value of imported goods in for electronic data-based supervision. 2014/15. Implementation of the Electronic System for Checks Image Transfer and Clearance In 2014/15, surplus of goods account (CHAKAVAK) as of 2014; design of decreased by 27.10 percent to USD 21,392.00 Bank-Wide Standard E-Checkbook million and non-oil goods account defi cit Issuance (SAYAD); development of Credit amounted to USD 30,011.00 million, Control and Oversight Center (MAKNA); showing 6.10 percent decrease compared and the operation of Information Security
22 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
Management (NAMAD) were among indices registered the highest decreases. important measures adopted by CBI in 2014/15, aimed at improved oversight and supervision The number and value of shares traded in of inter-bank transactions. 2014/15 fell by 12.90 and 43.70 percent, respectively, compared with 2013/14. Market Electronic payment instruments, equipment, capitalization amounted to Rls. 2,813.20 and systems in banks network expanded with trillion, showing 27.20 percent decrease an admissible growth in this year. The number compared with the preceding year. of cards issued in the banking system grew by 19.60 percent to over 333.00 million in Average CPI of goods and services and 2014/15, including 223.00 million debit cards Producer Price Index (PPI) grew by 15.60 (66.80 percent), 109.20 million prepaid or gift and 14.80 percent, respectively, in 2014/15, cards (32.70 percent), and merely 1.70 million compared with the previous year. Exportable credit cards (0.50 percent). goods price index, on the other hand, decreased by 0.50 percent compared with The number of Automated Teller Machines 2013/14. A comparison of these fi gures with (ATMs) went up by 19.50 percent to the corresponding fi gures of the year before 40,369.00 in 2014/15. The number of (34.70, 34.50, and 21.80 percent) reveals that Personal Identifi cation Number (PIN) pads the growth fi gures of all three indices were and Points of Sale (POSs) grew by 16.40 lower than 2013/14. and 19.70 percent, respectively. Thus, the number of POSs increased to 3.70 million Maldives at the end of 2014/15, indicating banking system appropriate approach towards further Real GDP growth decelerated marginally to expansion of electronic payments. 4.81 percent in 2015 from 6.48 percent in 2014, mainly due to the moderation in the The Tehran Stock Exchange Index (TEPIX) growth rate of the tourism sector and related decline, which started as of January 5, 2014, sectors. continued in the whole fi scal year of 2014/15 and this index reached 62,531.80 points by The performance of the tourism sector the end of 2014/15, indicating 20.90 percent remained sluggish in 2015 as indicated by decline for the whole year. the lower than anticipated growth in tourist arrivals and the decline bednights. The In 2014/15, all Tehran Stock Exchange smaller than expected growth in arrivals (TSE) price indices experienced reduction was spurred by a decline in tourist arrivals compared with the year before. Among all from China which offset the recovery of indices, top 50 performers and fi rst market the European market. Meanwhile, partly
23 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
reflecting the adverse conditions in the in government revenue during the year. international tuna market in 2015, the fisheries sector performance also remained weak in As for developments in the external sector, the review year as indicated by the decline in the current account deficit widened in 2015 fish purchases and volume of fish exports for largely due to a worsening of the balance on the year. In 2015, activity in the construction goods owing to a rise in imports, together sector remained robust which registered strong with the worsening of the services account. annual growth rates in the first three quarters Meanwhile, net financial inflows were lower of the year driven by the commencement of in 2015 when compared with 2014, owing several public sector infrastructure projects to the net repayment of private sector loans during the year. and the decline in foreign direct investment inflows. Meanwhile, gross international With regard to domestic price developments, reserves declined by 4.04 percent the rate of inflation (as measured by the annual when compared with 2014 and stood at percentage change in the CPI for Male’), USD 589.89 million at the end of 2015. remained low and stable throughout the year. The main contributor to the moderation in Effective from April 11, 2011, the Maldivian inflation was the easing of global commodity Rufiyaa (Rf.) was allowed to fluctuate within prices and domestic fish prices. a horizontal band of 20.00 percent on either side of a central parity of Rf. 12.85 per On the monetary front, the Maldives USD. With the introduction of the exchange Monetary Authority (MMA) lowered the rate band, the exchange rate of the Rufiyaa Minimum Reserve Requirement (MRR) from per US Dollar moved towards the upper limit 20.00 percent to 10.00 percent. M2 registered of the band and since then it has remained an increase of 13.59 percent during the year virtually fixed at Rf. 15.42. largely due to the growth in Net Domestic Assets (NDA) of the banking system. The Myanmar growth in NDA was largely driven by an increase in Treasury Bills (T-bill) investments Myanmar’s economic growth remains by commercial banks in 2015 and also due to strong, but macro-economic imbalances have a pick up in credit growth to the private sector. increased over the past year. Real GDP growth for April-March 2014/15 is estimated With regard to public finances, the budget to have reached 8.50 percent. Inflation deficit is estimated to widen from 2.92 percent reached 8.00 percent (YoY) in May, up from of GDP in 2014 to 6.93 percent of GDP in 4.00 percent in October (non-food inflation 2015. This was mainly due to a larger increase rose from 3.75 percent to 6.00 percent), in government expenditure relative to the rise reflecting mainly strong domestic demand,
24 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015 with import volumes growing by 28.50 framework for 2015/16 to 2017/18 has been percent in 2014/15. The current account laid out in order to achieve higher budget deficit widened to over 6.00 percent of GDP, credibility, enhance fiscal discipline and largely reflecting a rapidly rising trade deficit. improve strategic resource allocation. The authorities are committed to the Public Since late 2014, the Kyat (local currency) Finance Management (PFM) reform to has come under pressure to depreciate, and strengthen budget formulation and fiscal its value against the US Dollar has declined discipline, control expenditure, as well as by about 20.00 percent. At the end of March improve fiscal accounting and reporting 2015, the Central Bank of Myanmar’s (CBM) processes. The authorities’ 2015/16 budget foreign reserves covered around 3 months of projects an overall fiscal deficit of just fewer imports, well below the estimated adequate than 5.00 percent of GDP. Myanmar’s top level of 5-6 months of imports. This has policy priority in the near-term is to address largely resulted from strong import demand increasing macro-economic imbalances and and rising inflation pressures, reflecting the resulting vulnerabilities. This calls for ongoing fiscal stimulus and easy monetary and a tightening of monetary and fiscal policies credit conditions, however other factors have along with exchange rate flexibility. Given also played a role including strengthening the ongoing pressure on the Kyat, early action US Dollar, declines in natural gas prices. to tighten policies and enforce prudential measures is needed to address the underlying But Myanmar’s medium to long-term growth causes of the growing macro-economic prospects remain favorable on account imbalances. of continued reform and Foreign Direct Investment (FDI) inflows. Given its low Myanmar’s trade with ACU member countries income level, Myanmar can sustain such rapid decreased during 2014/15. Myanmar’s trade growth for a long time to come through catch surplus decreased to 73.43 percent compared up. With its strategic location and proximity to to the previous year. a dynamic east and south-east Asia, Myanmar stands to benefit from an expected relocation During 2014/15, total exports to ACU member of FDIs in manufacturing around the region countries decreased to 32.99 percent. India is in search of lower labor cost. the major importing country from Myanmar with the share of 90.47 percent among the In line with the policy priorities and ACU countries. At the same period, objectives of the Framework for Economic Bangladesh, Pakistan, Sri Lanka, Nepal and and Social Reform (FESR),– a credible, Iran accounted for 6.04, 2.82, 0.41, 0.01 and responsive and transparent planning and 0.25 percent, respectively. The major export budget process– the medium-term fiscal items to India included agricultural products
25 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
and fishery products. effective liquidity management and the lower level of inflation in neighboring Nepal countries.
Nepal’s real GDP at basic price grew by Nepal Stock Exchange (NEPSE) index 3.00 percent in 2014/15 compared to 5.10 dropped by 7.20 percent to 961.20 points in percent in 2013/14. Delay in monsoon, the the middle of July 2015 on YoY devastating earthquake of 25 April 2015 basis. Likewise, the YoY stock market and the subsequent aftershocks adversely capitalization fell by 6.40 percent to affected the output growth in the review year. Rs. 989.40 billion (USD 9.94 billion) The agriculture sector grew by 1.90 percent in the middle of July 2015. The ratio of while industry and services sector witnessed market capitalization to GDP stood at 46.60 the growth of 2.60 percent and 3.90 percent percent in the middle of July 2015. Of the in the review year. total market capitalization, the share of Banks and Financial Institutions (BFIs) (including April earthquake caused a total loss of insurance companies) stood at 77.70 percent. USD 7.06 billion in the economy, which is Hydropower, manufacturing and processing estimated to be about one-third of the GDP companies, hotels, trading and others recorded of 2014/15. The devastating earthquake a share of 7.00, 3.00, 2.50, 0.10 and 9.60 forced an additional 0.70 million people to percent, respectively. fall below the poverty line with the poverty estimated to grow by at least 2.50 percent to M2 expanded by 19.90 percent compared 3.00 percent. to a growth of 19.10 percent in the previous year. The Narrow Money (M1) registered a The ratio of gross consumption to GDP growth of 19.70 percent in the review year stood at 88.60 percent while the gross compared to a growth of 17.70 percent in the domestic savings surged to 11.40 percent of previous year. Domestic credit increased by the GDP in the review year. 14.90 percent in the review year compared to a growth of 12.70 percent in the previous The annual average CPI stood at 7.20 year. The deposit mobilization grew by 20.10 percent in the review year compared percent in the review year. to 9.10 percent in 2013/14. Inflation remained lower than the projected 8.00 The government budget deficit, on cash basis, percent in the monetary policy of 2014/15 remained at a deficit of Rs. 38.62 billion due mainly to the decline in the price of (USD 388.18 million) with the ratio of budget petroleum products, control of monetary deficit-to-GDP remained at 1.80 percent in aggregates at the desired level through the review year. Government expenditure,
26 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015 on cash basis, increased by 19.80 percent to by the bank. The Nepalese financial system Rs. 499.96 billion (USD 5.03 billion). The constituted 30 commercial banks (“A” class revenue mobilization grew by 13.80 percent institutions), 76 development banks (“B” class to Rs. 405.85 billion (USD 4.08 billion), institutions), 48 finance companies (“C” class which was 96.00 percent of annual budget institutions) and 49 micro-finance financial estimate. The revenue-to-GDP ratio stood at institutions (“D” class institutions) as of the 19.10 percent in the review year. middle of July 2015.
The trade deficit widened in 2014/15 on The ratio of Non-Performing Loan (NPL) to account of the increase in imports and the total loans of BFIs dropped to 3.33 percent fall in exports. Merchandise exports in the middle of July 2015 compared to 3.76 decreased by 7.30 percent to Rs. 85.32 billion percent a year ago. (USD 857.57 million) in 2014/15 while the merchandise imports increased by 8.40 Pakistan percent to Rs. 774.68 billion (USD 7.79 billion). Pakistan’s economy showed better performance in 2014/15, as GDP growth The overall BOP registered a record high improved slightly to reach 4.20 percent surplus of Rs. 144.85 billion (USD 1.43 in 2014/15, and key macro-economic billion) in 2014. The current account also indicators, like inflation, fiscal balance and posted a surplus of Rs. 108.32 billion Current Account Balance (CAB), recorded (USD 1.07 billion) during the review year. improvements.
The gross FX reserves surged by While several long standing structural 23.80 percent to Rs. 823.87 billion constraints (e.g., low investment rate and (USD 8.15 billion) in the middle of July persistent energy shortages) continue to 2015 compared to the growth of 24.80 hinder a sharp economic recovery, 2014/15 percent in the previous year. The current level became more challenging due to adverse of FX reserves is sufficient for financing weather shocks and weak external demand. merchandise imports of 13 months and However, a pickup in the services sector, and merchandise and services imports of 11.20 a modest recovery in agriculture allowed the months. economy attain a slightly higher growth rate.
The total number of BFIs licensed by Nepal The key development during 2014/15 was Rastra Bank (NRB) came down to 193 in the improvement in the external sector given the middle of July 2015 from 200 a year ago its significant positive spillover to the rest of due to merger and acquisition policy adopted the economy. The external account improved
27 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
due to a robust growth in worker remittances burden fell on commercial banks as external and a sharp decline in global oil prices. As flows remained subdued. Further pressure a result, not only country’s FX reserves came when the Government borrowed from reached an all-time high level of USD 18.70 commercial banks to retire its debt to State billion by the end of June 2015 (sufficient Bank of Pakistan (SBP). SBP therefore to finance over 5 months of the country’s stepped up its liquidity injections to ensure import bill), the exchange rate also remained adequate supply of loanable funds for the stable during the year. More importantly, private sector. Nevertheless, the overall credit the improvement in the external account to private sector remained lower than that in significantly diluted the global risk perception the previous year. for Pakistan. Encouragingly, the country was able to The stable Pakistan’s Rupee (PKR) parity marginally reduce its public-debt-to-GDP kept CPI inflation under control, and ratio mainly due to revaluation gain from lowered inflation expectations in the country. US Dollar appreciation against the major However, the significant reduction in CPI currencies. The reduction in debt burden inflation during 2014/15 was caused primarily was realized despite the successful launch of by a sharp decline in oil and other commodity 5-year Sukuk bond in November 2014, which prices. The average CPI inflation fell from allowed the Government to raise USD 1.00 8.60 percent last year, to only 4.50 percent billion against the initial target of USD 0.50 in 2014/15. A stable outlook of inflation and billion. BOP allowed policymakers to implement pro-growth strategies. In the energy sector, the Government passed on the benefit of declining oil prices to In the fiscal sector, the sharp decline in oil end-consumers, which sharply reduced the prices and subdued manufacturing activities cost of key fuels (e.g., high speed diesel, during the year had made already sluggish motor spirit, furnace oil). Consequently, the tax collections more difficult. Furthermore, domestic demand for petrol in transport provincial surplus have recorded a steep sector grew sharply during the year, reflecting decline during the year. The Government was a switch of Compressed Natural Gas however able to achieve fiscal consolidation (CNG) users to petroleum products. In the through containing growth in expenditures. electricity segment, the accumulating arrears The fiscal deficit improved slightly to 5.30 continue to drag the performance of the percent of GDP in 2014/15, from 5.50 percent power sector. Thus, the total power recorded last year. generation grew by 1.60 percent during 2014/15. In terms of financing the budget deficit, the
28 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
Sri Lanka tightening, several policy measures such as imposing minimum cash margin requirement The Sri Lankan economy registered a and maximum Loan to Value (LTV) for growth of 4.80 percent in 2015, compared the importation of motor vehicles were to the growth of 4.90 percent recorded in introduced in the last quarter of 2015 to 20141 . The growth in real GDP in 2015 was contain excessive credit flows to selected largely driven by an increase in consumption sectors. The merchandise trade deficit was demand, while investment activities made a widened marginally by 1.70 percent over the modest contribution. All three sectors of the previous year due to the increase in non-oil economy contributed to real economic growth imports and the slowdown in export earnings, in 2015. Inflation remained below mid-single in spite of the benefit of lower expenditure on digit levels during 2015, supported by the fuel imports. The modest performance of the favourable supply side developments in current account, together with the decline in both domestic and international markets and inflows to the financial account, resulted in contained inflation expectations. the BOP recording a deficit of USD 1,489.00 million and thereby the country’s gross official The Central Bank continued to maintain an reserves declined to USD 7.30 billion by the accommodative monetary policy stance end of 2015 from USD 8.20 billion at the end during the year in an environment of of 2014. persistently low inflation, but initiated a gradual tightening of monetary policy from Meanwhile, despite the fiscal consolidation the end of 2015 with a view to preempting process the budget deficit increased to 7.40 excessive demand pressures on inflation, percent of GDP in 2015 from 5.70 percent emanating from high credit and money of GDP in 2014, reflecting government’s expansion. Accordingly, the Central Bank dis-savings. Further, reflecting high budget commenced tightening monetary policy deficit, lower nominal GDP growth and the gradually towards by raising Statutory impact of exchange rate variations, central Reserve Requirements (SRR) applicable on government debt increased to 76.00 percent all Rupee deposit liabilities of commercial in 2015 from 70.70 percent in 2014. At the banks by 1.50 percentage points to 7.50 meantime, the financial sector demonstrated percent to be effective from the reserve period its resilience to volatile market conditions commencing 16 January 2016. Meanwhile, emanating from domestic and global prior to the commencement of monetary uncertainties during the year.
1 In July 2015, the Department of Census and Statistics (DCS) changed the base year for national accounts statistics to 2010 from 2002, while adopting the United Nation’s System of National Accounts (SNA) 2008 standard. The improved compilation procedure captures the changes in the economic structure of Sri Lanka over the past decade and introduces new economic activities to the national accounts system. The rebased GDP estimates had varying effects on macro-economic indicators. The analysis of the state of the Sri Lankan economy in 2015 provided in the Central Bank of Sri Lanka (CBSL) Annual Report is based on new GDP estimates, which are provisional.
29 Economic Highlights of ACU Member Countries ANNUAL REPORT 2015
Country Performance
Bangladesh
The economy of Bangladesh remained Gross international foreign exchange resilient and recorded a 6.50 percent growth reserves stood at USD 25,021.00 million at of Gross Domestic Product (GDP) in the end of 2014/15 representing more than Financial Year (FY)1 2014/15, which was 7 months of import cover. Active foreign 6.10 percent in 2013/14. This growth was exchange intervention by Bangladesh mainly contributed by the higher growth Bank (BB) continued in 2014/15 to keep of industry sector along with satisfactory Tk./USD exchange rate stable. As a result, growth of services sectors. Annual average the exchange rate Taka (Tk.) against Consumer Price Index (CPI) infl ation USD remained almost stable during 2014/15. (base: 2005/06=100) declined to 6.40 percent in 2014/15 from 7.40 percent Economic Growth in 2013/14. A cautious but growth and investment friendly monetary policy stance Bangladesh economy achieved reasonably was implemented during 2014/15. Broad satisfactory growth in 2014/15 in spite of Money (M2) registered a 12.40 percent the prolonged political unrest at home and growth in 2014/15 against the targeted slower growth in both developed and growth of 16.50 percent and the actual emerging market. The growth in agriculture growth of 16.10 percent in 2013/14. Total sector decreased to 3.00 percent in 2014/15 domestic credit decreased from 11.60 percent from 4.40 percent in 2013/14. This decrease in 2013/14 to 10.10 percent in 2014/15. The was mainly due to the lower growth in current account balance registered a defi cit of crops and horticulture sub-sector. Growth in USD 1,645.00 million in 2014/15, which crops and horticulture sub-sector recorded a was surplus of USD 1,406.00 million in growth of 1.30 percent in 2014/15 as against 2013/14. The capital and fi nancial account 3.80 in 2013/14. The growth in industry continued to register surplus. The overall sector increased to 9.60 percent in 2014/15 Balance of Payments (BOP) recorded a from 8.20 percent in 2013/14. The main surplus of USD 4,373.00 million in 2014/15. reason for this increase is the increased
1 Financial Year stands for beginning of July to the end of June.
30 Country Performance / Bangladesh ANNUAL REPORT 2015 growth of all the sub-sectors of industry increased from 6.60 to 6.90 percent of GDP. sector. Among the industry sub-sectors, The domestic savings investment gap as a growth of mining and quarrying, and percentage of GDP increased to 6.70 percent power, gas and water supply sub-sectors in 2014/15 from 6.50 percent in 2013/14. increased substantially to 7.50 and 7.00 percent in 2014/15 from 4.70 and 4.50 Infl ation percent in 2013/14, respectively. The services sector registered a 5.80 percent Annual average CPI infl ation (base: growth in 2014/15 which was 5.60 percent 2005/06=100) in Bangladesh declined in in 2013/14. The growth of all sub-sectors 2014/15. The infl ation stood at 6.40 percent of services sector was upward in 2014/15 in June 2015 against the target of 6.50 except wholesale and retail trade, repair of percent set in the monetary policy statement motor vehicles, motorcycles and personal (January-June 2015) while it was 7.40 percent and household goods; and transport, storage in 2013/14. Infl ationary pressure started and communication sub-sectors. easing since June 2014 and it continued till 2014/15 due to falling food infl ation resulting Real GDP Growth from suffi cient food supply. Besides, fuel price, (In percent) coupled with accommodative money growth
7 6.7 and stable exchange rate contributed to decline 6 6.5 5 in infl ation. The twelve month point-to-point 6.3 4 CPI infl ation also declined to 6.25 percent in 6.1 3
GDP growth 2014/15 from 6.97 percent in 2013/14. 5.9 2 Per capita GDP growth
5.7 1 National CPI Infl ation 5.5 0 2010/11 2011/12 2012/13 2013/14 2014/15 (12-month average: base 2005/06=100)
GDP growth Per capita GDP growth (In percent) 12
10 Savings and Investment 8 6
4 The ratio of gross national savings to GDP 2 declined slightly to 29.10 percent in 2014/15 0 from 29.20 percent in 2013/14. Gross fi xed 2010/112 011/12 2012/13 2013/14 2014/15 investment as a percentage of GDP increased Food Non-food General to 29.00 in 2014/15 from 28.60 percent in 2013/14. During the same period, private Fiscal Developments investment increased from 22.00 to 22.10 percent of GDP and public investment Total revenue receipts increased by 16.40
31 Country Performance / Bangladesh ANNUAL REPORT 2015
percent to Tk. 1,633.70 billion in 2014/15 2013/14. Growth in NFA declined due to compared to Tk. 1,403.70 billion in 2013/14. weak export growth and strong demand in Total public expenditure increased by imports of capital machinery and production 27.30 percent to Tk. 2,396.70 billion in inputs. On the other hand, the growth rate of 2014/15 compared to Tk. 1,882.10 billion in Net Domestic Assets (NDA) declined from 2013/14. The Annual Development Program 11.00 percent in 2013/14 to 10.00 percent (ADP) in 2014/15 was revised upward by to in 2014/15, which was lower than the target Tk. 750.00 billion which is 35.60 percent growth of 20.20 percent for 2014/15. The higher than the actual ADP in 2013/14. The credit to public sector stood negative at budget defi cit (excluding grants) in the 2.50 percent in 2014/15 against the targeted revised budget increased by 59.50 percent to 25.30 percent growth under the program in Tk. 763.00 billion (5.00 percent of GDP) in 2014/15 and 8.80 percent actual growth in 2014/15 from Tk. 478.40 billion in 2013/14. 2013/14. The growth in credit to private sector The domestic borrowing component of the increased from 12.30 percent in 2013/14 to defi cit fi nancing in 2014/15 was Tk. 260.20 13.20 percent in 2014/15 against the target billion (1.70 percent of GDP). The foreign growth of 15.50 percent. Reserve Money fi nancing component of the budget defi cit (RM) grew at a rate of 14.30 percent in (including grants) was Tk. 215.80 billion 2014/15 which was lower than the projected (1.40 percent of GDP). growth rate of 15.80 percent due mainly to the substantially lower level of NDA of Monetary and Credit Situation BB compared to the program level. Money Multiplier decreased to 5.32 in 2014/15 as BB pursued a cautious but growth supportive compared to 5.41 in 2013/14. The income monetary policy stance in 2014/15. The velocity of money decreased to 1.92 in objective of the monetary policy was to attain 2014/15 from 1.93 in 2013/14. the target growth as well as to maintain price and macro-economic stability. M2 recorded To keep the infl ation at target level, BB lower growth of 12.40 percent in 2014/15 continued to pursue a restrained policy against 16.50 percent targeted under the stance in both the fi rst and the second half of program and 16.10 percent actual growth 2014/15 and policy rates namely repo reverse in 2013/14. The lower growth in domestic repo rates were kept unchanged at 7.25 and credit in the banking system contributed to 5.25 percent, respectively. Besides, the Cash slow down the growth in M2 in 2014/15. Reserve Ratio (CRR) for the scheduled The Net Foreign Assets (NFA) of the banking banks remained unchanged to 6.50 percent system grew by 20.70 percent against the of their total demand and time liabilities for targeted 3.60 percent growth in 2014/15 but implementing the objective of monetary lower than 38.60 percent actual growth in policy in 2014/15. Regarding Statutory
32 Country Performance / Bangladesh ANNUAL REPORT 2015
Liquidity Ratio (SLR) it is mentioned that for jute goods (8.40 percent), knitwear products the conventional banks, the statutory liquid (3.10 percent) and woven garments (5.00 assets inside Bangladesh which also includes percent) contributed to increase the growth of excess reserves with BB shall not be less than merchandise exports in 2013/14. 13.00 percent of their total demand and time liabilities. For the shariah based Islami banks, Export Growth (In percent) this rate shall not be less than 5.50 percent. 45
This has been effective since 1 February, 40 2014. The bank rate remained unchanged at 35 30
5.00 percent in 2014/15. This rate has been 25 effective since 6 November, 2003. 20 15
10
Exchange Rate Developments 5
0 2010/11 2011/12 2012/132 013/14 2014/15 Active intervention by the BB in the foreign exchange market, keep the nominal Imports (fob) exchange rate stable in 2014/15. The nominal exchange rate depreciated by 0.22 percent Import payments (fob) in 2014/15 stood at and stood at Tk. 77.80 as of the end of June USD 40,685.00 million registering a growth 2015 compared to Tk. 77.63 as of the end of of 11.25 percent compared to USD 36,571.00 June 2014. The Nominal Effective Exchange million in 2013/14. Increase of import Rate (NEER) of Taka, calculated against a payments for rice (394.30 percent), crude trade weighted 10 currency basket (base: petroleum (337.10 percent), spices (70.50 2010/11=100) appreciated, by 9.16 percent percent), fertilizer (42.30 percent), wheat in 2014/15. The Real Effective Exchange (22.30 percent), etc. contributed to increase in Rate (REER) of Taka also appreciated by import growth during 2014/15. 14.03 percent in 2014/15.
Import Growth Exports (fob) (In percent)
60
Total exports earnings (including Export 50
Processing Zone (EPZ)) increased by 3.30 40 percent in 2014/15 to USD 30,768.00 30 million from USD 29,777.00 million in 20
2013/14. Growth of footwear (22.40 10 percent), engineering products (21.90 0 2010/11 2011/12 2012/13 2013/14 2014/15 percent), chemical products (20.10 percent),
33 Country Performance / Bangladesh ANNUAL REPORT 2015
Workers’ Remittances million in 2013/14. This defi cit is attributable chiefl y to an increase in the trade defi cit, with The fl ow of inward remittances from a lesser contribution of balance of service Bangladeshi nationals working abroad account. The fi nancial account surplus regained its growth in 2014/15, and played continued to increase from USD 2,855.00 an important role to increase foreign million in 2013/14 to USD 5,308.00 million exchange reserve and strengthening the in 2014/15, primarily due to increased foreign current account balance of the country. direct investment, and other investment. Receipts from this sector increased by The capital account surplus decreased from 7.65 percent from USD 14,116.00 million USD 598.00 million to USD 483.00 in 2013/14 to USD 15,170.00 million in million during this period. The overall BOP 2014/15. registered a lower surplus of USD 4,373.00 million in 2014/15 compared to a surplus of Foreign Exchange Reserves USD 5,483.00 million in 2013/14.
The gross foreign exchange reserves of BB Trends of Trade, Current Account and Overall Balance stood at USD 25,021.00 million at the end of (In percent of GDP) 4 2014/15 which is 16.40 percent higher than 3 2 USD 21,508.00 million of the same period 1 0 of 2013/14. The gross foreign exchange -1 -2 reserve is suffi cient to meet more than seven -3 -4 months of import cover. BB affords best -5 -6
-7 efforts to maintain optimum return from -8 2010/11 2011/12 2012/13 2013/14 2014/15 foreign exchange reserve investment by Trade balance Current account balance Overall balance diversifying the foreign asset portfolio in bonds (issued by sovereign, supranational and highly reputed foreign commercial Trade with ACU Member banks), Treasury Bills (T-bills) and Treasury Countries Notes of US Government and in short-term deposits with internationally reputed foreign Total transactions of Bangladesh under commercial banks. Asian Clearing Union (ACU) increased slightly in terms of volume during 2014/15 Balance of Payments (BOP) compared to the preceding year. Receipts signifi cantly increased from USD 79.70 Current account balance showed a defi cit million (Tk. 6.19 billion) to USD 115.50 of USD1,645.00 million in 2014/15 as million (Tk. 8.99 billion) and import compared to a surplus of USD 1,406.00 payments slightly increased from
34 Country Performance / Bangladesh ANNUAL REPORT 2015
USD 5,706.90 million (Tk. 443.03 billion) private and public investment will pick to USD 5,748.90 million (Tk. 447.26 up as the business climate improves under billion) with the ACU member countries a stabilizing political situation. Infl ation during 2014/15. As a result, the debtor moderated in 2014/15, refl ecting large public position of Bangladesh increased by stocks of food grains, normal weather, a USD 6.20 million or 0.11 percent to supportive monetary policy, and lower global USD 5,633.40 million (Tk. 438.28 billion) food and commodity prices. Monetary in 2014/15 compared to USD 5,627.20 programs projects 16.50 percent for 2015/16 million (Tk. 436.84 billion) in the preceding domestic credit growth to accommodate 7.00 year. percent real GDP growth with 6.20 percent infl ation. BB closely monitors the foreign Near and Medium-Term Outlook exchange market to avoid undue volatility in the exchange rate. It is expected that Bangladesh’s economy is on a stable recent sustained pick up in investment and path with a positive near to medium-term consumption imports will ease appreciation macro-economic outlook. GDP growth in pressures on Taka in near future. Bangladesh Bangladesh has been continuing to grow at has been categorized to the position of a lower a stable rate, despite political agitation in middle income country from the low income early 2015 that adversely affected transport country in 2014/15. However, Bangladesh’s services, exports, and investment. The desire to become middle income country by GDP growth forecast for 2015/16 is revised 2021 and an upper middle income country somewhat higher by 7.00 percent, still by 2030 is likely to be possible if there is with the expectation that exports will grow good governance in fi nancial and fi scal with continued economic recovery in the sectors, political stability and development US and the euro area, strong expansion in of infrastructural facilities. remittances will boost consumption demand,
35 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Major Economic Indicators
Year 2010/11 2011/12 2012/13 2013/14 2014/151 Item National Income and Prices Real GDP growth (percent) (2005/06=100) 6.50 6.50 6.00 6.10 6.50 GDP defl ator (percent change) 7.90 8.20 7.20 5.70 5.80 CPI infl ation (annual average) (2005/06=100) 8.802 8.70 6.80 7.40 6.40 GDP at current market prices (billion Taka) 9,158.00 10,552.00 11,989.00 13,436.00 15,136.00 GDP at current market prices (billion US Dollar) 128.70 133.40 150.00 172.90 194.80 Fiscal Sector (percent of GDP) Total revenue 10.20 10.90 10.70 10.50 10.80 Total expenditure 14.00 14.50 14.50 14.00 15.80 Overall budget defi cit (excluding grants) 3.90 3.60 3.80 3.60 5.00 Financing of overall budget defi cit 3.60 3.20 3.30 3.10 4.70 Net domestic fi nancing 3.30 2.90 2.80 2.80 3.60 bank borrowings 2.70 2.60 2.30 1.30 2.10 non-bank borrowings 0.60 0.30 0.50 1.50 1.50 Net foreign fi nancing 0.30 0.30 0.50 0.30 1.10 Money and Credit (percent change) Private sector 25.80 19.70 10.80 12.30 13.20 Broad money (M2) 21.30 17.40 16.70 16.10 12.40 Balance of Payments (percent change) Exports (fob) 39.20 6.20 10.70 12.00 3.30 Imports (fob) 52.10 2.40 0.80 8.90 11.30 Remittances 6.00 10.20 12.60 1.60 7.70 Gross offi cial reserve (million US Dollar) 10,912.00 10,364.00 15,315.00 21,508.00 25,021.00 Gross offi cial reserve (months of imports) 4.00 3.90 5.50 7.10 7.40
1 Provisional data.
2 Base: 1995/96=100, in fob term.
Source: Annual Report 2014/15, Bangladesh Bank
36 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Total Exports, Imports and Trade Balance (In millions of USDs)
Year 2010/11 2011/12 2012/13 2013/14 2014/15 Item
22,592.00 23,989.00 26,566.00 29,777.00 30,768.00 Exports (fob, including EPZ) (39.17) (6.18) (10.74) (12.08) (3.33)
32,527.00 33,309.00 33,576.00 36,571.00 40,685.00 Imports (fob, including EPZ) (52.08) (2.40) (0.80) (8.92) (11.25)
Trade Balance -9,935.00 -9,320.00 -7,010.00 -6,794.00 -9,917.00
Notes: Figures in the brackets indicate percentage changes over the previous year. Customs record is used to calculate import fob from 2010/11 and onwards as per Balance of Payments Manual-6 (BPM6).
Source: Statistics Department, Bangladesh Bank
37 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Exports to ACU Member Countries during January-December, 2015 (In millions of USDs) Commodity/Country Value Bhutan 4.84 Agri-products 2.22 Woven garments 0.76 Others 1.86 India 590.75 Frozen foods 7.13 Agri-products 70.30 Chemical products 17.17 Leather 19.58 Raw jute 49.28 Jute goods 148.76 Knitwear 27.16 Woven garments 81.85 Others 169.52 Iran 43.43 Jute goods 42.01 Others 1.42 Maldives 6.31 Agri-products 0.90 Chemical products 0.14 Others 5.27 Myanmar 26.97 Chemical products 13.23 Knitwear 4.57 Others 9.17 Nepal 20.98 Agri-products 7.98 Raw jute 3.02 Others 9.98 Pakistan 50.24 Agri-products 4.52 Tea 0.79 Raw jute 32.24 Others 12.69 Sri Lanka 28.57 Chemical products 12.37 Jute goods 1.49 Knitwear 0.98 Woven garments 2.39 Others 11.34 Source: Export Promotion Bureau (EPB)
38 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Import Payments to ACU Member Countries during January-December, 2015 (In millions of USDs)
Commodity/Country Value Bhutan 27.50 Vegetable products 19.00 Mineral products 7.00 Others 1.50 India 5,572.40 Live animals; animals products 43.50 Edible vegetable certain roots and tubers 248.70 Edible fruits and nuts peel of citrus fruits or melons 52.40 Coffee, tea, mate and spices 127.80 Cereals 676.20 Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured 273.10 tobacco substitutes Salt, sulphur, earths and stone, plastering materials 115.80 Mineral fuels, mineral oils and products of their distillation, bituminous substances; 166.00 mineral waxes Organic chemicals 171.00 Tanning or dyeing extracts 145.00 Plastics and rubber and articles thereof 206.40 Paper and paperboard and articles thereof 22.40 Textile and textile articles thereof 1,602.30 Base metals and article of base metals 360.90 Machinery and mechanical appliances, electrical machinery and equipment and parts 498.20 thereof Vehicles other than railway or tramway, rolling stock, parts and accessories thereof 464.40 Others 398.30 Iran 5.80 Ships, boats and fl oating structures 3.70 Cotton 0.10 Others 2.00 Maldives 1.00 Plastics and rubber and articles thereof 0.30 Base metals and article of base metals 0.20 Others 0.50
39 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Import Payments to ACU Member Countries during January-December, 2015 (Contd.) (In millions of USDs)
Commodity/Country Value Myanmar 28.80 Vegetable products 10.40 Wood and articles of woods; wood charcoal 11.10 Others 7.30 Nepal 5.80 Vegetable products 5.50 Others 0.30 Pakistan 490.60 Vegetable products 12.00 Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured 0.70 tobacco substitutes Mineral products 14.80 Products of the chemical or allied industries 11.00 Textiles and textile articles 419.80 Machinery and mechanical appliances, electrical equipment and parts thereof 8.20 Vehicles, aircraft, vessels and associated transport equipment 1.60 Others 22.50 Sri Lanka 44.20 Live animals; animals products 0.10 Products of the chemical or allied industries 8.40 Plastics and rubber and articles thereof 3.60 Textiles and textile articles 16.80 Others 15.30 Source: Statistics Department, Bangladesh Bank
Bangladesh: Trade through EPZ during January-December, 2015 (In millions of USDs)
Item Export Import ACU countries 65.11 428.26 ACU countries over total trade routed through EPZ (percent) 1.02 11.51 Note: There is no Free Trade Zone (FTZ) in Bangladesh. Source: Bangladesh Export Processing Zone Authority (BEPZA)
40 Country Performance / Bangladesh ANNUAL REPORT 2015
Bangladesh: Trade in Major Services with ACU Member Countries during January-December, 2015 (In millions of USDs) Country Item Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Net Services (A-B) -2.24 -270.97 -0.47 -3.66 -6.15 -1.39 -5.62 -18.17 Receipts (A) 0.67 194.99 0.21 0.66 9.25 3.11 9.16 0.78 Transportation 0.14 14.45 0.00 0.00 0.12 0.43 4.90 0.26 Travel 0.18 17.48 0.17 0.12 8.55 0.27 1.46 0.32 commercial 0.00 0.03 0.00 0.00 0.00 0.00 0.00 0.00 education 0.02 10.22 0.00 0.00 8.14 0.07 0.90 0.09 tourist 0.13 5.97 0.00 0.11 0.39 0.19 0.40 0.13 other 0.03 1.26 0.17 0.01 0.02 0.01 0.16 0.10 Communication service 0.00 35.84 0.00 0.00 0.00 0.11 0.68 0.00 Insurance services 0.00 0.90 0.00 0.00 0.00 0.00 0.00 0.00 Bank commission and 0.00 3.23 0.00 0.00 0.00 0.03 0.00 0.00 charges Misc. business, professional and 0.01 53.49 0.04 0.00 0.16 0.86 0.85 0.02 technical services Government services n.i.e 0.34 69.60 0.00 0.54 0.42 1.41 1.27 0.18 Payments (B) 2.91 465.96 0.68 4.32 3.10 4.50 14.78 18.95 Transportation 2.27 369.65 0.00 3.86 0.82 2.78 12.01 14.99 Travel 0.31 54.19 0.07 0.46 0.36 0.87 0.50 1.38 commercial 0.00 1.22 0.00 0.02 0.00 0.00 0.02 0.08 education 0.00 1.77 0.00 0.00 0.00 0.00 0.02 0.09 tourist 0.25 40.46 0.07 0.39 0.25 0.73 0.25 0.78 other 0.06 10.74 0.00 0.05 0.11 0.14 0.21 0.43 Communication service 0.03 4.04 0.00 0.00 0.00 0.00 0.05 0.25 Insurance services 0.00 0.14 0.00 0.00 0.00 0.00 0.00 0.04 Bank commission and 0.00 1.80 0.00 0.00 0.00 0.00 0.23 0.04 charges Misc. business, professional and 0.00 28.29 0.00 0.00 0.32 0.26 0.78 1.38 technical services Government services n.i.e 0.30 7.85 0.61 0.00 1.60 0.59 1.21 0.87 Note: Services data are given according to Balance of Payments Manual-6 (BPM-6). Source: Statistics Department, Bangladesh Bank
Source: Bangladesh Bank
41 Country Performance / Bangladesh ANNUAL REPORT 2015
Bhutan
With the worst of the 2012 current account primary sector at 2.37 percentage points. imbalances, the Economy rebounded in the Financial Year (FY)1 2014/15 with real On the reserve front, the RMA’s effort Gross Domestic Product (GDP) growth of has been focused on managing recurrent 5.46 percent following recovery efforts pressures on Indian Rupee (INR) reserves. from both the Royal Monetary Authority The operational threshold for convertible (RMA) and the Royal Government of Bhutan currency reserves established as part of the (RGOB). Vigilance over credit growth and RMA’s reserve management policy will fi nancial soundness continues to remain ensure adequate composition of reserves as the important policy imperatives for the between the INR and other convertible RMA of Bhutan. Credit growth has picked currency to position for INR needs. up immediately, partly to meet new as well as pent-up demand for housing and vehicle loans Bhutan’s annual infl ation for the quarter following it’s reintroduction in September ending June 2015 was recorded at 5.15 2014 (suspended in 2012). Macro prudential percent, down by 3.40 percent against 8.55 regulations pertaining to the restriction on percent in 2014. The fall in the prices of food distribution of profi ts, debt to equity ratio, items has mainly contributed to the decrease loan to value and loan to income, minimum in the infl ation in the quarter ending June ceiling on leverage ratio and the margin 2015. A signifi cant decrease in the prices requirement component of the time varying of food commodities was registered with capital provisioning and margin requirement food infl ation at 2.92 percent in the second have been implemented. As part of the fi scal quarter, compared to 12.33 percent during measures, government has introduced new the same quarter last year. On the other hand, taxes, such as sales tax on telecom services the general prices of non-food items and green tax on fuel along with the revision increased to 6.66 percent during the second of sales tax and customs duty on import of quarter of 2015 compared to 6.11 percent last vehicles. year.
Growth was largely driven by the tertiary At the end of the FY, gross international sector with a contribution of 8.87 percentage reserves stood at USD 958.45 million points followed by the secondary sector decreasing from USD 997.91 million as of with 3.06 percentage points, while of the the end of June 2014. Reserves were suffi cient
1 Financial Year stands for beginning of July to the end of June.
42 Country Performance / Bhutan ANNUAL REPORT 2015 to fi nance 11.84 months of merchandise largest sectors during the period. imports while covering 51.68 percent of public external debt. Of the total reserves, Monetary Sector USD 788.02 million were convertible currency while 10.87 billion were INR. The annual growth of Broad Money (M2) averaged 15.10 percent in the past fi ve Real Sector years fueled by transferable deposits, which comprises of current and savings deposits of The economy has revived with real GDP the commercial banks. On the other hand, growth at 5.46 percent in 2014 from 2.14 among the counterparts of M2, domestic percent in 2013. The tertiary sector grew credit growth has contributed to the growth signifi cantly to 8.87 percent in 2014 from in M2. For the year ending June 2015, 0.33 percent in 2013 though secondary and M2 growth increased to 7.82 percent from primary sectors have declined from 3.49 6.62 percent as of the end of June 2014. This percent and 2.94 percent to 3.06 and 2.37 higher growth in M2 was mainly contributed percent, respectively. In particular, the hotels by other deposits, which grew by 12.59 and restaurants, wholesale and retail trade, percent as compared to 9.37 percent in 2014. and mining and quarrying have displayed The two major components of M2 comprises signifi cant growth in the year while electricity of Narrow Money (M1) and other deposits. and water was recorded a negative growth. The Year-on-Year (YoY) growth in M1 has declined to 4.97 percent in June 2015 from Real GDP Growth 5.05 percent in June 2014. Growth in M1 (Percent change) was mainly because of currency in circulation 14 outside the banks and savings deposits, which 12 grew by 4.23 percent and 15.75 percent, 10 respectively. 8
6 Growth in M2 and its Counterparts
4 (Annual change, percent)
2
50 0 2010/11 2011/12 2012/13 2013/14 2014/15 40
30
In terms of the sector shares in nominal GDP, 20 the construction, agriculture, livestock and 10 0 forestry, electricity and water, the general -10 2010/11 2011/12 2012/13 2013/14 2014/15 government sector (community, social and -20 personal services), and the transport, storage NFA DC OIN M2 and communication sector have been the fi ve
43 Country Performance / Bhutan ANNUAL REPORT 2015
Currency in circulation outside the banks while 17.32 percent and 45.23 percent increased from Ngultrum (Nu.) 5.70 billion were held as cash in hand and other to Nu. 5.95 billion as of June 2015, while deposits, respectively. In terms of foreign savings deposits increased from Nu. 16.33 assets excluding cash in hand, the banks billion to Nu. 18.90 billion. The remaining held Nu. 3.14 billion worth of foreign constituent of M1, i.e. current deposits, assets, denominated in INR (Nu. 1.21 recorded a YoY growth of negative 4.75 billion) and convertible foreign currency percent, decreasing from Nu. 17.67 billion to (Nu. 1.93 billion). Nu. 16.83 billion as of June 2015. The other major component of M2 i.e. other deposits, On the liabilities side, annual growth in constituting of time deposits and foreign total deposits (including foreign currency currency deposits, recorded a YoY growth of deposits) recorded 7.64 percent which 12.59 percent as compared to 9.37 percent a increased from Nu. 80.54 billion to Nu. 86.69 year ago. The growth in other deposits was billion in 2014/15. Of their total deposits on account of higher growth in time deposits, liabilities, demand deposits constituted which grew by 15.92 percent as compared to Nu. 35.73 billion, time deposits Nu. 25.45 7.75 percent in the previous year. billion and foreign currency deposits Nu. 1.22 billion. Time deposits and foreign currency The performance of the banking sector has deposits increased to Nu. 26.67 billion as of been progressive as the total assets increased June 2015 from Nu. 23.69 billion as of June by 7.63 percent from Nu. 80.54 billion as 2014. of June 2014 to Nu. 86.69 billion as of June 2015. The quality of loan portfolio of the fi nancial institutions is depicted by the Non-Performing On the assets side, as of June 2015, reserves Loan (NPL) ratio. While total loans accounted for 22.55 percent while foreign increased by 13.17 percent from Nu. 63.19 assets accounted for 3.62 percent of total billion in June 2014 to Nu. 71.51 billion in assets. The remaining (Nu. 64.01 billion) June 2015, the NPL ratio improved to 9.46 comprised of debt and equity claims on percent from 12.03 percent. Total NPL fell residents (government and government by 10.96 percent from Nu. 7.60 billion in corporations, public sector, Non-Bank June 2014 to Nu. 6.77 billion in June 2015. Financial Institution (NBFIs), and the private The NPL for most sectors improved in 2015 sector). Banks’ reserves stood at Nu. 19.55 except for the agriculture, manufacturing billion as of June 2015 recording a YoY and personal loan sectors. Of these three growth of negative 7.30 percent. Of the sectors, agriculture and manufacturing total reserves, 37.45 percent were absorbed deteriorated from Nu. 354.29 million to through the Cash Reserve Ratio (CRR), Nu. 484.92 million and from Nu. 1.01 billion
44 Country Performance / Bhutan ANNUAL REPORT 2015 to Nu. 1.32 billion, respectively. As a Overall BOP percentage share to total NPL, the trade/ (In millions of Nus.) commerce sector of the fi nancial institutions 70, 000 observed the highest NPL of 20.53 percent, 60, 000 50, 000 followed by the manufacturing/industry sector 40, 000 30, 000 at 19.46 percent, personal loans at 17.05 20, 000 10, 000 percent, and housing sector at 16.17 percent. 0 -10, 000 -20, 000 2010/11 2011/12 2012/13 2013/1412 2014/15
External Sector Trade deficit Budgetaryg rants Capitaland f inancial a ccount Current account deficit Overallb alance 1 Revised data. Grossir nternational eserves 2 Bhutan’s current account defi cit increased Provisional data. from 28.18 percent of GDP in 2013/14 to 30.18 percent of GDP in 2014/15 from Hydropower exports decreased from Nu. 29.69 billion to Nu. 36.09 billion. While Nu. 11.23 billion in 2013 to Nu. 10.63 the trade defi cit widened in the year, by 6.65 billion in 2014 owing to a combination of percent, reaching Nu. 26.02 billion or 21.77 lower production from delayed monsoons percent of GDP in the year. Defi cits continued and increased domestic consumption. to persist in the services and primary income Hydropower continues to remain Bhutan’s accounts as well, while the usual surplus in largest export (29.88 percent share), followed the secondary income (driven by grants for by ferro alloys, at Nu. 8.84 billion and 24.84 budget support) decreased by 15.77 percent in percent share. the year. In terms of the direction of trade, India The capital and fi nancial account balance continues to remain Bhutan’s largest trading increased by 20.25 percent to Nu. 37.86 partner, accounting for over 80.00 percent billion. Indian Rupee denominated of both exports and imports in 2014. Top hydropower loan disbursements increased exports to India include hydropower, ferro by 27.04 percent to INR 18.13 billion with alloys, semi-fi nished products of iron and an additional INR 9.57 billion received non alloy steel, carbides and cement. Top as the grant component. After accounting imports from India include diesel and for other fi nancial fl ows and the negative net petroleum products, hydraulic turbines, water errors and omissions, the capital and fi nancial wheel and regulators and iron ore products. account surplus was not enough to fi nance Following India, Bangladesh and Germany the current account defi cit with a subsequent also remain in among the top three export drawdown in reserves by an equivalent of destinations of Bhutan. Major exports to Nu. 560.41 million. Bangladesh include oranges, cardamoms, dolomite and limestone, while exports to
45 Country Performance / Bhutan ANNUAL REPORT 2015
Germany consisted almost entirely of ferro Government of India (GOI) line of credit). alloys. For imports, India, Japan and China Within the convertible currency loan were the top three import sources in 2014. portfolio, concessional public and publicly Major imports from Japan included fl at rolled guaranteed debt accounted for 99.88 percent products of iron and non alloy steel and of while the remaining 0.12 percent represented other alloy steel, and motor vehicles. Major outstanding external debt of the private imports from China included carbonaceous sector. and similar pastes for electrodes and furnace linings, polymers, articles of carbon for The GOI remains Bhutan’s largest creditor electrical purposes (electrodes, brushes, with 67.83 percent of overall external debt battery), coke and semi-coke of carbon, and at Nu. 80.20 billion or 98.78 percent of total household electronic appliances. Rupee outstanding debt. This is followed by the Asian Development Bank (ADB) with Exchange Rate Developments USD 259.17 million, the World Bank with USD 165.36 million and the Government of In exchange rate developments, the Austria with USD 80.99 million. Bhutan’s Ngultrum averaged Nu. 62.05 per total debt outstanding stood at 98.91 percent USD in the FY, depreciating by 0.93 percent of GDP. from the previous year. In June-to-June comparisons, the Ngultrum depreciated by Overall debt servicing on both convertible 6.91 percent from averaging Nu. 59.73 against currency and Indian Rupee debt for 2014/15 the USD in June 2014 to Nu. 63.86 in June was USD 139.46 million as compared to 2015. USD 178.92 million in 2013/14. Bhutan’s debt service ratio measured as a percent of External Debt and Servicing the export earnings from goods and services decreased to 19.85 percent in 2014/15 from Bhutan’s total outstanding external debt 27.14 percent in 2013/14. increased to an equivalent of USD 1.85 billion as of June 2015. Of this, an Fiscal Sector equivalent of USD 581.21 million was outstanding on convertible currency loans According to the revised budget for 2014/15, and the remaining INR 81.18 billion were the overall fi scal policy stance of the outstanding Indian Rupee loans. Of the total Government continued to be progressive, Rupee debt, 83.39 percent were outstanding with total expenditure increasing by 16.97 public debt on hydropower projects while percent (from Nu. 33.52 billion in 2013/14 to 8.62 percent represented debt taken to Nu. 39.21 billion) during the year. The fi nance BOP transactions with India (the increase was on account of growth in
46 Country Performance / Bhutan ANNUAL REPORT 2015 spending for both current and capital percent of GDP, receipts of foreign grants expenditures, which grew by 22.87 percent decreased from 13.51 percent in 2013/14 to and 10.17 percent, respectively. 9.33 percent in 2014/15.
On the resource front, total revenue The total expenditure outlay for 2014/15 (including grants) decreased by 9.91 percent grew by 16.97 percent to Nu. 39.21 billion in 2014/15, compared to the 17.68 percent over the 2013/14 outlay. Total expenditure growth in 2013/14. Total revenue decreased increased from 31.81 percent of GDP in by 7.77 percentage points to 23.44 percent of 2013/14 to 32.80 percent in 2014/15. The GDP in 2014/15. share of capital and current expenditure to total outlay were 43.78 percent and 56.22 Domestic revenue (excluding grants) percent, respectively. financed 64.39 percent of the total expenditure during the year, decreasing by 5.96 percentage points over the previous year. Tax revenue constituted 72.32 percent of total domestic revenue while non-tax revenue constituted 26.30 percent, with the remaining being on account of other miscellaneous receipts.
Composition of Domestic Revenue (In percent of GDP)
20 18 16 14 12 10 8 6 4 2 0 200910 / 20 101 /1 201 12 /1 201 23 /1 2013/1412 201/145 Tax revenue Non-tax revenue
1 Revised data. 2 Provisional data.
External grants in 2014/15 (Nu. 11.15 billion) fi nanced 28.44 percent of the total budget outlay, a decrease from 42.47 percent in the previous year but still continued to meet a large portion of the capital expenditure. In
47 Country Performance / Bhutan ANNUAL REPORT 2015
Bhutan: Major Economic Indicators
Year Item 2010/11 2011/12 2012/13 2013/14 2014/15 GDP Growth and Prices (percent change) Real GDP at market price 11.73 7.89 5.07 2.14 5.46 Consumer prices 8.33 13.50 5.50 8.55 5.15 Wholesale prices (India) 9.90 7.43 4.88 5.61 -2.20 Government Budget (in millions of USD) Total revenue and grants 621.48 649.42 558.81 539.64 586.63 of which: foreign grants 231.58 248.69 174.31 231.60 179.75 Total expenditure and net lending 658.34 670.14 636.18 545.35 631.93 Current balance 64.83 68.41 54.63 91.78 51.62 Overall balance -36.86 -20.72 -77.37 -69.89 -45.30 Money and Credit (percent change, end of period) Broad money (M2) 21.20 -1.00 18.60 6.62 7.82 Credit to private sector 29.40 30.10 7.10 6.44 14.00 Interest Rates (end of period) One-year deposits 4.80 5.00-6.00 5.00-6.50 5.00-6.50 4.00-7.00 Lending rate 10.00-16.00 10.40-16.00 11.70-16.00 10.00-16.00 11.70-17.00 91-day RMA bills 2.00 4.10 3.00 2.30 0.13 Balance of Payments (in millions of USD) Trade balance -459.64 -395.48 -354.39 -393.21 419.37 with India -334.44 -254.53 -314.72 -282.45 -306.99 Current account balance -516.90 -389.91 -469.73 -483.07 -581.54 (in percent of GDP) -32.32 -23.07 -26.44 -28.45 -30.18 with India -396.67 -307.99 -485.34 -418.92 -483.18 (in percent of GDP) -24.80 -18.23 -27.32 -24.67 -25.08 Royal Government of Bhutan loans, net (including 259.97 223.44 326.90 304.38 390.29 hydropower) of which: India 162.73 196.51 269.75 265.94 368.90 Errors and omissions -40.23 -188.73 19.67 51.37 -37.76 Overall balance 17.59 -180.39 167.92 69.64 -9.03 (in percent of GDP) 6.00 -10.70 9.50 4.10 -0.47
48 Country Performance / Bhutan ANNUAL REPORT 2015
Bhutan: Major Economic Indicators (Contd.)
Year Item 2010/11 2011/12 2012/13 2013/14 2014/15
External Indicators (end of period) Gross offi cial reserves (in millions of USD) 796.21 674.32 916.86 997.91 958.45 (in months of merchandise imports) 8.40 8.96 12.97 12.61 11.84 External debt (percent of GDP) 79.53 88.40 98.40 100.31 98.91 Debt to service ratio 51.70 127.11 229.20 27.14 19.85 Memorandum Items: Nominal GDP (in millions of USD) 1,584.91 1,689.87 1,776.40 1,714.31 1,926.60 Nu. per USD (fiscal year period average) 45.33 50.27 54.86 61.47 62.05 Money supply (M2, end of period) 1,117.14 997.07 1,083.69 1,031.19 1,101.44 Money supply (M1, end of period) 667.78 635.77 688.92 645.87 671.64 Counterparts Foreign assets (net) 775.30 699.59 885.28 876.63 938.74 Domestic credit 675.50 924.33 955.75 850.81 906.61 Claims on private sector 733.17 869.98 853.53 810.78 915.72 Components Currency outside banks 152.06 127.13 103.56 92.80 95.83 Demand deposits 515.70 508.64 585.36 553.07 575.82 Quasi-money 449.36 361.30 394.77 385.33 429.80 Reserve money (M0) 435.20 333.06 437.43 433.35 423.03 of which: banks’ deposits 263.12 186.94 302.73 301.67 272.63 Money multiplier (M2/M0) 45.38 3.00 2.50 2.40 2.60 Income velocity (GDP/M2) 1.43 1.80 1.70 1.60 1.75 Population growth rate 1.80 1.80 1.90 1.50 1.31 Unemployment rate 3.30 3.10 2.10 2.90 2.60
Notes: Figures are on a calendar year basis. Real sector data source: National Statistics Bureau, Bhutan. BOP, fi scal and money and banking statistics are on a fi scal year basis (July-June). CPI for Bhutan is as of the last quarter of the fi scal year. Indian Wholesale Price Index (WPI) is as of the end of the period.
Source: Royal Monetary Authority of Bhutan
49 Country Performance / Bhutan ANNUAL REPORT 2015
Bhutan: Real GDP Growth by Sector during 2010/11-2014/15 (Year-on-Year, change in percent)
Year Item 2010/11 2011/12 2012/13 2013/14 2014/15
Gross Domestic Product (GDP) 11.73 7.89 5.07 2.14 5.46
Primary sector 0.85 2.41 2.31 2.94 2.37
Secondary sector 12.48 4.06 6.80 3.49 3.06
Tertiary sector 15.21 13.91 4.31 0.33 8.87
Source: National Accounts Statistics
Bhutan: Composition of Domestic Revenue 2010/11-2014/15 (In millions of Ngultrums)
Year 1 2 Item 2010/11 2011/12 2012/13 2013/14 2014/15
Total Revenue 27,365.66 29,369.43 26,430.57 31,104.28 28,021.20
Domestic revenue 17,674.03 20,144.80 21,093.48 23,582.77 25,246.87
tax revenue 11,593.49 14,676.90 15,403.12 16,182.77 18,259.13
non-tax revenue 5,865.31 5,677.50 5,698.57 7,061.84 6,640.99
Grants 10,497.73 12,501.50 9,562.64 14,236.35 11,153.27
In percent of GDP
Total Revenue 37.75 34.57 27.12 29.52 23.44
Domestic revenue 24.38 23.71 21.64 22.38 21.12
tax revenue 15.99 17.28 15.81 15.36 15.27
non-tax revenue 8.09 6.68 5.85 6.70 5.56
Grants 14.48 14.72 9.81 13.51 9.33
1Revised data.
2Provisional data.
Source: Royal Monetary Authority of Bhutan
50 Country Performance / Bhutan ANNUAL REPORT 2015
Bhutan: Overall Balance of Payments (In millions of Ngultrums)
Year 1 2 Item 2010/11 2011/12 2012/13 2013/14 2014/15
Trade Defi cit 20,835.00 19,881.00 20,709.00 24,171.00 26,022.00 Budgetary Grants 10,498.00 12,457.00 9,415.00 11,398.00 9,193.00 Current Account Defi cit 23,431.00 19,601.00 25,769.00 29,694.00 36,085.00 Capital and Financial Account 26,242.00 20,223.00 34,412.00 31,491.00 37,867.00 Overall Balance 798.00 -9,068.00 9,212.00 4,280.00 -560.00 Gross International Reserves 35,605.00 37,969.00 54,736.00 59,966.00 61,106.00
1Revised data.
2Provisional data.
Source: Royal Monetary Authority of Bhutan
51 Country Performance / Bhutan ANNUAL REPORT 2015
Bhutan: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15
Sector/Country
Bangladesh Fruits (oranges, apples); cardamoms; wheat bran; mineral products (gypsum, quartz, dolomite, Goods ferroalloys, limestone and other calcareous stone) India Hydropower; base metal and base metal products (wires, cables, rods and copper products; Goods ferroalloys; iron and non-alloy steel); mineral products (cement, dolomite, gypsum, coal); carbides; processed foods Services Transportation (passenger air transport); travel Nepal Goods Coal; gypsum; fruit juices
Source: Department of Revenue and Customs, Ministry of Finance
Bhutan: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15
Sector/Country Bangladesh Goods Garments; prepared foodstuff and beverages (biscuits, wafers, juices); home and kitchen wares India Mineral products (high speed diesel, petrol, kerosene); base metals and products (iron and steel, aluminum, cutlery, and copper); machinery and mechanical appliances, electrical equipment and parts (electrical transformers and converters, equipment for lifting, handling, loading or Goods un loading machinery, bulldozers, and other moving, grading, leveling, scraping, excavating, tamping, compacting machinery and equipment); transport vehicles and parts (motor cars, etc.); vegetable and live animal and animal products (cereals, meat, poultry) Construction; education; health; business services (telecommunications, information technology, Services etc.) Nepal Yarn, textiles and garments; toiletries, live and prepared foodstuff (meat, poultry, noodles, pasta, Goods bread, etc.); steel and iron masts; aluminum, steel and insulated wire/cable; electrical generators and transformers
Source: Department of Revenue and Customs, Ministry of Finance
Source: Royal Monetary Authority of Bhutan
52 Country Performance / Bhutan ANNUAL REPORT 2015
India
Real Sector Agricultural Sector
As per the advance estimates released by The South-West Monsoon (SWM) rainfall Central Statistics Offi ce (CSO) on February in 2015 at the end of the season was 14.00 8, 2016, real Gross Domestic Product (GDP) percent below Long Period Average (LPA), (at market prices) growth picked up to the lowest in 6 years, on the back of 12.00 7.60 percent during 2015/16 (7.20 percent percent defi ciency last year. Prolonged in Financial Year (FY)1 2014/15) largely dry spell through most part of August- contributed by private consumption demand September 2015 depleted most reservoirs to and supported by fi xed investment. Growth below normal levels and possibly affected in government expenditure and net exports soil moisture. This has resulted into lower decelerated sharply. On quarterly basis, production of kharif crops both foodgrains exports and imports contracted for the fi fth and commercial crops in 2015/16 (second consecutive quarters in the third quarter of advance estimates) than the previous year. 2015/16. In continuation, with the post monsoon The real per capita income grew by 6.20 rainfall or the North East Monsoon (NEM) percent in 2015/16 (5.80 percent in 2014/15). (October-December) defi cient by 23.00 Growth in real Gross Value Added (GVA) percent below LPA (33.00 percent below at basic prices increased to 7.30 percent LPA last year), the reservoir level in the 91 in 2015/16 (7.10 percent in 2014/15) major reservoirs was merely 46.00 percent led by higher growth in industry and on December 31, 2015 against 58.00 percent agriculture sectors, even as services sector last year. However, the total foodgrains growth moderated. Within the industrial production (kharif and rabi) during 2015/16, sector, while growth in manufacturing as per the second advance estimates is sub-sector picked up sharply, that of growth marginally higher while that of oilseeds, in mining and quarrying and electricity, cotton, sugarcane and jute and mesta declined gas, water supply and other utility services over the previous year. Higher foodgrains sub-sectors moderated. The deceleration in production despite defi cient rainfall in both services sector growth was refl ected in all its monsoon seasons and lower water reservoir sub-sectors. levels indicate reduced impact of rainfall
1 Financial Year stands for beginning of April to the end of March.
53 Country Performance / India ANNUAL REPORT 2015
defi ciency on production of foodgrains expedite infrastructure projects, particularly due to policy initiatives which include the Public Private Partnership (PPP); price timely advisories, contingency plans and incentives for oil and gas sector; tax promotion of better variety seeds by the sops to new manufacturing fi rms–start- Government- as well as agricultural research ups and corporate sector; Foreign Direct institutions and universities somewhat. In Investment (FDI) relaxations especially in view of these developments in agricultural food processing industry; and reductions production coupled with better performance in customs and excise duty rates on key of horticulture crops, the advance estimate of inputs–if implemented quickly and effectively national income placed agricultural GVA at would add boost the sector’s performance. basic prices (2011/12 prices), at 1.10 percent for 2015/16. The pick-up in electricity and coal production, notwithstanding the moderation Industrial Sector in growth in overall index of eight core industries (2.00 percent during April-January Industrial output grew by 3.20 percent 2015/16 from 5.30 percent during the during April-December 2015, despite corresponding period last year) and uptick the contraction since November 2015, in Project Management Institute (PMI) compared to 2.10 percent growth during manufacturing index may indicate a slow April-December last year. The pick-up turn-around in industrial sector. in industrial activity during the period was driven by mining and manufacturing. Human Development: Progress Consumer durables, which was dragging of India the growth of manufacturing sector for the last two and half years has been largely The 2015 Human Development Report registering double-digit growth in the last (HDR) themed ‘Work for Human 6 months supported by low infl ation, fall in Development’ presents the Human fuel prices, upbeat consumer sentiment and Development Index (HDI) values and advantageous base effect. ranks 187 countries in terms of three basic parameters: to live a long and healthy life, Phasing out of base effects in the coming to be educated and knowledgeable, and to months, coupled with weak global demand, enjoy a decent standard of living. India’s cheaper imports and lower new investment HDI value for 2014 is 0.61, positioning announcements by the private sector add to the country at 130 out of 188 countries and uncertainty to industrial sector performance. territories. However, when adjusted for However, recent budgetary proposals– income inequality, India’s HDI value is 0.44. institutional mechanisms to resolve and
54 Country Performance / India ANNUAL REPORT 2015
Infrastructure commissioning of transmission lines during the period April 2015-January 2016 Infrastructure development has remained a when compared with the same period last major policy priority, as refl ected in a series of year. However, the Plant Load Factor (PLF) policy initiatives undertaken during 2015/16. of thermal power plants4 during April Allocation of telecommunication spectrum 2015-January 2016 turned out to be lower in and coal mines through auction process, comparison with the same period last year due passage of mines and minerals (Development to moderation in demand reflecting partly and Regulation) Amendment Act, setting up the impact of weak fi nancial position of state a committee on Revisiting and Revitalising power distribution companies. the PPP model of infrastructure development, establishment of National Infrastructure A worrisome aspect has been the existence and Investment Fund (NIIF) for fi nancing of a large number of stalled projects in infrastructure, approval for National Smart value terms during the period ending Grid Mission (NSGM), introduction of December 2015 as per Centre for Monitoring UDAY (Ujwal DISCOM Assurance Yojana) Indian Economy (CMIE’s) capex database. for fi nancial turn-around of power distribution Data relating to central sector projects companies, renewed focus on increasing the (Rs. 1.50 billion and above) does not show domestic production of coal1 , creation of a any discernible improvement in respect of conducive environment for boosting road parameters such as the time overruns and cost construction2, etc. have been some important overruns during the current fi nancial year policy initiatives undertaken during 2015/16. so far.
During the period 2015/163 , road construction Employment and domestic coal production have fared well. Power generations during 2015/16 (April The results of the latest quarterly Quick 2015-January 2016) recorded a growth rate of Employment Survey (QES) conducted 4.60 percent over the corresponding period by the Labour Bureau, revealed that the last year. There has been a growth of about rate of employment generation in the 47.40 percent with regard to the export-sensitive sectors, which had
1 Through-efforts to expedite Environmental and Forestry clearances as well as pursuing with state governments for assistance in land acquisition and coordinated efforts with railways for movement of coal.
2 (a) One time fund infusion to revive and physically complete languishing national highway projects, (b) entrusting authorization to National Highways Authority of India (NHAI) for rationalized compensation to concessionaires in case of delays not attributable to concessionaires for languishing highway projects on BOT Mode, (c) taking up road projects by NHAI under Engineering, Procurement, Construction (EPC) mode and Hybrid Annuity Model.
3 Based on data availability.
4 Coal and lignite based plants only. 55 Country Performance / India ANNUAL REPORT 2015
been declining steadily since April-June mobilization from tax and non-tax sources. 2014, eventually turned negative during April-June 2015. The revised estimates show that the budgeted targets of revenue defi cit and GFD as percent Currently, the focus of the Government has of GDP for 2015/16 were met. Revenue been on job creation through initiatives like defi cit at 2.50 percent was lower than the Make in India as well as enhancing the skills budgeted target of 2.80 percent of GDP. of the workforce through programs like skill Despite higher expenditure, particularly in India so as to appropriately reap the benefi ts the capital account, and a large shortfall of demographic dividend. in the projected disinvestment receipts, buoyancy in indirect tax collections and Fiscal Developments non-tax revenues helped in meeting the fi scal defi cit target for 2015/16. The Union Budget 2016/17, which was presented against the backdrop of Banking Developments deceleration in global growth, turbulent fi nancial markets and shrinking global The performance of the Indian banking trade, has adhered to the path of fi scal sector remained subdued during 2014/15. consolidation with the central government’s The banking sector experienced a slowdown Gross Fiscal Defi cit (GFD) projected to in balance sheet growth a trend that had set decline by 0.40 percentage points to 3.50 in since 2011/12. The moderation in assets percent of GDP for the ensuing fi nancial growth of Scheduled Commercial Banks year. The expected reduction in GFD refl ects (SCBs) was mainly attributed to tepid the combined impact of an increase in growth in loans and advances to below 10.00 non-debt receipts, particularly through tax percent. Growth in investments also slowed revenues, spectrum revenues, dividends, and down marginally. The decline in credit disinvestment proceeds while making room growth refl ected the slowdown in industrial for enhanced budgetary allocation towards growth, poor earnings growth reported seventh pay commission’s recommendations by the corporates and risk aversion on the and implementation of One Rank One part of banks in the background of rising Pension (OROP) scheme for defence services. bad loans. Further, with the availability of The focus of the Budget is on enhancing alternative sources, corporates also switched expenditure in priority areas, viz., farm and part of their fi nancing needs to other sources rural sector; social sector; infrastructure; such as external commercial borrowings, employment generation; and recapitalization corporate bonds and commercial papers. of Public Sector Banks (PSBs), which On the liabilities side, growth in deposits is to be fi nanced by additional revenue and borrowings also declined signifi cantly.
56 Country Performance / India ANNUAL REPORT 2015
During 2014/15, the Capital to agreement between the Reserve Bank and Risk-Weighted Assets Ratio (CRAR) of the Government on February 20, 2015. The SCBs remained well above the stipulated Reserve Bank adopted a revised liquidity minimum requirement of 9.00 percent. As management framework and operations in at the end of March 2015, CRAR of all August 2014 making it fl exible, transparent SCBs was reported at 13.00 percent and predictable with emphasis on developing (Basel III), same level as in the previous year. term auctions. The policy repo rate was eased to 6.75 percent with a cumulative reduction Financial Inclusion of 125 bps since January, 2015, taking into consideration easing of inflationary Pradhan Mantri Jan Dhan Yojana (PMJDY) pressures, low capacity utilization, weak was launched on 28th August, 2014 with the production indicators and credit off-take. objectives of providing universal access to banking facilities, providing basic banking Reserve money increased at a higher pace accounts with overdraft facility and RuPay of 14.18 percent as on February 19, 2016 as Debit card to all households, conducting compared with a growth of 11.19 percent a fi nancial literacy programs, creation of year ago. Reserve money growth was led by credit guarantee fund, micro-insurance and a pickup in both currency in circulation and unorganised sector pension schemes. The bankers’ deposits with the Reserve Bank objectives are expected to be achieved in of India (RBI) on the components side and two phases over a period of four years up primarily by the increase in Net Foreign to August 2018. Under the Government’s Assets (NFA) on the sources side. initiative of PMJDY Basic Savings Bank Deposit Accounts (BSBDAs) to the tune of The Year-on-Year (YoY) growth in Broad 210.00 million were opened as on February Money (M3) was 11.28 percent as on 24, 2016. There was a considerable increase February 5, 2016 as compared with a growth in total BSBDAs 441.00 million accounts of 11.03 percent in the corresponding period as at the end of September 2015 against of the previous year. The growth in money 398.00 million as at the end of March 2015 was mainly on the back of higher growth (243.00 million at the end of the March 2014). in currency with the public. Growth in aggregate deposits was marginally lower at Monetary Developments 11.02 percent vis-à-vis 11.08 percent last year with time deposits growing at 10.82 In a signifi cant move on the monetary percent, as compared with 11.26 percent policy framework, the architecture of a in the previous year. On the sources side, fl exible infl ation targeting of (4±2) percent bank credit growth by SCBs was higher at was formalized with the signing of an 11.54 percent as against 9.90 percent last
57 Country Performance / India ANNUAL REPORT 2015
year. onions–helped considerably to mitigate food price pressures. Price Situation Fuel and light group infl ation edged down Infl ation in terms of all India Consumer to 5.30 percent in January 2016 from 5.80 Price Index (CPI) remained moderate during percent in August 2015. The decline occurred 2015/16 so far, with some uptick beginning mainly due to further easing of global crude the third quarter of 2015/16. The average oil prices with the price of the Indian Basket infl ation during April-January 2015/16 at at USD 28.08 per barrel, thus recording 4.90 percent remained considerably lower 52.00 percent fall between April-January than 6.60 percent during the corresponding 2016. Excluding food and fuel, infl ation period of the previous year. The decline was remained low in 2015/16, mainly due to lower aided by further fall in global commodity input cost pressures supported by decline in prices, especially of crude oil, as well as crude oil prices, moderate wage growth and moderate food price pressures despite a subdued demand conditions. Infl ation in this defi cient monsoon. The intra-year infl ation group stood at 4.70 percent in January 2016. movements were signifi cantly subdued in the Under the miscellaneous category, infl ation fi rst half and reached a low of 3.69 percent in case of transport and communication in July 2015 (lowest since November 2014) sub-group fi rmed up to 1.60 percent before increasing to 5.69 percent in January in January 2016 from 0.60 percent in 2016. November 2015. Some price pressures were witnessed in the services segment, Infl ation in the food group, although recorded particularly in health, education and at 5.40 percent during the fi rst quarter personal care and effects segments. of 2015, declined during second quarter Infl ation in the housing sub-group stayed and hovered around 3.30 percent before low with the latest fi gure for January 2016 at increasing to 6.70 percent in January 2016. 5.20 percent. Despite moderate price pressures in case of food and beverages, select food items such as Infl ation in terms of Wholesale Price Index vegetables and pulses witnessed signifi cant (WPI) reached a four decade low at -5.06 month-on-month build-up of price percent in August 2015, before moving up to pressures during the year. Supply side -0.90 percent in January 2016 (provisional), measures initiated by the Government– as per the latest available data. This marked such as action against hoarding and black WPI in the negative territory for the fi fteenth marketing, suspension of futures trading consecutive month on account of benign in select pulses, discouraging exports global commodity prices and sharp fall in and incentivizing imports of pulses and crude oil prices.
58 Country Performance / India ANNUAL REPORT 2015
Stock Market April-February 25, 2016 as against a net infl ow of USD 42.40 billion during During 2015/16 so far, the Indian stock April-February 2015. market remained subdued. The Bomby Stock Exchange (BSE) Sensex declined by 17.20 External Sector percent (up to February 26, 2016) over end of the March 2015 mainly on account of turmoil India’s export growth has remained in in global equity markets following slowdown negative territory in 2015/16 so far. Based in China and its currency devaluation, on Directorate General of Commercial concerns over global economic growth and Intelligence and Statistics (DGCI&S) data, slump in commodity prices especially crude India’s exports contracted by about 18.50 oil prices. The downward trend in Indian stock percent in April-November 2015 as against market was also guided by mixed corporate an increase of 4.10 percent during earnings, Foreign Policy Instruments (FPIs’) Corresponding Period of the Previous Year concern over Miller Analogies Test (MAT), (COPPY). Fall in exports largely refl ect weakening of Rupee against US Dollar, inter alia subdued global demand conditions investors concern over delay in passage of caused by slowdown in major emerging Goods and Services Tax (GST) Bill, tight market economies and falling commodity liquidity conditions and selling by FPIs. prices. Imports also showed a fall of 17.20 However, Indian equity market has been percent during the same period (an increase relatively resilient during this period compared of 4.60 percent during COPPY). The decline to other major Electronics and Mechanical in import growth was mainly due to a fall Engineers (EMEs). in Petroleum Oil and Lubricants (POL) and coal imports. Oil imports fell to USD 61.50 Yields in the Government Securities billion during April-November 2015 from Market USD 106.60 COPPY due to a substantial fall in the international crude oil prices (Indian The 10-year Government Securities (G-Secs) basket). Non-oil imports were valued at yield increased during 2015/16 so far due to USD 200.40 billion during April-November global sell-off spurred outfl ows from Indian 2015 which were 4.40 percent lower than markets, increase in infl ation, depreciation of level of corresponding period of the previous Rupee and tightening liquidity conditions. year. India’s trade defi cit at USD 87.50 billion during April-November 2015 was lower Foreign Investment than USD 102.50 billion during COPPY.
Foreign portfolio investment recorded a net outfl ow of USD 5.40 billion during
59 Country Performance / India ANNUAL REPORT 2015
Current Account compared with USD 18.10 billion in the fi rst half of 2014/15. Following a modest level of trade defi cit and marginal improvement in net invisibles, Foreign Exchange Reserves India’s Current Account Defi cit (CAD) narrowed to 1.40 percent of GDP in the fi rst Foreign Exchange Reserves (FER) in nominal half of 2015/16 from 1.80 percent during terms (including valuation) increased by COPPY. Net invisible receipts were USD 8.70 billion (from USD 341.60 billion marginally higher with the moderation in to USD 350.40 billion) during the period net services earnings and private transfer April-December 2015 as compared with receipts being offset by a smaller net outfl ow USD16.40 billion in COPPY. of primary income (profi t interest and dividends). External Debt
Capital Flows India’s total external debt stock increased to USD 483.20 billion at the end of The net capital infl ows (on Balance of September 2015 from USD 475.20 Payments (BOP) basis) moderated to billion at the end of March 2015. The USD 25.40 billion during April-September long-term external debt increased by 2015 from USD 36.40 billion in COPPY. USD 7.40 billion (1.90 percent) over Among major forms of capital flows, net March 2015 to USD 397.10 billion, while FDI infl ows during the fi rst half of 2015/16 short-term debt registered an increase of rose by more than 10.50 percent over the 0.70 percent and stood at USD 86.10 billion level during COPPY. In contrast, portfolio at the end of September 2015. Out of the total investment recorded a net outfl ow increase in the long-term debt, the largest USD 9.10 billion during the fi rst increase of USD 6.70 billion was on account half of 2015/16 as against a net of NRI deposits followed by commercial infl ow of USD 22.30 billion during COPPY. borrowings which rose by USD 1.50 billion. Non-Resident Indian (NRI) deposits with Short-term debt at the end of September 2015 commercial banks at USD 10.10 billion witnessed increase over its level at the end were signifi cantly higher in the fi rst half of March largely on account of increase in of 2015/16 than the net infl ow into these external debt liabilities of commercial banks. accounts during COPPY. Since the net capital The US Dollar continued to dominate the infl ows were higher than CAD, there was currency composition of India’s external debt an accretion of USD 10.60 billion to foreign and accounted for 57.70 percent of the total exchange reserves (on a BOP basis: excluding external debt at the end of September 2015. valuation effect) in the fi rst half of 2015/16 as
60 Country Performance / India ANNUAL REPORT 2015 4.67 5.18 4.66 -6.53 3.17 -6.43 19.89 5.58 2014/15 2015/16 2014/15 2015/16 (In percent) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Apr-Dec Apr-Dec 1 1.74 6.10 62.82 -72.49 -111.05 -6.63 -7.63 -6.53 30.39 13.21 5.07 1.69 -6.33 11.63 1.07 2.01 -6.31 -5.81 -4.33 -9.39 12.80 3.26 9.02 15.43 33.19 -3.30 1.00 4.35 4.65 17.79 3.32 15.42 13.26 16.28 0.29 10.82 32.21 11.75 24.90 28.45 8.98 21.24 India: Real GDP Growth-at Market Price (at 2011/12 prices) Market Price (at 2011/12 Growth-at India: Real GDP 2014/15 2015/16 ce Year fi nal consumption nal fi nal consumption nal 6.24 7.61 8.20 9.23 1.53 6.57 6.40 5.62 6.40 6.12 6.14 fi Central Statistics Of xed capital formation 4.85 5.26 8.29 2.21 3.72 5.35 5.22 7.58 2.78 fi Advanced estimates. Discrepancies at market pricesGDP 7.24 -20.02 -266.49 7.57 -193.77 -45.94 7.47 -155.33 213.80 8.34 -103.76 6.56 -90.40 157.04 6.71 21.54 7.56 -181.42 7.73 7.26 7.44 7.51 Private Government capital formationGross 6.00 5.64 9.33 2.96 4.52 7.28 5.42 8.17 4.09 5.54 5.89 Net exports 1 gross change in stocksvaluables Exports 20.35Imports 5.54 23.00 20.611 15.97 21.61 0.80 3.40 -6.32 5.08 -0.65 8.50 4.59 5.68 -6.06 -4.98 -3.44 -10.80 Source: Source: Item
61 Country Performance / India ANNUAL REPORT 2015 5.139.26 9.54 5.83 11.08 10.33 12.99 6.95 2014/15 2015/16 2014/15 2015/16 (In percent) Q1 Q2 Q3 Q4 Q1 Q2 Q3 April-December 1 9.45 8.40 8.03 9.90 11.66 8.317.08 8.54 7.30 8.27 7.40 8.57 8.15 9.83 6.66 8.46 6.20 7.18 7.53 7.07 7.39 7.26 4.42 3.699.83 5.03 9.48 11.58 5.29 8.35 4.86 6.18 2.59 13.07 5.96 10.45 1.19 8.08 4.03 10.14 5.06 8.64 3.74 9.56 8.02 5.86 10.19 8.80 8.79 4.36 3.98 7.47 6.04 -0.25 1.12 2.28 2.82 -2.42 -1.70 1.65 2.05 -0.99 0.28 0.58 10.83 6.91 16.45 7.01 9.06 10.14 8.56 5.02 6.54 11.10 6.86 10.60 10.2910.66 8.55 6.94 12.69 4.22 12.08 10.26 9.02 25.28 9.30 4.14 11.59 6.13 9.92 7.10 7.52 2014/15 2015/16 India: Real Gross Value Added Growth at Basic Prices (2011/12=100) Added Growth Value India: Real Gross ce Year fi Central Statistics Of nancial, insurance, real estate shing Advanced estimates. Services Added (at basic Value Gross prices) Industry 6.47 8.78 9.24 6.21 3.39 6.91 7.13 8.40 11.03 6.30 8.80 Agriculture, forestry and forestry Agriculture, fi mining and quarrying manufacturing gas, water supply electricity, and other utility services construction trade, hotel, transportation, 5.53communication and services related to broadcasting 9.50fi and professional services 7.85public administration, defence and other services 5.76 1.691 6.63 7.28 9.02 12.56 Source: Source: Item
62 Country Performance / India ANNUAL REPORT 2015
India: Sectoral and Use-Based Classifi cation of Industries of IIP (In percent)
Growth Rate Year Weight in the IIP 2014/15 2014/15 2015/161 Item April-March April-December
Sectoral
mining 14.20 1.50 1.90 2.20
manufacturing 75.50 2.30 1.80 3.10
electricity 10.30 8.40 10.10 4.50
Use-based
basic goods 45.70 7.00 8.00 3.40
capital goods 8.80 6.40 5.10 1.70
intermediate goods 15.70 1.70 1.80 1.90
consumer goods (a+b) 29.80 -3.40 -5.00 4.00
consumer durables (a) 8.50 -12.60 -15.20 12.40
consumer non-durables (b) 21.30 2.80 2.30 -1.00
Total 100.00 2.80 2.60 3.20
1 Provisional data.
Source: Central Statistics Offi ce
63 Country Performance / India ANNUAL REPORT 2015
India: Position in Global Human Development Index 2014 (In percent)
Multidimensional Population below HDI GNI Per Inequality Country GDI GII Poverty Index poverty line Capita adjusted HDI Value Rank (2015) (percent)
India 0.61 130.00 5,497.00 0.44 0.80 0.56 0.28 23.60
Note: GNI (Gross National Income) is based on 2011 dollar Purchasing Power Parity (PPP); HDI – Human Development Index; GII – Gender Inequality Index; GDI – Gender Development Index.
Source: Human Development Report 2015 and Human Development Initiative (OPHI), Country Briefi ng December 2015
India: Foreign Trade (In millions of USDs)
1 2 1 2 Year 2013/14 2014/15 2014/15 2015/16
Item April-March April-November
314,415.72 310,338.53 213,774.45 174,790.36 Exports (4.70) (-1.30) (4.10) (-18.24)
450,213.68 448,033.43 316,280.67 261,956.48 Imports (-8.30) (-0.49) (4.60) (-17.18)
Trade Balance -135,797.96 -137,694.90 -102,506.21 -87,166.12
1 Revised data.
2 Provisional data.
Note: Figures in brackets are growth rates (YoY).
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
64 Country Performance / India ANNUAL REPORT 2015 Imports 2 2015/16 Exports Imports 1 2014/15 Exports Imports 1 (In millions of USDs) Exports April-March April-November India: Trade with ACU Member Countries ACU Member with Trade India: Imports 2013/14 2014/15 7.27 3.12 8.06 2.86 7.74 3.09 7.62 2.78 356.20 152.00106.30794.30 335.40 4.00 1,387.00 149.70 152.60 774.60 198.10 1,222.80 4.30 107.70 484.30 100.70 284.60 946.90 2.70 265.40 461.20 113.30 765.60 2.30 6,183.50 479.904,968.50 10,379.60 6,450.50 4,175.403,598.30 620.602,286.30 8,927.90 4,334.70 529.604,569.10 2,752.00 430.80 4,556.30 411.30 671.80 7,141.00 1,856.70 3,727.40 640.40 6,711.70 1,850.40 497.30 3,081.90 428.40 4,726.90 759.30 1,229.50 418.70 4,364.60 340.40 1,991.80 411.00 1,215.70 298.00 3,679.10 306.70 494.50 Exports Year India’s India’s to Directorate General of Commercial Intelligence and Statistics (DGCI&S) ACU country-wise latest data available till November 2015. Provisional data. Revised data. Country Bhutan Iran Maldives Myanmar Nepal Pakistan Sri Lanka Bangladesh Total Trade Total India’s Share ACU’s 314,415.721 450,213.682 310,338.53 22,862.50Note: 448,033.43Source: 14,034.70 213,774.45 25,013.20 316,280.67 174,790.36 12,822.30 261,956.48 16,545.80 9,779.70 13,323.50 7,287.80 Total Trade (percent) Trade Total
65 Country Performance / India ANNUAL REPORT 2015
India: Exports of Major Commodities to ACU Member Countries (In millions of USDs)
Year 2013/14 2014/15
Commodity April-March
Engineering goods 5,983.50 8,588.20
Rice 2,292.50 2,130.80
Petroleum products 1,997.30 2,280.20
Cotton yarn/ fabrics/ made-ups, handloom 1,729.80 1,771.00 products, etc.
Oil meals 1,377.20 637.40
Cotton raw including waste 1,072.40 690.50
Organic and inorganic chemicals 1,055.80 1,109.50
Drugs and pharmaceuticals 910.20 963.40
Plastic and linoleum 627.10 679.20
Man-made yarn/ fabrics/ made-ups, etc. 597.90 660.30
Wheat 570.10 342.50
Fruits and vegetables 558.80 536.40
Mica, coal and other ores, minerals 407.90 363.10 including processed minerals
Sugar 340.50 166.50
Meat, dairy and poultry products 305.90 140.40
Others 3,035.50 3,603.50
Total Export to ACU 22,862.40 24,662.90
Total Export 314,415.72 310,338.53
Percentage Share to Total Export 7.27 7.95
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
66 Country Performance / India ANNUAL REPORT 2015
India: Imports of Major Commodities from ACU Member Countries (In millions of USDs)
Year 2013/14 2014/15
Commodity April-March
Petroleum, crude and products 8,789.50 7,364.20
Wood and wood products 811.90 448.10
Pulses 621.00 804.60
Fertilisers, crude and manufactured 558.90 231.70
Organic and inorganic chemicals 491.30 744.20
Dyeing/tanning/colouring materials 394.20 423.80
Fruits and vegetables 307.50 423.20
Iron and steel 293.50 221.10
Artifi cial resins, plastic materials, etc. 218.50 234.00
Spices 160.20 150.00
Miscellaneous processed items 107.20 138.10
Transport equipment 102.70 191.30
Textile yarn fabric, made-up articles 94.80 112.10
Ready made garments cotton including 93.70 106.20 accessories
Non-ferrous metals 91.60 96.30
Others 898.10 1,097.10
Total Import from ACU 14,034.60 12,786.00
Total Import 450,213.68 448,033.43
Percentage Share to Total Import 3.12 2.85
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
67 Country Performance / India ANNUAL REPORT 2015
India: Exports to Special Economic Zones
Item Export Growth Year (In millions of USDs) (In percent)
2004/05 4,075.98 35.19
2005/06 5,158.84 26.57
2006/07 7,643.83 48.17
2007/08 16,559.73 116.64
2008/09 21,710.70 31.11
2009/10 46,547.28 114.40
2010/11 69,304.56 48.89
2011/12 76,055.08 9.74
2012/13 87,513.34 15.07
2013/14 81,663.06 -6.69
2014/15 75,849.28 -7.12
Source: Ministry of Commerce (MOC)
68 Country Performance / India ANNUAL REPORT 2015
India: Exports to Central Government Special Economic Zones (In millions of USDs)
Year 2014/15 2010/11 2011/12 2012/13 2013/14 Item (January-October)
SEZ1 Kandla 643.03 565.78 549.01 641.89 591.90
SEEPZ2 SEZ 2,223.91 2,221.41 2,453.67 2,367.58 1,959.44
SEZ Noida 2,227.34 1,538.89 1,285.67 1,273.18 946.82
SEZ Cochin 5,732.53 5,995.77 1,964.11 256.26 193.57
FALTA SEZ 319.94 158.77 212.73 218.34 129.81 VISAKHAPATNAM 463.99 511.94 359.78 383.84 133.44 SEZ
1 It stands for Special Economic Zone.
2 It stands for Santacruz Electronics Export Processing Zone.
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
69 Country Performance / India ANNUAL REPORT 2015
India: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15
Sector/Country
Bangladesh Cotton raw including waste, rice, wheat, oil meals, fruits and vegetables, other cereals, Agriculture cotton yarn/fabrics/ made-ups, handloom products, etc. Mica, coal and other ores, minerals including processed minerals, petroleum products, Industry organic and inorganic chemicals, plastic and linoleum, drugs and pharmaceuticals Bhutan Agriculture Meat, dairy and poultry products, rice Mica, coal and other ores, minerals including processed minerals, petroleum products, organic Industry and inorganic chemicals, drugs and pharmaceuticals, electronic goods Iran Agriculture Rice, oil meals, tea, other cereals, sugar Organic and inorganic chemicals, drugs and pharmaceuticals, iron ore, plastic and linoleum Industry gems and jewellery, paper, paper board and product, engineering goods Maldives Agriculture Meat, dairy and poultry products, fruits and vegetables, rice Mica, coal and other ores, minerals including processed minerals, petroleum products, Industry cereal preparations and miscellaneous processed items, drugs and pharmaceuticals, marine product Myanmar Agriculture Cotton yarn/fabrics/ made-ups, handloom products, etc., oil meals, tobacco, pulses, coffee Cement, clinker and asbestos cement, ready made garments of all textiles, plastic and Industry linoleum, drugs and pharmaceuticals, electronic goods, agro chemicals Nepal Cotton yarn/fabrics/ made-ups, handloom products, etc., rice, fruits and vegetables, oil Agriculture meals, cotton yarn/fabrics/ made-ups, handloom products, etc. Organic and inorganic chemicals, paper, paper board and products, drugs and pharmaceuticals Industry petroleum products, electronic goods, engineering goods Pakistan Meat, dairy and poultry products, oil meals, fruits and vegetables, spices, cotton raw including Agriculture waste, pulses, oil seeds, man-made yarn/fabrics/ made-ups, etc. Organic and inorganic chemicals, engineering goods, plastic and linoleum, drugs and Industry pharmaceuticals, handicrafts excluding handmade carpet
70 Country Performance / India ANNUAL REPORT 2015
India: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15 (Contd.)
Sector/Country
Sri Lanka Cotton yarn/fabrics/ made-ups, handloom products, etc., man-made yarn/ fabrics/ made- Agriculture ups, etc., fruits and vegetables, rice, sugar, spices Paper, paper board and product, petroleum products, plastic and linoleum, organic and Industry inorganic chemicals, drugs and pharmaceuticals, engineering goods
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
India: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15
Sector/Country Bangladesh
Agriculture Fruits and vegetables, jute yarn, jute, raw
Textile yarn fabrics, made-up articles, metaliferrous ores and other minerals, leather and Industry leather products, ready made garments cotton including accessories, ready made garments manmade fi ber, cement, clinker and asbestos cement,
Bhutan
Agriculture Fruits and vegetables, spices Artifi cial resins, plastic materials, etc., iron and steel, transport equipment, organic and Industry inorganic chemicals, cement, clinker and asbestos cement Iran
Agriculture Fruits and vegetables, spices, tea
Artifi cial resins, plastic materials, etc., metaliferrous ores and other minerals, glass and Industry glasswear, organic and inorganic chemicals, petroleum, crude and products, leather and leather products Maldives Machinery, electrical and non-electrical, petroleum, crude and products, iron and steel, Industry electronic goods Myanmar Wood and wood products, fruits and vegetables, natural rubber, fruits / vegetable seeds, Agriculture pulses, spices Metaliferrous ores and other minerals, handicrafts (excluding handmade carpets), Industry machinery, electrical and non-electrical, marine products, electronic goods
71 Country Performance / India ANNUAL REPORT 2015
India: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15 (Contd.)
Sector/Country Nepal Manmade yarn, fabrics, made-ups, wood and wood products, fruits and vegetables, Agriculture spices, tea, textile yarn fabric, made-up articles, manmade yarn, fabrics, made-ups Organic and inorganic chemicals, medicinal. and pharmaceutical products, leather and Industry leather products, iron and steel, artifi cial resins, plastic materials, etc., non-ferrous metals Pakistan
Agriculture Fruits and vegetables, cotton raw and waste, sesame seeds, spices, wool raw
Petroleum, crude and products, cement, clinker and asbestos cement, leather and Industry leather products, organic and inorganic chemicals, glass and glassware, medicinal and pharmaceutical products Sri Lanka Manmade yarn, fabrics, made-ups, wood and wood products, fruits and vegetables, Agriculture spices, tea, textile yarn fabric, made-up articles, manmade yarn, fabrics, made-ups Machinery, electrical and non-electrical, transport equipment, metaliferrous ores and Industry other minerals, glass and glassware Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S)
Source: Reserve Bank of India
72 Country Performance / India ANNUAL REPORT 2015
Iran
Introduction
In Financial Year (FY)1 2014/15, the second macro-economic targets, the Central Bank year after the 11th Government of hope of Islamic Republic of Iran (CBI) strategy and prudence got elected, the adoption of and approach were to strengthen monetary economic policies aimed at non-infl ationary discipline, adopt appropriate liquidity exit from the deep recession and the tightly management, and rebalance liquidity growth disciplined monetary and fi nancial policies structure through increase in indigenous stabilized macro-economic conditions of Iran. money all aimed at better access of economic Moreover, the initial positive outcome of Iran agents to liquidity and foreign exchange negotiation with P5+1 countries on nuclear while strengthening stability in money and issue and the optimistic views on the ultimate foreign exchange markets. Sound fi nancing agreement with P5+1 strengthened economic of economic activities, priority for provision recovery. of working capital to productive units, and the anchoring of infl ation expectations were Iranian economy, which showed eight among major targets of CBI policies. The quarters of negative growth in 2012/13 and CBI policy package of 2014/15 in areas 2013/14 and experienced a full recessionary of monetary, foreign exchange, and credit cycle during these two years, turned into a policies, supervision of banks and credit positive performance of 3.00 percent Gross institutions, and the payment system Domestic Product (GDP) growth in 2014/15. management led to infl ation containment and The GDP growth of 2014/15, combined better economic performance which were with a sharp decline of infl ation by 19.10 two major economic achievements of Iran in percentage points to 15.60 percent in 2014/15 2014/15. from an extremely high level of 34.70 percent in the year before, strengthened economic GDP growth at base year constant prices conditions in Iran and put the national of 2004/05 rebounded from negative economy on a non-infl ationary sustainable 1.90 percent in 2013/14 to 3.00 percent in growth path. 2014/15. The services sector, along with manufacturing and mining and oil sectors, In line with Government policies in attaining contributed by 1.50, 1.30, and 0.50 percentage
1 Financial Year stands for March to March.
73 Country Performance / Iran ANNUAL REPORT 2015
points respectively to total real GDP growth, policies affected positively the infl ation comprising the largest sectoral contributions expectation formation among Iranian to output growth. Moreover, gross fi xed consumers and investors in 2014/15. capital formation at constant prices surged by 3.50 percent at global level and by 8.70 and Real Sector 0.70 percent for the sub-groups of machinery and construction, respectively. Improvements In 2014/15, Iran produced crude oil in in macro-economic policy and condition and adherence to the quotas set by the better outlook for international relations, Organization of Petroleum Exporting and external transactions of Iran greatly Countries (OPEC). Average world crude contributed to economic achievements and oil production1 in 2014 amounted to performance in the year 2014/15. 88.70 mb/d, showing a rise of 2.40 percent compared with 2013. Crude oil production The other major economic achievement by OPEC member countries, accounting for in 2014/15 was the progress toward price 41.30 percent of world crude oil production, stability. The infl ation rate in Iran was went down by 0.10 percent to 36.60 mb/d. reduced considerably after a long period Moreover, world crude oil consumption2 of persistent surge. The average monthly grew by 0.90 percent and reached 92.10 infl ation rate after a continued rise over mb/d3 . the fi rst seven months of 2013/14 reaching the peak of 40.40 percent in October OPEC Members’ Quotas in 2014 2013, reversed to a declining trend. The (In percent) Others Saudi Arabia monthly infl ation rate then decreased to (2 3.60) (31. 44) 34.70 percent in the last month of 2013/14 (March 2014) and with a further substantial decline stabilized at 15.60 percent in March 2015. The monthly point-to-point increase in Consumer Price Index (CPI) decelerated Iraq (8. 98) Iran accordingly from its peak of 45.10 percent in Kuwait (9. 88) (8. 53) U.A.E. Venezuela June 2013 to 16.20 percent in March 2015. (10. 14) (7. 43) Safe and sound liquidity management and improved exchange rate and foreign exchange
1 Includes Natural Gas Liquid (NGL), shale oil, and oil sands.
2 Includes domestic demand for oil, aviation and marine fuels, fuel for refi neries, oil wastes, ethanol, and biodiesel.
3 Figures provided by the British Petroleum (BP) do not match the amount of oil supply and demand at global level. Based on the OPEC data, world oil supply and demand were respectively 92.40 and 91.30 mb/d in 2014.
74 Country Performance / Iran ANNUAL REPORT 2015
Spot price of Iran’s medium crude oil The 7.50 percent growth in agricultural decreased by 21.10 percent on average to products in 2014/15 and the positive USD 83.10 per barrel in 2014/15. Moreover, developments in foreign trade sector led to international crude oil prices followed an 3.80 percent rise in the value-added of the upward trend until June 2014 and then agriculture sector at constant 2004/05 prices. reversed. In 2014, the price of OPEC basket1 of crude oil decreased by 9.20 percent on Based on preliminary estimates on national average to USD 96.20 per barrel, compared accounts, the value-added fi gures of the with USD 105.90 per barrel in 2013. Price manufacturing and mining sectors showed of other types of crude oil followed similar respectively 6.70 and 9.80 percent growth trends in 2014. Furthermore, Iran’s crude in 2014/15, compared with the year before, oil exports decreased by 16.40 percent, on at constant 2004/05 prices. Rise in the value average, and reached 1.30 mb/d and the of the manufacturing sector in 2014/15 was exports of oil products amounted to 119.00 largely attributable to the improvement in thousand b/d in 2014/15, indicating 20.00 the performance of large manufacturing percent increase. establishments (with 100 employees or more). Accordingly, production index of large Average Spot Prices of Crude Oil During 2014 manufacturing establishments increased by (USD per barrel) 6.70 percent in this year.
110
100 Data on operation permits issued for new 90 manufacturing units show that the number of 80 operation permits increased by 16.70 percent 70 in 2014/15 and the amount of investment 60 went up by 11.20 percent. On the other hand, 50 Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. the number of establishment permits, as Iran( m edium) Dubai OPEC basket an indicator of private sector’s tendency to make new investments, fell by 4.30 percent, Based on the data released by the Ministry pointing to 16.40 percent reduction in the of Jihad-e-Agriculture, total farming, amount of investment. horticultural, livestock, and fi shery products were approximately 104.20 million tons According to the Ministry of Industry, Mine, in 2014/15, showing 7.50 percent increase and Trade, a total of 2.90 thousand new compared with 2013/14. operation permits, with an investment of
1 Includes Arab Light (Saudi Arabia), Basra Light (Iraq), Merey (Venezuela), Bonny Light (Nigeria), Ess Sider (Libya), Iran Heavy (Islamic Republic of Iran), Kuwait Export (Kuwait), Qatar Marine (Qatar), Murban (U.A.E), Saharan Blend (Algeria), Oriente (Ecuador), and Girassol (Angola).
75 Country Performance / Iran ANNUAL REPORT 2015
Rls. 85.60 trillion, were issued in 2014/15. total fl oor space of buildings stipulated in This is indicative of respectively 16.70 and construction permits declined by respectively 11.20 percent increase in terms of number 36.10 and 42.80 percent. and investment compared with 2013/14. Job opportunities created based on issued In 2014/15, private sector investment in the operation permits went up by 0.90 percent buildings of urban areas rose by 7.50 percent and reached 47.20 thousand in 2014/15. (at current prices) to Rls. 810.60 trillion. Private sector investment in the buildings In 2014/15, industrial investment based on of Tehran, other large cities, and small and issued operation permits was Rls. 29.40 medium-size cities grew by 12.30, 10.00 and billion per unit. The number of establishment 1.30 percent, respectively. permits issued by the Ministry of Industry, Mine, and Trade for new manufacturing Population and Employment establishments and the expansion of existing units decreased by 4.30 percent to 16.50 In 2014/15, Iran’s population grew by 1.20 thousand. percent to 77.80 million. The share of men in total population reached 50.40 percent. Performance indicators of the construction In this year, 72.50 percent of the population and housing sector experienced reduction (56.40 million) dwelled in urban and the in 2014/15 compared with the year before. remaining in rural areas. Gender ratio (the Slowdown in the activities of this sector is number of males per 100 females) was 101.50 indicative of lower private sector’s tendency in 2014/15, lower than the respective fi gure in to invest in construction activities. Based on 2011/12 (101.80). preliminary estimates on national accounts, the value-added of the construction sector Total number of households was estimated decreased by 0.40 percent at constant at 23.80 million in 2014/15, indicating 4.00 2004/05 prices and reached Rls. 138.50 percent increase compared with the estimated trillion in 2014/15. number of households in the year before (22.90 million). Out of total households, Reviewing data on construction permits 17.60 million were residing in urban and 6.20 issued by municipalities indicates that the million in rural areas, showing 4.50 and 2.60 number and total fl oor space in construction percent growth, respectively, compared with permits issued for urban areas decreased 2013/14. by 32.10 and 40.20 percent, respectively. Number and total fl oor space of buildings in According to the Statistical Center of Tehran indicated 51.80 and 49.60 percent Iran (SCI), in 2014/15, participation rate fall. In other large cities, number and decreased by 0.40 percentage point to 37.20
76 Country Performance / Iran ANNUAL REPORT 2015 percent, still lower than the average rate of the rose 36.30 percent to Rls. 978.00 trillion, 2005-14 period (38.70 percent). This low rate representing 96.80 percent realization is attributable to economic downturn affecting compared with the approved fi gure. Share different sectors of economic activity and the of tax revenue in total revenues was 72.60 outside restrictions imposed on the Iranian percent and that of other government economy. revenues, 27.40 percent compared with the respective fi gures of 2013/14 (68.90 and Based on the SCI, the number of available 31.10 percent). jobs reached 21.30 million in 2014/15. This is lower than the year before by 36.20 Government Budget thousand (0.20 percent). Accordingly, in (In trillion Rls.)
2014/15, the unemployment rate increased 1,450 by 0.20 percentage point to 10.60 percent. 1,200 950
Unemployment rate in urban areas decreased 700 by 0.20 percentage point to 11.60 percent. In 450 200 rural areas, however, this rate reached 7.90 -50
-003 percent, up by 0.90 percentage point compared 2010/11 2011/12 2012/13 2013/14 2014/15 Revenues Expenses with 2013/14. Continued drought in Iran over Disposal of non-financial assets Acquisition of non-financial assets the past years has raised unemployment rate Operating and non-financial balance in rural areas and decreased employment opportunities for rural dwellers. In this year, tax revenue increased by 43.60 percent to Rls. 709.70 trillion, showing Unemployment Rate 101.00 percent realization compared with the (In percent) approved fi gure. All major components of tax 16 revenue increased in 2014/15, with the tax on 14 imports indicating the highest rise by 66.00 12 percent and wealth tax registering the lowest
10 growth by 15.00 percent. In 2014/15, income
8 tax revealed the lowest realization by 92.70 percent whereas tax on imports enjoyed the 6 2010/11 2011/12 2012/13 2013/14 2014/15 highest realization of 122.30 percent. Among Urban areas Rural areas Total the major components of tax revenue, direct tax refl ected a realization of 98.20 percent and Government Budget and indirect tax, 104.10 percent. Finance Review of the sources of government general In 2014/15, government general revenues budget by oil and non-oil items indicates that
77 Country Performance / Iran ANNUAL REPORT 2015
receipts from sale of crude oil and oil products 8.60 percent, in terms of volume (weight), to constituted almost 35.40 percent of total. The 124,650.00 thousand tons. Share of exports corresponding fi gure for the preceding year in total trade increased by 1.70 percentage was 43.50 percent. points, in terms of value, to 40.60 percent. In terms of volume, however, share of exports Expenses (current expenditures) rose by in total trade reached 65.50 percent, down by 20.10 percent to Rls. 1,438.30 trillion in 5.20 percentage points. 2014/15, showing 97.10 percent realization compared with the approved fi gure. The In 2014/15, value of exports (through growth rate of government expenses in the Customs) increased by 15.90 percent to year before was 34.60 percent. In 2014/15, USD 36,555.00 million compared with national and provincial expenses accounted the respective fi gure of the previous year. for 96.50 and 3.50 percent of government Moreover, the volume (weight) of exports expenses, respectively. In this year, all rose by 0.70 percent to 81,634.00 thousand major expenditure items of national current tons, compared with the previous year. Rise expenditures, except for previously approved in the value of exports (through Customs) was and allocated budgetary items (budgetary mainly attributable to the increase in the value items and notes) and subsidies on essential of exports of chemical and petrochemical goods, were raised. Subsidy paid on essential products. Accordingly, the price of each ton goods, accounting for 10.60 percent of total of exported goods reached USD 448.00 in government expenses, decreased by 7.80 2014/15, showing a rise of 15.10 percent percent, compared with 44.20 percent increase compared with the previous year. in the previous year. Review of the exported goods, in terms of Considering the performance fi gures value, reveals that gas and oil products, of revenues and expenses in 2014/15, organic and inorganic chemicals and rubber the government operating balance ran and plastic products had the lion’s share in Rls. 460.40 trillion defi cit, down by 4.10 total as in previous years. The total share of percent compared with the previous year. the mentioned groups in the value of exports (through Customs) grew by 4.60 percentage External Sector points to 48.10 percent. Furthermore, total share of these groups in the value of industrial According to the data released by the Islamic exports increased from 54.70 percent in Republic of Iran Customs Administration, in 2013/14 to 60.30 percent in 2014/15. 2014/15, trade through Customs1 increased by 10.90 percent, in terms of value, to The value of imports went up by 7.80 percent USD 90,125.00 million. Moreover, it rose by to USD 53,569.00 million in 2014/15,
1 Excluding value and volume (weight) of crude oil exports. 78 Country Performance / Iran ANNUAL REPORT 2015 compared with the preceding year and the decreased by 27.10 percent to volume (weight) of imports rose by 27.70 USD 21,392.00 million and non-oil goods percent to 43,016.00 thousand tons. Higher account defi cit amounted to USD 30,011.00 increase in the volume of imported goods million, showing 6.10 percent decrease compared with their value reduced the unit compared with 2013/14. value (price of one ton) of imported goods by 15.60 percent from USD 1,476.00 in the Free on Board (fob) value of exports went year before to USD 1,245.00 in 2014/15. down by 6.90 percent to USD 86.50 billion in Decline in the international prices of 2014/15. The main factor behind this decline imported goods and lifting of some import was 14.20 percent decrease in oil exports1. restrictions were among factors that led to In this year, foreign exchange receipts a decrease in the per ton value of imported from non-oil exports grew by 9.70 percent goods in 2014/15. and share of non-oil exports in total value of exports rose by 5.50 percentage points. Review of the imported goods, in terms Moreover, in 2014/15, fob value of imports of value, refl ects that machinery and increased by 2.40 percent to USD 65,079.00 transportation vehicles, chemicals, cereals million. and cereal preparations, and iron and steel accounted for respectively 37.20, 13.20, Money and Banking 11.60, and 7.90 percent of the value of imports through Customs in 2014/15. Liquidity amounted to Rls. 7,823.80 trillion Total share of these groups in the value of in March 2015, showing 22.30 percent imports through Customs was 69.90 percent, growth compared with March 2014. compared with 64.80 percent in 2013/14. Comparing the liquidity growth in this year with the 38.80 percent liquidity growth in Current account surplus decreased by 36.80 2013/14 is indicative of 16.50 percentage percent to USD 15,861.00 million in 2014/15. points decrease. Among the major components of the current account, services account defi cit increased Claims on non-public sector (excluding profi t and the surplus of goods account, income and revenue receivables), with 16.40 percent account, and current transfers account increase compared with the year before, was declined. the main factor behind the liquidity growth of 2014/15. This variable had a positive In 2014/15, surplus of goods account share in the rise of liquidity by 12.50
1 Includes value of crude oil, oil products, natural gas, and natural gas liquids and condensate (Tariff codes: 2709, 2710, and 2711) exported by National Iranian Oil Company (NIOC), National Iranian Gas Company (NIGC) and National Iranian Oil Refi ning and Distribution Company (NIORDC), petrochemical companies, and others (customs and non-customs).
79 Country Performance / Iran ANNUAL REPORT 2015
percentage points, showing 12.50 percentage Payment Systems points decrease compared with the previous year’s fi gure (25.00 percentage points share In line with system development and in the 38.80 percent growth of liquidity in implementation of electronic payment 2013/14). system and the adoption of standard risk- based system-wide oversight on electronic Monetary base surged by 10.70 percent, payment system, CBI prepared the foundation indicating 10.70 percentage points decrease for electronic data-based supervision. compared with the growth fi gure of 2013/14 Implementation of the Electronic System (21.40 percent). for Checks Image Transfer and Clearance (CHAKAVAK) as of 2014; design of Bank- Net foreign assets of the CBI, with 5.60 Wide Standard E-Checkbook Issuance percent fall and a negative share of 7.90 (SAYAD); development of Credit Control percentage points in monetary base, was the and Oversight Center (MAKNA); and major decreasing factor for the growth of the operation of Information Security monetary base in March 2015. Management System (NAMAD) were among important measures adopted by CBI In 2014/15, CBI other items (net), with 2.60 in 2014/15, aimed at improved oversight and percent decrease compared with March 2014 supervision of inter-bank transactions. and a decreasing share of 2.50 percentage points, was another factor behind the decline Electronic payment instruments, equipment, in the monetary base. The main reason behind and systems in banks network expanded with this decline was 2.10 percent increase in the an admissible growth in this year. The number foreign reserve revaluation account of CBI of cards issued in the banking system grew (on other liabilities of CBI account), which by 19.60 percent to over 333.00 million in had a negative contribution to monetary base 2014/15, including 223.00 million debit cards growth by 1.70 percentage points. (66.80 percent), 109.20 million prepaid or gift cards (32.70 percent), and merely 1.70 million Major Economic Variables credit cards (0.50 percent). (In percent)
40 The number of Automated Teller Machines 30 (ATMs) went up by 19.50 percent to 20 40,369.00 in 2014/15. The number of 10 Personal Identifi cation Number (PIN) pads 0 and Point of Sales (POSs) grew by 16.40 -10 2010/11 2011/12 2012/13 2013/14 2014/15 and 19.70 percent, respectively. Thus, the
Economic growth Inflation Liquidity growth number of POSs increased to 3.70 million
80 Country Performance / Iran ANNUAL REPORT 2015 at the end of 2014/15, indicating banking indices registered the highest decreases. system appropriate approach towards further expansion of electronic payments. The number and value of shares traded in 2014/15 fell by 12.90 and 43.70 percent, Electronic transactions processed through respectively, compared with 2013/14. Market the banking system increased by 31.80 capitalization amounted to Rls. 2,813.20 and 70.10 percent, in terms of number and trillion, showing 27.20 percent decrease value, respectively. In 2014/15, a total compared with the preceding year. The of 4,908.00 million transactions, worth slowdown of the markets in the year 2014/15 Rls. 16,499.00 trillion, were processed was due to a host of factors, notable among through ATMs. Besides, the number of them were the lengthy negotiations with transactions processed through POSs grew the P5+1 on nuclear issue, decline in crude by 39.50 percent from 3,910.00 million in oil and other commodity prices, increase 2013/14 to 5,453.00 million in 2014/15. in the price of natural gas as feedstock for Transactions processed through PIN-pads petrochemical plants in the Budget Law for went up by 30.90 percent in terms of number 2014/15, and the ambiguities related to the and 26.40 percent in terms of value. In this interaction of the Ministry of Petroleum year, a total of 2,167.00 million transactions, with refi neries regarding the determination of valued at Rls. 1,110.00 trillion were processed the price of gas deliveries. There were other through cell phones, landlines, kiosks, and uncertainties and ambiguities in the said year Internet. Share of ATMs in total transactions as to setting of royalties on Golgohar and declined by almost 4.10 percentage points Chadormaloo mining divestment to Iranian in terms of number while the share of POSs Mines and Mining Industries Development rose by 2.30 percentage points and that of and Renovation Organization (IMIDRO) cell phones, landlines, kiosks, and Internet by 30.00 percent according to the 2014/15 increased by 1.80 percentage points in terms Budget Law, recession in the construction of number. These trends reveal an upsurge and housing sector, low development in the use of new electronic instruments, expenditures by government, certain but a reduction in cash payments in daily conditions in the steel global market, and transactions by the public. high government debt to listed companies, which also affected market slowdown in the Capital Market mentioned year.
In 2014/15, all Tehran Stock Exchange During 2014/15, a total of 2,420.40 million (TSE) price indices experienced reduction shares of organizations, public companies, compared with the year before. Among all and banks, worth Rls. 9,612.00 billion, indices, top 50 performers and fi rst market were offered by the Iranian Privatization
81 Country Performance / Iran ANNUAL REPORT 2015
Organization as well as specialized holding 15.60 and 14.80 percent, respectively, companies on the TSE, showing 70.70 and in 2014/15, compared with the previous 90.80 percent decrease, in terms of number year. Exportable goods price index, on and value, respectively, compared with the other hand, decreased by 0.50 percent 2013/14. compared with 2013/14. A comparison of these fi gures with the corresponding Changes in Stock Exchange Indices fi gures of the year before (34.70, 34.50, (Percentage change over respective month of previous year) and 21.80 percent) reveals that the growth fi gures 210 of all three indices were lower than 108 105 2013/14. 102
90 60 Growth in Price Indices 30 (Percentage change over respective month of previous year) 0
-03 50 341 34-9 451 45-5 45-9 10 11 1 10 11 5 10 11 9 11 12 1 11 12-5 11 12-9 12 13 1 12 3-5 12 3-9 34-5 20 / - 20 / - 20 / - 20 / - 20 / 20 / 20 / - 20 /1 20 /1 201 /1 - 201 /1 201 /1 201 /1 - 201 /1 201 /1
40 Financial index Industrial index TEPIX TEDPIX (dividend and price index) 30
20
Price Trends 10
0 -9 341 34-5 34-9 451 45-5 45-9 10 11 1 10 11-5 10 11 11 12 1 11 12-5 11 12-9 12 3 1 12 3-5 12 3-9 Average CPI of goods and services and 20 / - 20 / 20 / 20 / - 20 / 20 / 20 /1 - 20 /1 20 /1 201 /1 - 201 /1 201 /1 201 /1 - 201 /1 201 /1 PPI (2004/05=100) CPI (2011/12=100) Producer Price Index (PPI) grew by
82 Country Performance / Iran ANNUAL REPORT 2015
Iran: Major Economic Indicators
Year Item 2010/11 2011/12 2012/13 2013/14 2014/15
Percent Change (2004/05=100) Real Gross Domestic Product (GDP) 6.50 4.301 -6.801 -1.901 3.001 (at basic prices) Non-oil Real GDP 7.00 5.40 -0.90 -1.10 2.80 Gross Fixed Capital Formation 3.80 3.50 -23.80 -6.90 3.50 Consumer Price Index (CPI) 12.40 21.50 30.50 34.70 15.60 (at constant 2011/12 prices) Broad Money 25.20 20.10 30.00 38.802 22.30 (at current prices) In percent of GDP Gross Fixed Capital Formation 27.80 26.20 27.60 26.80 26.20 Public 7.40 7.10 5.50 6.00 6.10 Private 20.40 19.20 22.10 20.80 20.00 Gross National Saving 42.20 44.20 40.20 39.70 na Current Account Balance 5.90 10.70 5.10 5.70 3.80 Total Government Revenue 17.30 17.80 14.10 14.20 14.90 o/w: oil 9.20 9.10 6.00 6.50 5.80 Total Government Expenditures 18.40 18.70 14.70 15.20 16.10 Overall Budget Balance -1.10 -0.80 -0.60 -0.90 -1.20 In millions of USDs Total Debt 26,136.00 20,078.00 10,682.00 9,419.00 8,191.00 Medium and long-term 11,417.00 9,304.00 8,546.00 7,772.00 7,055.00 Short-term 14,719.00 10,774.00 2,136.00 1,647.00 1,136.00 Inter-bank Market Exchange Rate 10,339.00 10,962.00 12,260.00 21,253.00 26,509.00 (USD/Rls.)
1 Provisional data. 2 It is important to note that part of the growth in the rate of liquidity in 2013/14 was attributable to higher coverage of fi nancial data of new banks and institutions. In fact, 12.90 percentage points of the 38.80 percent liquidity expansion in 2013/14 was due to the higher scope of statistical coverage, unrelated to economic factors. Excluding the data related to the six banks and four institutions, the liquidity growth for the year 2013/14, comparable to fi xed statistical framework of 2012/13, would be 25.90 percent. Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
83 Country Performance / Iran ANNUAL REPORT 2015
Iran: GDP Growth by Economic Sectors (at Constant 2004/05 Prices) (In percent)
Year 1 1 1 1 Item 2010/11 2011/12 2012/13 2013/14 2014/15
Agriculture 4.90 -0.10 3.70 4.70 3.80 Manufacturing 7.90 5.00 -6.40 -2.90 5.00 Oil and Gas 4.20 -1.00 -37.40 -8.90 4.80 Services 6.70 5.80 1.10 -1.50 2.40 Total 6.50 4.30 -6.80 -1.90 3.00 1 Provisional data.
Source: Economic Accounts Department, Central Bank of the Islamic Republic of Iran
Iran: Government Per-Capita Revenues and Expenses (at Constant 2011/12 Prices) (In Rls.) Year 2010/11 2011/12 2012/13 2013/14 2014/15 Item Revenues 6,295,816.00 7,245,115.00 5,724,392.00 5,301,321.00 6,180,415.00 Tax revenues 4,661,440.00 4,783,120.00 3,981,127.00 3,652,403.00 4,484,773.00 Expenses 10,802,037.00 11,679,333.00 8,966,282.00 8,850,366.00 9,089,699.00 Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
Iran: Ratio of Selected Budget Items to GDP (In percent)
Year Item 2010/11 2011/12 2012/13 2013/14 2014/15
Revenues 8.10 8.70 8.00 7.70 9.00 Expenses 13.90 14.10 12.60 12.80 13.30 Acquisition of Non-fi nancial Assets 4.50 4.60 2.10 2.40 2.80 Net Disposal of Non-fi nancial Assets 4.70 4.50 3.90 4.20 3.10 Operating Balance -5.80 -5.30 -4.50 -5.10 -4.30 Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
84 Country Performance / Iran ANNUAL REPORT 2015
Iran: Value of Exports (In millions of USDs)
Year 1 1 2 Item 2012/13 2013/14 2014/15 Percentage Change Exports of Goods (fob) 97,271.00 93,124.00 86,471.00 -7.10 Oil Exports 68,058.00 64,882.00 55,352.00 -14.70 Non-oil Exports 29,213.00 28,243.00 31,119.00 10.20 1 Revised data. 2 Provisional data. Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
Iran: Ratio of Imports, Exports, Current Account Balance and Non-Oil Exports to GDP (In percent)
Year 1 1 1 1 Item 2010/11 2011/12 2012/13 2013/14 2014/15 Imports 16.30 14.20 15.10 14.30 15.60 Exports 24.30 26.60 21.40 21.00 20.80 Current Account Balance 5.90 10.70 5.10 5.70 3.80 Non-oil Exports 4.90 4.90 6.40 6.40 7.50 1 Provisional data. Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
Iran: Exports to ACU Member Countries in 2014/15
Item Country Weight in Kg Value in USDs
Bangladesh 230,037,652.00 101,943,986.00 India 6,355,457,748.00 2,768,138,076.00 Maldives 603,123.00 258,163.00 Myanmar 230,357,347.00 119,437,325.00 Nepal 399,475.00 239,083.00 Pakistan 1,525,357,788.00 747,128,889.00 Sri Lanka 174,442,411.00 95,864,252.00 Source: Islamic Republic of Iran Customs Administration (IRICA)
85 Country Performance / Iran ANNUAL REPORT 2015
Iran: Imports from ACU Member Countries in 2014/15
Item Country Weight in Kg Value in USDs
Bangladesh 34,075,667.00 37,978,732.00 India 2,696,126,007.00 2,610,960,521.00 Pakistan 183,511,799.00 233,928,096.00 Sri Lanka 37,909,442.00 122,611,154.00
Source: Islamic Republic of Iran Customs Administration (IRICA)
Iran: Current Account Balance
In millions of USDs Percentage Change Year Item 2011/12 2012/13 2013/14 2014/151 2013/14 2014/151
Current Account Balance 58,507.00 23,362.00 25,105.00 15,861.00 7.50 -36.80
Goods 67,779.00 28,563.00 29,326.00 21,392.00 2.70 -27.10
Services -9,771.00 -7,359.00 -6,820.00 -6,985.00 -7.30 2.40
Income 93.00 1,649.00 2,034.00 943.00 23.30 -53.60
Current transfers 406.00 509.00 565.00 511.00 10.90 -9.70
Current Account Balance (non-oil) 2 -54,915.00 -42,069.00 -36,173.00 -35,543.00 -14.00 -1.70
1 Provisional data.
2 Excludes value of exports and imports of crude oil, oil products, natural gas, condensates and natural gas liquids (Tariff codes: 2709, 2710 and 2711) by NIOC, NIGC, NIORDC, petrochemical companies and others (customs and non-customs).
Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
86 Country Performance / Iran ANNUAL REPORT 2015
Iran: Growth in Price Indices (2011/12=100)
Percentage Change Over Previous Year Year Item 2010/11 2011/12 2012/13 2013/14 2014/15
Consumer Price Index (CPI) of Goods 12.40 21.50 30.50 34.70 15.60 and Services
Producer Price Index (PPI) 16.60 34.20 32.40 34.50 14.80
Exportable Goods Price Index 11.00 14.20 124.10 21.80 -0.50
Source: Economic Research and Policy Department, Central Bank of the Islamic Republic of Iran
Iran: Tehran Stock Exchange (TSE) Indices (1990/91=100)
Percent age Change Year Item 2012/13 2013/14 2014/15 2013/14 2014/15
TEPIX 38,040.80 79,015.40 62,531.80 107.70 -20.90
Financial Index 60,811.60 157,627.90 135,088.80 159.20 -14.30
Industrial Index 32,891.70 65,836.90 51,296.00 100.20 -22.10
Top 50 Performers Index 1,617.70 3,335.80 2,576.30 106.20 -22.80
First Market Index 30,030.70 58,606.80 45,317.50 95.20 -22.70
Second Market Index 62,839.90 152,441.60 127,840.60 142.60 -16.10
Source: Tehran Stock Exchange
87 Country Performance / Iran ANNUAL REPORT 2015
Iran: Electronic Payment Instruments
Percentage Change Over Previous Year Item Year 2010/11 2011/12 2012/13 2013/14 2014/151
Bank Cards 46.90 35.50 29.70 23.60 19.60
ATMs 20.40 29.10 13.30 11.90 19.50
POSs 31.90 44.30 23.10 15.60 19.70
PIN-pads 35.10 22.60 0.60 5.70 16.40
1 Provisional data.
Source: Payment Systems Department, Central Bank of the Islamic Republic of Iran
Iran: Number of Electronic Payment Instruments
Year-end Year Percentage Change Item 2013/141 2014/15
Bank cards (thousand) 279,058.00 333,891.00 19.60
ATM 33,773.00 40,369.00 19.50
POS 3,109,507.00 3,721,023.00 19.70
PIN-pads 56,152.00 65,337.00 16.40
1 Revised data.
88 Country Performance / Iran ANNUAL REPORT 2015
Iran: Volume and Value of Electronic Transactions Processed through the Banking System
Volume (million) Value (trillion Rls.) Year Item 2012/13 2013/14 2014/151 2012/13 2013/14 2014/151 Total Electronic Transactions Through 6,901.00 9,696.00 12,782.00 13,616.00 18,405.00 31,305.00 the Banking System ATMs 4,010.00 4,120.00 4,908.00 4,924.00 7,780.00 16,499.00 POSs 2,355.00 3,910.00 5,453.00 5,673.00 6,177.00 8,739.00 PIN-pads 180.00 194.00 254.00 2,824.00 3,922.00 4,957.00 Mobile, Phone, Kiosk and 356.00 1,472.00 2,167.00 195.00 526.00 1,110.00 Internet
1 Provisional data
Source: Payment Systems Department, Central Bank of the Islamic Republic of Iran
Iran: Government General Budget Revenues1 (In billion Rls.)
Share (percent) Year 2012/13 2013/14 2014/15 Item 2012/13 2013/14 2014/15
Revenues 568,203.20 717,384.00 977,963.10 100.00 100.00 100.00
Tax revenues 395,166.70 494,249.50 709,651.90 69.50 68.90 72.60
Other revenues 173,036.50 223,134.50 268,311.20 30.50 31.10 27.40
1 Excluding earmarked revenues and expenditures.
Source: Treasury General, Ministry of Economic Affairs and Finance
89 Country Performance / Iran ANNUAL REPORT 2015
Iran: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15
Sector/Country Bangladesh Agriculture Dried fruits, pistachio Petroleum bitumen, semi-fi nished products of iron or non-alloy steel, resin, paraformaldehyde, Industry marble and travertine India
Agriculture Pistachio, dates, tanned skins of sheep or lambs
Urea, methanol, petroleum bitumen, anhydrous ammonia, ethylene glycol, polymers of vinyl Industry chloride, petroleum jelly, aluminum, refi ned lead Maldives Industry Petroleum bitumen Myanmar Industry Petroleum bitumen, fi nishers, mineral oils Nepal Industry Petroleum bitumen Pakistan Agriculture Raw skins of sheep or lambs, chickpeas, apple, seeds of coriander, pistachio Petroleum bitumen, petroleum gases, motor oils, articles of plastics, electrical transformers, Industry chocolate Sri Lanka Agriculture Aquatic invertebrates, dates, saffron Industry Petroleum bitumen, petroleum gases, rubber, urea
Source: Islamic Republic of Iran Customs Administration (IRICA)
90 Country Performance / Iran ANNUAL REPORT 2015
Iran: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15
Sector/Country Bangladesh Agriculture Sesame seeds Industry Yarn and woven fabrics, synthetic fi bers India Semi-milled or wholly-milled rice, black tea, oilcake, sesame seeds, raw sugar, turmeric, Agriculture barley, banana Industry Products of iron or non-alloy steel, iron ores and concentrates, medicaments, synthetic fi bers Pakistan Agriculture Semi-milled or wholly-milled rice, sesame seeds, mango, chickpeas Industry Folding cartons and boxes, casting machines, woven fabrics, poultry incubators Sri Lanka Agriculture Black tea, coconut, banana Industry Cosmetic products, activated carbon, paper and paperboards
Source: Islamic Republic of Iran Customs Administration (IRICA)
Source: Central Bank of the Islamic Republic of Iran
91 Country Performance / Iran ANNUAL REPORT 2015
Maldives
Macro-economic Developments
According to estimates made by the Ministry of the industry, it declined to 68.90 percent of Finance and Treasury in October 2015 in 2015, down from 74.05 percent in 2014, real Gross Domestic Product (GDP) growth largely due to the fall in bed nights and slowed down to 4.81 percent in Financial partly due to the increase in the operational Year (FY)1 2015 from 6.48 percent in 2014. bed capacity. Meanwhile, total tourist This was largely on account of a slower- receipts declined by 4.76 percent to an than-expected growth of the tourism sector estimated USD 2.57 billion in 2015, down during the year. Although tourist arrivals for from USD 2.70 billion in 2014. 2015 grew annually by 2.44 percent reaching 1.23 million it was considerably lower than Refl ecting the adverse conditions in the the initial growth forecast of 7.38 percent for international tuna market in 2015, the the year. The lower than expected performance performance of the fi sheries sector also of the tourism sector is attributable to the remained weak in the year 2015 as suggested decline in arrivals from China during the by the key indicators of the sector. year. In 2015, arrivals from Europe improved Accordingly, fresh fi sh purchases made by compared to the previous year, with most collector vessels from local fi shermen, major European source markets posting which amounted to 40.57 thousand metric positive growth numbers. With regard to tonnes during January-November 2015 developments in other key indicators of declined by 10.10 percent on annual terms, the Maldivian tourism sector, the average following a decline of 17.37 percent for duration of stay declined marginally from the same period in 2014. Additionally, the 6.04 days to 5.66 days which was refl ected volume of fi sh exports also registered a in the 4.30 percent decline in the total decline of 1.55 percent in January-November tourist bed nights recorded for 2015. The 2015 in annual terms, although earnings on continued downward trend in the average fi sh exports rose by 1.62 percent. The decline duration of stay is attributable to a shift in in the volume of fi sh exports was largely the composition of arrivals, from traditional on account of a fall in the volume of frozen European markets to China over the last six yellowfi n tuna exports which more than offset years. As for the average occupancy rate the increase in the volume of fresh or chilled
1 Financial Year stands for beginning of January to the end of December.
92 Country Performance / Maldives ANNUAL REPORT 2015 yellowfi n tuna exports. However, earnings on percent in 2015 following two consecutive fresh or chilled yellow fi n tuna exports were years of relatively low and stable infl ation. much greater which increased the total fi sh The slowdown in the rate of infl ation during export earnings for the year. 2015 was infl uenced by a number of domestic and external factors. On the external front, the The construction sector performance sharp decline in crude oil prices contributed remained robust in 2015 as indicated by the signifi cantly to the dampening of infl ationary strong annual growth rate of the construction pressures both through its direct and indirect sector value added during the fi rst three effects. On the domestic front, the slowdown quarters of the year. The annual growth in in the infl ation rate was driven by declining the construction industry output averaged domestic fi sh prices. Accordingly, fi sh prices 40.44 percent in the fi rst three quarters on average declined annually by 0.15 percent of 2015 compared with 20.14 percent in in 2015, down from an increase of 2.71 the same period of 2014. Meanwhile, key percent in 2014. indicators of the sector such as bank credit and construction related imports also pointed Looking at developments in the monetary to strong performance of the sector. For policy, the Maldives Monetary Authority example, during January-November 2015 (MMA) lowered the Minimum Reserve construction related imports (wood, metal, Requirement (MRR) from 20.00 percent to cement and aggregates) grew considerably 10.00 percent, effective from 20 August 2015. by 42.96 percent on annual terms, whilst The main reason for the reduction in MRR commercial bank credit to the sector rose by was to align the rate of MRR in the Maldives 40.67 percent. The continued positive growth to international levels. The other objective of the sector was maintained throughout the was to reduce the cost of funding for banks year largely due to the commencement of and thus facilitate private sector lending. As several public sector infrastructure projects for the developments in monetary aggregates, by the Government in 2015. Furthermore, Broad Money (M2) registered a growth of construction projects related to the 50th 13.59 percent at the end of 2015, largely anniversary of the Maldives’ independence driven by a growth in the Net Domestic celebrations which fell in 2015, also Assets (NDA) of the banking system. The contributed to the positive growth of the NDA growth stemmed from a 33.30 percent sector. annual increase in Treasury Bills (T-bills) investments by commercial banks. This was Concerning domestic price developments, mainly due to commercial banks investing the rate of infl ation (as measured by the part of the funds that was released from the annual percentage in the Consumer Price lowering of MRR in T-bills. In addition, Index (CPI) for Male’) eased further to 1.37 banks also increased their investments in
93 Country Performance / Maldives ANNUAL REPORT 2015
T-bills following the prior announcement by domestic sources, mainly by issuing T-bills to the MMA in the latter half of 2015 regarding the domestic market in 2015. the downward revision of T-bills rates. Furthermore, the growth in NDA was also Regarding the external sector1, the current boosted by increased credit growth to the account defi cit widened from USD 124.61 private sector by the commercial banks. In million (4.08 percent of GDP) in 2014 to 2015, credit to the tourism, construction and USD 399.86 million (11.88 percent of commerce sectors registered annual increases GDP) in 2015. This was largely due to of 4.13, 40.67, and 15.99 percent, respectively a worsening of the merchandise trade during the year. balance owing to a rise in imports, together with a decline in the trade in services. The With regard to public fi nances, according merchandise trade balance deteriorated by to estimates available from the Ministry of 14.27 percent during the year and totalled Finance and Treasury as at October 2015, USD 1,896.86 million driven by the 9.07 the fi scal defi cit for 2015 is estimated to be percent (USD 177.93 million) increase in 6.93 percent of GDP, which is higher than the the value of merchandise imports, refl ecting initial estimate of 3.02 percent of GDP for increased economic activity, and also to some the year. In 2015, total revenue (excluding extent by the 19.59 percent (USD 58.95 grants) increased to Rf. 16.62 billion or million) fall in total merchandise exports 32.02 percent of GDP (31.83 percent of (fob). The decline in merchandise exports GDP in 2014) driven by higher growth in refl ects the fall in the re-exports of jet fuel both tax and non-tax revenues compared to international carriers, owed to the impact with 2014. Although revenue collection by of declining global oil prices, which offset the Government in 2015 remained strong, the growth in domestic exports. The trade total revenue fell short of the budget target in services remained in surplus although it due to shortfalls in both tax and non-tax narrowed by 2.11 percent to USD 2,183.21 revenue. Meanwhile, total expenditure million. This was due to a decline in travel (excluding net lending) rose from 35.10 receipts during the year. percent of GDP in 2014 to 41.04 percent of GDP or Rf. 21.30 billion in 2015 although The fi nancial account of the this fi gure is lower than budgeted given BOP recorded a net infl ow of that spending on capital expenditure was USD 299.96 million for the year 2015 lower than anticipated. The growth in total compared with a net infl ow of USD 500.82 expenditure during the year was driven by million which was recorded in 2014. The the increase in current expenditure. In 2015, reduction in net fi nancial infl ows in 2015 the budget was fi nanced entirely through compared with 2014 was mainly due to the
1 Balance of Payments (BOP) data was last revised in October 2015.
94 Country Performance / Maldives ANNUAL REPORT 2015 net repayment of private sector loans Rufi yaa was allowed to fl uctuate within a coupled with a decrease in Foreign Direct horizontal band of 20.00 percent on either Investments (FDI) infl ows. FDI infl ows side of a central parity of Rf. 12.85 per (the main component of the fi nancial USD. With the introduction of the exchange account) are estimated at USD 333.16 rate band, the exchange rate of the Rufi yaa million in 2015 which is a decline of 10.33 per US Dollar has moved towards the upper percent when compared with 2014, due to a limit of the band and since then has remained fall in reinvested earnings. virtually fi xed at Rf. 15.42. Accordingly, the MMA reference rate remained unchanged Meanwhile, gross international reserves throughout 2015, and stood at Rf. 15.41 declined by 4.04 percent and stood at per USD at the end of the year. At the end USD 589.89 million at the end of the year. of 2015, the bilateral exchange rates of the In terms of import cover, reserves are Rufi yaa appreciated against the currencies of estimated to fall to 3.06 months of imports the country’s main trading partners such as at the end of 2015 from 3.48 months of the Singapore Dollar, the Indian Rupee, the imports at the end of 2014. Sri Lankan Rupee, the Sterling Pound, and the Euro. Effective from April 11, 2011, the Maldivian
95 Country Performance / Maldives ANNUAL REPORT 2015
Maldives: Major Economic Indicators
Year Item 2011 2012 2013 2014 2015
In millions of USDs
Real Gross Domestic Product (GDP, 1,589.90 1,611.10 1,678.90 1,777.20 na at basic price)
Consumer Price Index (CPI1) 89.70 99.40 103.40 105.90 107.40
Broad money 1,237.00 1,301.30 1,536.50 1,763.70 2,002.10
In percent of GDP
Current account balance -15.60 -7.40 -4.60 -4.10 -11.90
Total government revenue2 27.70 26.20 27.70 32.20 34.10
Total government expenditure3 34.30 33.90 31.80 35.10 41.00
Overall budget balance4 -6.60 -7.70 -4.10 -2.90 -6.90
1 This is the CPI index with base year June 2012.
2 Total government revenue includes total revenue and grants.
3 Total government expenditure as a percentage of GDP from 2013 to 2015 is calculated excluding net lending.
4 Overall balance from 2013 to 2015 is calculated excluding net lending.
Source: Maldives Monetary Authority, National Bureau of Statistics, Ministry of Finance and Treasury
96 Country Performance / Maldives ANNUAL REPORT 2015
Maldives: Foreign Trade1 (In millions of USDs)
Year 2011 2012 2013 2014 2015 Item
Exports2 2,450.90 2,493.30 2,923.10 3,327.70 3,290.60
Imports2 2,297.80 2,146.40 2,399.50 2,757.40 3,004.30
Trade balance 153.00 346.80 523.50 570.30 286.40
1 These are revised estimates based on data available as at 31 December 2015. 2 Exports and imports include goods and services.
Source: Maldives Monetary Authority
Maldives: Main Items of Goods and Services Exported to ACU Member Countries in 20151
Sector/Country
Bangladesh
Goods Flours, meals and pellets of fi sh, unfi t for human consumption
India
Goods Scrap metal (steel, aluminum, copper)
Sri Lanka
Goods Fresh, dried, chilled or frozen tuna, processed fi sh
1 Export of services mainly include travel receipts. MMA does not compile travel receipts by country.
Source: Maldives Customs Service
97 Country Performance / Maldives ANNUAL REPORT 2015
Maldives: Main Items of Goods and Services Imported from ACU Member Countries in 2015
Sector/Country
Bangladesh
Meat, fi sh and seafood, beverages and confectionaries, vegetables, root crops and spices, tobacco Goods and tobacco accessories, pharmaceuticals
India
Metal, cement and aggregates and construction related items, price administered staples, pharmaceuticals, vegetables, root crops and spices, fruit, nuts and seeds, meat, fi sh and seafood, dairy and egg, beverages and confectionaries, cereal and grain products, transport equipment Goods and parts, machinery and mechanical appliances and parts, personal care and hygiene, clothing, footwear and fashion accessories, plastics and articles of plastic, stationaries, offi ce supply and printed materials, medical and surgical supplies, electrical and electronic machinery and equipment and parts
Iran
Dairy and egg, beverages and confectionaries, cereal and grain products, furniture, fi xtures and Goods fi ttings, clothing, footwear and fashion accessories
Nepal
Goods Pharmaceuticals, household items, cement and aggregates
Pakistan
Cereal and grain products, wood, metal, cement and aggregates, fruit, nuts and seeds, Goods pharmaceuticals, price administered staples, vegetables, root crops and spices
Sri Lanka
Electrical and electronic machinery and equipment and parts, beverages and confectionaries, transport equipment and parts, vegetables, root crops and spices, machinery and mechanical appliances and parts, price administered staples, dairy and egg, fruit, nuts and seeds, metal and Goods construction related items, pharmaceuticals, meat, fi sh and seafood, plastics and articles of plastic, personal care and hygiene, computer equipment and supplies, furniture, fi xtures and fi ttings, clothing, footwear and fashion accessories, chemical and chemical products
Source: Maldives Customs Service
Source: Maldives Monetary Authority
98 Country Performance / Maldives ANNUAL REPORT 2015
Myanmar
Recent Economic Developments and Outlook
In line with the objectives under the Real GDP Growth Rate Framework for Economic and Social (In percent)
Reform (FESR), Myanmar has continued 16 its growth momentum over the years. Real 14 Gross Domestic Product (GDP) growth for 12 Financial Year (FY)1 2014/15 is estimated to 10 8 have reached 8.50 percent. Growth picked up 6 paces in manufacturing, construction, tourism, 4 and natural gas production, which more than 2
0 offset a slowdown in agriculture. Infl ation 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 reached 8.00 percent Year-on-Year (YoY) in May, up from 4.00 percent in October But Myanmar’s medium-long term growth (non-food infl ation rose from 3.75 percent prospects remain favorable on account to 6.00 percent), refl ecting mainly strong of continued reform and Foreign Direct domestic demand, with import volumes Investment (FDI) infl ows. Given its low growing by 28.50 percent in 2014/15. The income level, Myanmar can sustain such 2014/15 fi scal defi cit is estimated at 3.00 rapid growth for a long time to come percent of GDP, but the underlying defi cit through catch up. With its strategic location is estimated at 5.50 percent once one-off and proximity to a dynamic east and receipts from telecom and gas companies southeast asia, Myanmar stands to benefi t are excluded. The current account defi cit from an expected relocation of FDIs in widened to over 6.00 percent of GDP, largely manufacturing around the region in search reflecting a rapidly rising trade defi cit, of lower labor cost. To take advantage of which increased from 4.50 percent of GDP to this opportunity, Myanmar will need to 8.25 percent. continue to pursue market-oriented reform and improve its business environment. However, the projected growth in 2015/16 is at 9.33 percent on account of strong FDI infl ows to support rapid growth in
1 Financial Year stands for beginning of April to the end of March.
99 Country Performance / Myanmar ANNUAL REPORT 2015
energy and manufacturing industries. Government continues to scrutinize wage and A booming tourism sector will also help boost salary increases and reduce non-productive transportation and construction industries. expenditure. Infrastructure development under the next fi ve-year national development plan will The authorities are committed to the Public help sustain economic growth in the long Finance Management (PFM) reform to run. strengthen budget formulation and fi scal discipline, control expenditure, as well as Contribution to GDP (Sector-Wise) improve fi scal accounting and reporting (In percent) processes. The authorities continue to focus 120 on maintaining fi scal discipline in order 100 to ensure debt sustainability and create the 80
60 fi scal space needed. With the assistance
40 of the World Bank and other development
20 partners, the Myanmar Modernization of
0 2005/062006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Public Finance Management Project is being
Industry Services ando thers Agriculture, livestock, fishery and forestry implemented to support effi cient, accountable and responsive delivery of public services through Myanmar’s PFM systems as well as Near-term Macro-economic to strengthen institutional capacity. Stability The authorities’ 2015/16 budget projects an In line with the policy priorities and overall fiscal deficit of just under 5.00 objectives of the FESR–a credible, responsive percent of GDP. Nevertheless, the budget and transparent planning and budget represents a fi scal expansion of nearly process–the medium-term fi scal framework 2.00 percent of GDP from last year, largely for 2015/16 to 2017/18 has been laid out in refl ecting a substantial wage increase for order to achieve higher budget credibility, public sector employees, albeit from a very enhance fi scal discipline and improve strategic low base (a little over 2.00 percent of GDP). resource allocation. Credit to the private sector has been growing The authorities have gradually tightened by 50.00 percent annually on average during fi scal policy and remain committed to 2011/12-2014/15 and is expected to increase reducing central bank defi cit fi nancing. The by about 45.00 percent this year. Much authorities will ensure fi scal sustainability of the credit has been provided to trade, through greater revenue mobilization and manufacturing, construction (including real expenditure re-prioritization. In addition, the estate) and agriculture, which collectively
100 Country Performance / Myanmar ANNUAL REPORT 2015 account for more than two-thirds of total current downward pressure on the Kyat is credit. Over 90.00 percent of the credit is largely a result of macro-economic policy extended through loans for 12 months or inconsistency-monetary and fi scal policies less, which are routinely rolled over with are too loose to anchor the exchange rate capitalization of interest. Loans through hire expectations, although external shocks purchase are also rising, although they still have also played a role. Under the current account for less than 10.00 percent of total macro-economic policy settings, resisting loans outstanding. depreciation pressure could lead to a quick rundown of reserves. Since late 2014, the Kyat has come under pressure to depreciate, and its value against Prudential Measures the US Dollar has declined by about 20.00 percent. At the end of March 2015, the Prudential measures, as well as liquidity Central Bank of Myanmar’s (CBM) Foreign tightening, have been conducted to arrest Reserves (FR) covered around 3 months of credit expansion and minimize fi nancial imports, well below the estimated adequate sector risks. This would help empower the level of 5-6 months of imports. This has supervisors to ensure that all banks meet largely resulted from strong import demand capital and liquidity requirements in a and rising infl ation pressures, refl ecting reasonably short-time frame, that prudent ongoing fi scal stimulus and easy monetary and loan classifi cation and loss provisioning are credit conditions, however other factors have followed and that loans are sound before also played a role including a strengthening they are rolled over. The authorities are trying US Dollar, declines in natural gas prices. to strengthen monitoring of hire purchase and credit funded by Foreign Loans (FL), and Myanmar’s top policy priority in the near- starts to prepare a bank resolution framework. term is to address increasing macro-economic imbalances and the resulting vulnerabilities. Revenue mobilization remains a top priority This calls for a tightening of monetary and to increase public resources available for fi scal policies along with exchange rate promoting inclusive growth. Tax revenue fl exibility. Given the ongoing pressure on has increased signifi cantly over the last three the Kyat, early action to tighten policies and years, but it is still well below levels in most enforce prudential measures is needed to peer countries because of a narrow tax base, address the underlying causes of the growing exacerbated by extensive tax incentives and macro-economic imbalances. weak administration. Given the limited fi scal resources and huge spending needs, it is all Exchange rate fl exibility is critical the more important that Myanmar maintain to maintaining external stability. The fi scal discipline to ensure debt sustainability.
101 Country Performance / Myanmar ANNUAL REPORT 2015
Myanmar’s risk of debt distress remains low, domestic payment industry through mobile but overall public debt is projected to rise and card network to strengthen international over time given the large fi nancing needs for payment network in line with the CBM’s development. This highlights the importance payment strategy. of keeping defi cits low and pursuing prudent external borrowing with an emphasis on External Sector concessional loans. In the reporting period, an overall Balance of Payment System Development Payments (BOP) position recorded negative performance. This was mainly due to increase The CBM launched a Real-Time Gross in imports. During the 2014/15, the value of Settlement (RTGS) system for the fi rst exports increased by 3.53 percent compared time by January 2016. The system will to the previous year mainly due to oil and allow transfers between banks to be settled natural gas. Other exports include vegetables, immediately, making payments much more wood, fi sh, clothing, rubber and fruits. effi cient. Rather than physically moving Myanmar main exports partner are China, money or using cheques, both the creditor India, Japan, South Korea, Germany, and debtor’s accounts can be immediately Indonesia, Hong Kong, Thailand, Singapore, adjusted electronically when a transaction United States, United Kingdom and Malaysia. is made. This platform will also support the settlement in Delivery Versus Payment The value of imports increased by 11.72 (DVP) for government securities percent compared to the previous year. The transactions and CBM’s liquidity support main import items were fuel, vegetable to all users of Financial Institutions. In oil, vehicles, pharmaceutical products, line with Association of Southeast Asian construction equipment, polymers, tires and Nations (ASEAN) Regional Financial machinery. Integration framework, Myanmar is trying to develop and harmonize the region’s fi nancial Total Exports, Total Imports and Trade Balance infrastructure in par with international best (In millions of USDs)
practices to facilitate the payment network. 14, 000 Newly enacted Financial Institutions 12, 000 10, 000 Law (FIL) 2016 endorses to extend the 8, 000 6, 000 payment mechanism and allows the third 4, 000 2, 000
party to participate internal and external 0 payment industry. The CBM is allowing -2, 000 -4, 000 and facilitating international payment 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 Total Exports Total Imports Trade Balance organizations to invest and participate in
102 Country Performance / Myanmar ANNUAL REPORT 2015
Trade with ACU Member agricultural products and fi shery products. Countries Total imports from ACU countries increased Myanmar’s trade with ACU member by 19.56 percent during 2014/15. India is the countries decreased during 2014/15. major import country to Myanmar with the Myanmar’s trade surplus decreased to 73.43 share of 93.01 percent among ACU countries. percent compared to previous year. In 2014/15, imports items from India consisted of bicycle spare parts, machinery, During 2014/15, total exports to ACU member stationary, cosmetics, medicine, medical countries decreased to 32.99 percent. India equipment, tyre, tube and fl ap, mild steel, is the major export country from Myanmar vehicle spare parts, agriculture use, hair, with the share of 90.47 percent among electrical, plastic, foodstuff, personal goods. ACU countries. At the same period, At the same period, Bangladesh, Pakistan, Bangladesh, Pakistan, Sri Lanka, Nepal Sri Lanka, Nepal and Iran accounted for and Iran accounted for 6.04, 2.82, 1.42, 0.85, 0.12, 0.03, and 4.57 percent, 0.41, 0.01, and 0.25 percent, respectively. respectively. The major export items to India included
103 Country Performance / Myanmar ANNUAL REPORT 2015
Myanmar: Major Economic Indicators (In millions of Kyats)
Year 1 2 Item 2010/11 2011/12 2012/13 2013/14 2014/15
Gross Domestic 39,872,545.70 42,000,875.70 45,080,103.10 48,879,914.30 53,132,343.00 Product (GDP) Agriculture, livestock, 14,658,789.30 14,562,113.60 14,806,493.80 15,346,115.20 15,845,667.80 fi shery and forestry Industry 10,528,431.00 11,604,661.20 12,533,395.10 13,964,076.00 15,689,685.90 Service and other 14,685,325.40 15,834,100.90 17,740,214.20 19,569,723.10 21,596,989.30 Growth rate of GDP 10.40 5.60 7.30 8.40 8.70 (percent) Infl ation Rate 8.22 3.20 4.70 5.72 5.90 (percent) Balance of Payments (BOP) Exports of goods 46,388.70 45,874.20 7,446,420.40 9,915,960.50 10,594,557.00 Imports of goods -31,419.10 -42,999.40 -6,655,327.70 -11,265,724.30 -12,991,847.20 Trade balance 14,969.60 2,874.80 791,092.70 -1,349,763.80 -2,397,290.20 Services (net) -10,946.60 -12,515.60 -2,019,294.60 -1,025,056.90 -1,952,175.30 Transfers (net) 1,279.80 2,645.70 453,691.60 1,352,772.10 2,780,203.50 Current account (net) 5,302.80 -6,995.10 -774,510.30 -1,022,048.60 -1,569,262.00 Financial account (net) 14,368.00 13,657.10 -3,966,121.80 3,037,045.50 1,232,384.20 Errors and omissions -15,904.70 -497.70 10,579,130.30 2,008,255.10 733,240.10 Overall balances 3,766.10 6,164.30 5,838,498.20 3,435,486.70 392,876.10
1 Provisional actual data.
2 Provisional data.
Source: National Planning Department and Central Bank of Myanmar
104 Country Performance / Myanmar ANNUAL REPORT 2015
Myanmar: Balance of Payments Goods and Services Account (In millions of USDs)
Year 1 2 Item 2010/11 2011/12 2012/13 2013/14 2014/15 Trade Balance 2,684.00 524.90 935.60 -1,395.00 -2,399.00 Exports 8,360.20 8,488.80 8,748.90 10,269.60 10,632.30 Imports 5,676.20 7,963.90 7,813.30 11,664.60 13,031.30 Services Balance -1,974.20 -2,318.20 -2,371.20 -890.90 -1,958.70 Receipts 713.90 1,082.60 1,531.30 2,799.40 3,177.00 Payments 2,688.10 3,400.80 3,902.50 3,690.30 5,135.70
1 Provisional actual data.
2 Provisional data.
Source: Central Bank of Myanmar
Myanmar: Trade with ACU Member Countries in 2014/151 (In millions of USDs)
Item Exports Imports Country Bangladesh 49.79 9.11 Bhutan -- India 745.80 594.96 Iran 2.08 29.26 Maldives -- Nepal 0.08 0.19 Pakistan 23.21 5.43 Sri Lanka 3.42 0.74 Total 824.38 639.69
Share of Trade with ACU Member 7.75 4.91 Countries in Total Trade (percent)
1 Provisional data.
Source: National Planning Department
105 Country Performance / Myanmar ANNUAL REPORT 2015
Myanmar: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15
Sector/Country
Bangladesh Agriculture Rice, various beans India Agriculture Various beans, forest products, corn, mineral water Pakistan Agriculture Various beans, broom/sweeper, cutch, ginger, forestry products, hair, turmeric Sri Lanka Agriculture Rice, various beans, cane
Myanmar: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15
Sector/Country
Bangladesh Industry Medicine, medical equipment India Bicycle spare parts, machinery, stationary, cosmetics, medicine, medical Industry equipment, tyre, tube and fl ap, mild steel, vehicle spare parts, agriculture use, hair, electrical, plastic, foodstuff, personal goods Pakistan Industry Medicine, medical equipment
Source: Myanma Foreign Trade Bank and Myanma Investment and Commercial Bank
Source: Central Bank of Myanmar
106 Country Performance / Myanmar ANNUAL REPORT 2015
Nepal Real Sector
Nepal’s real Gross Domestic Product The industrial sector grew by 2.60 percent (GDP) at basic prices grew by 3.00 percent in the review year compared to a growth of in 2014/15 compared to 5.10 percent in 6.20 percent in the previous year. The lower Financial Year (FY)1 2013/14. Delay in growth in industrial sector is attributed to monsoon, the devastating earthquake of 25 labor shortage, physical damages caused by April 2015 and the subsequent aftershocks the earthquake and sluggish demand for have signifi cant negative impact on all sectors industrial production. Likewise, the service of the economy resulting into a lower output sector grew by 3.90 percent compared to a growth in the review year. The agriculture growth of 6.30 percent in the previous year. sector, which contributes about one-third to Despite the improvement in labor relation, real GDP grew by 1.90 percent in the review security situation and other structural year compared to the growth of 2.90 percent bottlenecks, adverse impact of the devastating in the previous year. The slow growth in earthquake of April 25, 2015, especially on agricultural sector could be attributed to hotel and restaurants, real estate, renting and the decline in the production of principal business activities and wholesale and retail cereal crops–paddy and maize owing to late trade have impeded the growth rate of service monsoon, and losses in livestock and some sector in the review year. agro–products from the earthquake.
GDP Growth Rate (at basic prices) Sectoral GDP Growth Rate (In percent) (In percent)
8 8
6 6
4 4
2
2
0 2010/112 011/12 2012/13 2013/14 2014/15 0 2010/11 2011/12 2012/13 2013/14 2014/15 Industry Agriculture Service
1 Financial Year stands for the middle of July to the middle of July.
107 Country Performance / Nepal ANNUAL REPORT 2015
According to the Post Disaster Needs formation to GDP stood at 40.50 percent in Assessment (PDNA) report published the preceding year. by the National Planning Commission (NPC), the earthquake caused a total loss of Infl ation USD 7.06 billion in the economy. The damage of the earthquake is estimated at Nepalese economy experienced moderate 57.80 percent in the social sector, 25.20 infl ationary pressure in 2014/15. The annual percent in the productive sector, 9.50 percent average consumer price infl ation stood at in the infrastructure sector and 7.50 percent 7.20 percent in the review year compared to in the cross cutting issues. The loss from the 9.10 percent in 2013/14. Infl ation remained earthquake is estimated at about one-third lower than the projected 8.00 percent in the of GDP in 2014/15, leading to around 1.60 monetary policy of 2014/15. This is mainly percentage points shrinkage in the overall due to the decline in the price of petroleum economic growth rate. products, the control of monetary aggregates at the desired level through effective liquidity The PDNA report reveals that poverty management and the lower level of infl ation is estimated to increase by at least 2.50 in neighboring countries. The annual average to 3.00 percent due to the earthquake in indices of food and beverages group and 2014/15. This resulted into an additional non-food and services group grew by 0.70 million people falling below the 9.60 and 5.20 percent, respectively during poverty line. Of these additional people the review year. Such indices had increased pushed into the poverty, 50.00 to 60.00 by 11.60 and 6.80 percent, respectively in percent are believed to live in the central 2013/14. hills and mountains. In addition, the poverty situation is likely to aggravate further due Consumer Price Infl ation (annual) to the disruption in water supply, sanitation, (In percent) 16 health services and schools and increase in
food shortage on account of the devastating 12 earthquake. 8
The ratio of gross consumption to GDP 4 dropped marginally to 88.60 percent in the 0 review year compared to 89.10 percent in 2010/11 2011/12 2012/132 013/14 2014/15 the previous year. Consequently, the gross CPI Food Non-Food domestic savings surged to 11.40 percent of the GDP compared to 10.90 percent in the The annual average wholesale price infl ation previous year. Similarly, the ratio of capital remained at 6.10 percent in 2014/15
108 Country Performance / Nepal ANNUAL REPORT 2015 compared to 8.30 percent in the previous Monetary Sector year. The annual average price indices of agricultural commodities, domestic Maintaining stability both in the internal manufactured commodities and imported and external front has remained to be the commodities increased by 8.80, 5.60, and main objectives of Nepalese Monetary 0.70 percent, respectively in the review year Policy (NMP). The policy stance, targets, compared to a growth of 11.30, 6.00, and instruments and programs have been laid 4.20 percent in the previous year. down taking into account national economy, current situation of the fi nancial sector and Securities Market the possible developments in global economy and its likely impact on Nepalese economy. The performance of securities market The strategy of the monetary policy is to remained low in 2014/15. Nepal Stock achieve macro-economic stability to support Exchange (NEPSE) index, only one security growth target as set out by the Government in market index in the country, decreased by its policies and programs. 7.20 percent to 961.20 points in the middle of July 2015 on Year-on-Year (YoY) basis. Broad Money (M2) expanded by 19.90 This index had increased by 99.90 percent to percent compared to a growth of 19.10 1,036.10 points a year ago. percent in the previous year. The higher growth of M2 supply in the review year is The YoY stock market capitalization due mainly to the higher growth rate of Net decreased by 6.40 percent to Rs. 989.40 Foreign Assets (NFA) of the banking sector. billion (USD 9.94 billion) in the middle of Likewise, Narrow Money (M1) registered a July 2015. The ratio of market capitalization growth of 19.70 percent in the review year to GDP stood at 46.60 percent in the middle compared to a growth of 17.70 percent in the of July 2015 compared to 54.40 percent a previous year. year ago. The NFA increased by 24.20 percent in the Of the total market capitalization as of the review year compared to a rise of 27.20 middle of July 2015, the share of banks and percent in the previous year. A higher fi nancial institutions (including insurance growth of remittance infl ows coupled with a companies) stood at 77.70 percent. decelerated growth of imports resulted in an Hydropower, manufacturing and processing expansion of NFA in the review year. companies, hotels, trading and others recorded a share of 7.00, 3.00, 2.50, 0.10, and 9.60 Domestic credit increased by 14.90 percent percent, respectively. in the review year compared to a growth of 12.70 percent in the previous year. Increase
109 Country Performance / Nepal ANNUAL REPORT 2015
in claims on the private sector as well as percent to Rs. 77.67 billion (USD 780.68 fi nancial institutions resulted in a higher million), 66.50 percent of annual budget growth of domestic credit in the review year. estimate, compared to its growth of 19.80 percent in the previous year. Deposit mobilization of Bank and Financial Institutions (BFIs) remained positive due to The revenue mobilization of the Government the growth in remittance infl ows. The deposit of Nepal grew by 13.80 percent to mobilization grew by 20.10 percent, while the Rs. 405.85 billion (USD 4.08 billion), loans and advances surged by 17.50 percent in which was 96.00 percent of annual budget the review year. estimate of Rs. 422.90 billion (USD 4.25 billion). The revenue had risen by 20.50 Fiscal Sector percent to Rs. 356.62 billion (USD 3.63 billion) in 2013/14. Despite the slowdown The government budget defi cit, on cash basis, in economic activities after April remained at a defi cit of Rs. 38.62 billion earthquake and the deceleration of imports, (USD 388.18 million). Such budget defi cit revenue-to-GDP ratio stood at 19.10 percent was Rs. 13.75 billion (USD 140.00 million) in the review year. Such ratio was 18.40 in 2013/14. Low growth in resource percent in 2013/14. mobilization relative to government expenditure accounted for such a budget Among the components of revenue in defi cit during the review year. The ratio 2014/15, Value Added Tax (VAT) revenue of budget defi cit-to-GDP remained at 1.80 registered a share of 27.70 percent followed percent in the review year. by income tax revenue (22.00 percent), customs revenue (18.40 percent), and excise Government expenditure, on cash basis, revenue (13.20 percent). In the previous year, increased by 19.80 percent to Rs. 499.96 such compositions were 28.40, 21.90, 19.10, billion (USD 5.03 billion) in 2014/15 and 12.70 percent, respectively. compared to an increase of 16.30 percent to Rs. 417.47 billion (USD 4.25 billion) The Government mobilized domestic in 2013/14. An increase in recurrent and borrowings of Rs. 42.42 billion (USD 426.37 capital expenditure contributed to such a million) to fi nance the budget defi cit in the growth of total expenditure during the review review year which accounted for 2.00 year. The recurrent expenditure increased percent of GDP. by 10.90 percent to Rs. 328.98 billion (USD 3.31 billion) compared to a growth of 21.70 percent in the preceding year while capital expenditure increased by 26.60
110 Country Performance / Nepal ANNUAL REPORT 2015
External Sector Balance of Payments (BOP)
Foreign Trade The overall BOP registered a record high surplus of Rs. 144.85 billion (USD 1.43 Nepal is primarily an import-based economy. billion) in 2014/15 compared to a surplus of Its trade with India constitutes about Rs. 127.13 billion (USD 1.29 billion) in the two-thirds share of total foreign trade which previous year. The current account posted stood at 63.70 percent in the review year a surplus of Rs. 108.32 billion (USD 1.07 compared to 66.70 percent in the previous billion) during the review year compared to year. a surplus of Rs. 89.72 billion (USD 909.20 million) in the previous year. The higher The trade defi cit widened in 2014/15 on level of surplus in current account is mainly account of the increase in imports and the attributed to the low growth of good imports, fall in exports. The trade defi cit widened at a increase in remittance infl ows and grants, lower pace due to slow down in the import among others. growth caused by devastating earthquake in the last quarter of the review year. Foreign Exchange Reserve
Merchandise exports decreased by 7.30 The gross foreign exchange reserves surged percent to Rs. 85.32 billion (USD 857.57 by 23.80 percent to Rs. 823.87 billion million) in 2014/15. Such exports had (USD 8.15 billion) in the middle of July 2015 increased by 19.60 percent to Rs. 91.99 billion compared to the growth of 24.80 percent in (USD 936.67 million) in the previous year. the previous year. Based on the total imports A fall in exports to India, China and other of the current fi scal year, the current level of countries resulted in a decrease in overall foreign exchange reserves is suffi cient for exports. During the review year, merchandise fi nancing merchandise imports of 13 months, imports increased by 8.40 percent to and merchandise and services imports of Rs. 774.68 billion (USD 7.79 billion). Such 11.20 months. imports had gone up by 28.30 percent to Rs. 714.37 billion (USD 7.27 billion) in The reserve adequacy ratios remained the previous year. The growth of imports satisfactory in the review year. The ratio of remained low mainly due to the decrease reserve-to-GDP, reserve-to-imports and in the price of petroleum products and the reserve-to-M2 remained at 38.80, 93.20, and decline in imports of gold, betelnut, coal, 43.90 percent, respectively in the review year. crude soyabean oil, among others. Such ratios were 34.30, 83.10, and 42.50, percent, respectively in the previous year.
111 Country Performance / Nepal ANNUAL REPORT 2015
Financial System companies and one each of the Employees Provident Fund, Citizen Investment Trust and The Nepalese fi nancial system comprises Postal Saving Bank. of banking sector and non-bank fi nancial sector. Financial sector comprises commercial The total number of banks and fi nancial banks, development banks, fi nance companies institutions licensed by NRB came down to and micro-fi nance institution, while 193 in the middle of July 2015 from 200 a non-bank fi nancial sector comprises year ago. Despite the decline in the number contractual saving institutions, insurance of BFIs due to merger and acquisition, companies and postal saving banks. As of the fi nancial access has widened because of middle of July 2015, the fi nancial expansion in number of BFIs branches from system constituted 30 commercial banks 3,430 at the middle of July 2014 to 3,838 at (“A” class institutions), 76 development banks the middle of July 2015 together with the (“B” class institutions), 48 fi nance companies expansion of some products such as mobile (“C” class institutions), 49 micro-fi nance banking and branchless banking. fi nancial institutions (“D” class institutions), 16 Nepal Rastra Bank (NRB) permitted The ratio of Non-Performing Loan (NPL)-to- cooperatives undertaking limited banking total loans of BFIs dropped to 3.33 percent transactions, 30 NRB permitted Non- in the middle of July 2015 compared to 3.76 Governmental Organizations (NGOs) for percent a year ago. limited banking transactions, 25 insurance
Note: The annual average mid rate has been applied to derive the fi gures in terms of US Dollar.
112 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Key Macro-Economic Indicators
Year 2010/11 2011/12 2012/13 2013/14 2014/15 Item
Percent Change
Real Gross Domestic Product (GDP) growth 3.90 4.50 3.80 5.10 3.00
Consumer Price Index (CPI) 9.60 8.30 9.90 9.10 7.20
Total exports 5.80 15.40 3.60 19.60 -7.30
Total imports 5.80 16.50 20.60 28.30 8.40
Trade balance -24.20 -16.70 -23.90 -29.70 -10.80
Gross foreign exchange reserve 19.90 61.50 21.40 24.80 23.80
Nepal Stock Exchange (NEPSE) index -24.00 7.40 33.00 99.90 -7.20
Market capitalization of stock market -14.17 13.80 39.70 105.50 -6.40
Government revenue 11.00 22.20 21.10 20.50 13.80
Government expenditure 13.70 15.20 12.30 16.30 19.80
Government budgetary defi cit 24.30 -82.30 39.70 -55.90 180.80
Gross domestic borrowing 2.50 8.10 -47.70 4.90 112.30
Money Supply (M1) 5.20 18.60 14.40 17.70 19.70
Broad Money (M2) 12.30 22.70 16.40 19.10 19.90
Domestic credit 39.80 9.30 17.20 12.70 15.60
In percent of GDP
Gross consumption 91.40 88.50 89.40 89.10 88.60
Gross domestic saving - - 10.60 10.90 11.40
Gross capital formation - - 37.30 40.50 na
Market capitalization of stock market 23.60 23.60 30.40 54.40 46.60
Government budgetary defi cit 3.70 1.50 1.50 2.00 1.80
Government revenue 11.00 15.90 17.50 18.40 19.10
Source: Trade and Export Promotion Center, Nepal
113 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Effect of 2015 April Earthquake on Economic Growth (In percent)
Item Pre-earthquake Post-earthquake Sector (estimate) (estimate) Agricultural sector 2.30 1.90
Non-agriculture sector 5.70 3.60
Gross Domestic Product (at basic price) 4.60 3.00
Gross Domestic Product (at market price) 5.00 3.40
Nepal: Reserve Adequacy Ratios (In percent)
Year 2012/13 2013/14 2014/15 Item
Reserve/GDP 31.50 34.30 38.80
Reserve/Imports1 84.00 83.10 93.20
Reserve/M2 40.50 42.50 43.90
1 Goods and services imports
Nepal: Number of Banks and Financial Institutions
Number of BFIs Branches of BFIs Year 2014 2015 2014 2015 Item Middle of July
Commercial Banks 30.00 30.00 1,547.00 1,672.00
Development Banks 84.00 76.00 818.00 808.00
Finance Companies 53.00 48.00 239.00 242.00
Micro-fi nance Development Banks 33.00 39.00 826.00 1,116.00
Total 200.00 193.00 3,430.00 3,838.00
114 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Trade with ACU Member Countries during 2014-15 (In millions of USDs)
Exports of Commodities Imports of Commodities Year Country 2013/14 2014/15 2013/14 2014/15
Bangladesh 21.79 10.90 17.59 27.45
Bhutan 1.01 1.22 3.59 4.08
Iran 0.17 0.10 0.36 0.56
Maldives 0.05 0.09 0.00 0.14
Myanmar 0.05 0.02 13.50 11.74
Pakistan 0.89 0.29 3.56 4.18
Sri Lanka 0.03 0.39 7.00 2.46
Total 23.99 13.01 45.60 50.61
Share of Total Trade with ACU 2.60 1.49 0.63 0.64 Countries to Total Trade (percent)
Source: Trade and Export Promotion Center, Nepal
115 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Main Items of Goods and Services Exported to ACU Member Countries in 2014/15
Sector/Country
Bangladesh Edible vegetables, lentils, dried vegetables, roots and tubers, residues and waste from food Agriculture industries, raw hides and skins, leather, dairy produce Prepared animal fodder, tanning or dry extracts, works of arts, collectors’ pieces and Industry antiques, etc. Bhutan Agriculture Organic surface active agents, waxing preparation Articles of iron and steel, electrical machineries and equipments, sound recorders, reproducers, Industry television image, aluminum and article thereof, apparels, clothing, accessories man made fi laments, soap, lubricating preparations, miscellaneous edible preparations Maldives Carpets and other textile fl oor coverings, other made up textile articles, worn clothing, paper Industry and paper board Myanmar Agriculture Meat and edible meat offal Industry In-organic chemicals, pharmaceuticals products, textile articles, etc. Iran Agriculture Raw hides and skins, leather, tea, coffee, mate and spices, etc. Article of apparels and clothing accessories, paper and paper board, felt and non-woven Industry special yarns, twine, ropes, cables, etc. Pakistan Agriculture Organic chemicals, raw hides and skins, leather, coffee, tea, mate, spices, etc. Articles of apparels and clothing accessories, optical photographic, cinematographic, Industry measuring, checking, precision, medical and surgical instruments, printed books, newspaper, pictures, tanning and dying extracts, miscellaneous edible preparation, etc. Sri Lanka Raw hides and skins, leather, preparations of vegetables, fruits, nuts, other parts of plant, Agriculture coffee, tea, mate and spices, etc. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical Industry instruments and apparels, textile articles, copper and articles thereof
116 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15
Sector/Country Bangladesh Agriculture Edible vegetables and certain roots and tubers, dried vegetables, juices Electrical machineries and equipments, parts thereof, sound recorder and reproducers, paper yarn, woven fabrics, cotton, pharmaceutical products, beverages, spirits and vinegar, Industry mineral fuels, mineral oils, bitumen substance, wax, special woven fabrics, tufted textile fabrics, furniture, etc. Bhutan Preparation of vegetables, fruits, ruts, other parts of plants, edible vegetables and certain Agriculture roots, etc. Salts, sulphur, plastering materials, lime and cements, mineral fuels, mineral oils and Industry products of other distillation, bituminous substances Iran Agriculture Fertilizers
Articles of apparel and clothing, mineral fuels, mineral oils, products of their distillation, Industry bituminous substances, mineral waxes, beverages, spirits and vinegar, paintings, drawing and pastels
Maldives Agriculture Fish and crustaceans, mollusks and other aquatic invertebrates, etc. Textile articles, carpets, sets, worn clothing, worn textile articles, rags, and miscellaneous Industry edible preparations Myanmar Agriculture Edible vegetables, certain roots and tubers, wood and articles of wood, furniture Industry Bedding, mattress, cushions, lamps and lighting fi ttings, textiles, etc. Pakistan Agriculture Edible fruits and nuts, milk and cream, peel of fruits, citrus fruits or melons, etc.
Plastic and articles thereof, glass and glassware, cotton, carpets, other textile fl oor coverings, residues and waste of food industries, prepared animal fodder, article of Industry apparels, clothing accessories, optical, photographic instruments, article of stones, plaster, cement, mica or similar materials, cosmetics waving machines, power looms, artifi cial parts of body
117 Country Performance / Nepal ANNUAL REPORT 2015
Nepal: Main Items of Goods and Services Imported from ACU Member Countries in 2014/15 (Contd.)
Sector/Country Sri Lanka Agriculture Live animals, coffee, tea, mate, spices, tobacco and manufactured tobacco, etc.
Printed books, newspaper, pictures, other products of printing industries, manuscripts, typescripts, mineral oils, mineral fuels, products of other distillation, bituminous Industry substance, mineral wax, paper and paper boards, electrical machineries, equipments and parts thereof, rubber and articles thereof, lead and articles thereof, sound recorders, reproducers, TV image, vehicles and parts thereof, etc.
Source: Trade and Export Promotion Center, Nepal
Source: Nepal Rastra Bank
118 Country Performance / Nepal ANNUAL REPORT 2015
Pakistan
Pakistan’s economy gained further during than 2.70 percent growth last year. The crop the Financial Year (FY)1 2014/15. Not only sector, on the other hand, faced multiple that the country was able to accelerate Gross setbacks, such as the September 2014 fl oods, Domestic Product (GDP) growth, it also heavy rains in April 2015, and the decline in consolidated macro-economic stability as domestic prices of agri produce in tandem the key macro-economic indicators (like with the global trends. In addition, the infl ation, fi scal balance and current account increase in fertilizer prices pulled down its balance) recorded improvements. With this demand, particularly during the rabi season, backdrop, the following discussion provides a which in turn, further weakened the already brief performance review of different sectors low yields for most of the major crops. of the economy. Persistent low yields bring up concerns Real Sector on long-term food security in the country, particularly when the prospects of increasing Pakistan’s real GDP growth improved to area under cultivation are limited; and reach 4.20 percent in 2014/15 – a seven growing population is pushing up the demand year high level – underpinned by a pickup for food. Ensuring food sustainability in the services sector, and a modest recovery becomes more challenging in the in agriculture. While several long standing long-term due to climate change and its structural constraints (for example, low looming threat on food and water security. In investment rate and continuing energy terms of water stress, the importance of more shortages) keep on hindering sharp economic storage capacity, improved productivity and recovery, the challenge became more conservation cannot be overemphasized. complex in 2014/15 due to adverse weather shocks and weak external demand. The GDP Industry could not perform well during growth, therefore, fell short of the target of 2014/15 despite some positive developments 5.10 percent. (e.g., steep decline in the global prices of minerals, metals and other industrial inputs; In agriculture, a better performance by the and robust growth in construction). The major livestock sector (having 11.80 percent share slowdown was recorded in the Large Scale in GDP) pushed up the overall growth in Manufacturing (LSM) sector, which could 2014/15 to 2.90 percent, marginally higher grow by 3.30 percent in 2014/15, compared
1 Financial Year stands for beginning of July to the end of June.
119 Country Performance / Pakistan ANNUAL REPORT 2015
to 4.10 percent last year, and the target of 7.00 post sustained and high growth in GDP. percent. While some slowdown was expected due to a strong base-effect in some of the Energy Sector industries (e.g., sugar, fertilizer, cooking oil and ghee and Petroleum Oil and Lubricants The drastic fall in the global oil prices (POL), the weak external demand (impacting in 2014/15 had varying implications for cotton yarn, clothing and other textile items) different segments of the energy sector. The and continued energy shortages in other Government decision to pass on the benefi t industries (such as, textile, glass, paper, of declining oil prices to end-consumers leather) further pulled down the LSM growth sharply reduced the cost of key fuels (e.g., in 2014/15. high speed diesel, motor spirit, furnace oil). In fact, the pass through of global decline in oil The services sector grew by 5.00 percent in prices to local retail fuel prices was stronger 2014/15, comfortably surpassing the 2013/14 in Pakistan compared to many regional and growth of 4.40 percent, mainly due to a sharp advanced economies. Consequently, the recovery in general government services and domestic demand for petrol in transport sector fi nance and insurance. As mentioned earlier, grew sharply during the year, refl ecting a the increase in salaries and pension explain switch of Compressed Natural Gas (CNG) a sharp rise in contribution from general users to petroleum products. government. Within fi nance and insurance, the banking sector of Pakistan continued On the other hand, the accumulating arrears to show strong performance on the back of in the power sector continue to drag its improved earnings. The profi ts of the banking performance. The total power generation industry increased sharply during 2014/15, grew by 1.60 percent during 2014/15 – this largely due to their investment in government was insuffi cient to meet the growing demand securities. The rest of the subsectors under for electricity, thereby leading into a persistent the services head recorded a lower growth in load management during the year. 2014/15 than the last year. Finally, while capacity issues, administrative From the demand side, the consumption constraints and security concerns continue continues to anchor the GDP growth, whereas to impede development of the gas sector the investment rate remained stagnant at in Pakistan, the decline in wellhead prices around 15.00 percent in 2014/15. There is a in response to falling crude oil prices have direct relation between investment and growth, further dampened the prospects of future gas as shown by the cross country evidence. Thus, exploration and production in the country. a persistently low level of investments is one This is a concern as the proven gas reserves as of the reasons the country has not been able to well as annual gas production are already on
120 Country Performance / Pakistan ANNUAL REPORT 2015 the declining trajectory. Besides, slow pace of POL prices also helped softened infl ationary development in the hydel and alternate energy expectations as measured by Institute of resources are likely to increase Pakistan’s Business Administration (IBA)-SBP’s future energy dependence on costly foreign Consumer Confi dence Survey (CCS)1. resources, thereby increasing vulnerabilities in the external sector. In overall terms, the fall in CPI infl ation is broad-based, with dominant contribution Infl ation from lower food and POL prices. All measures of core infl ation (non-food-non- As mentioned earlier, the average Consumer energy; trimmed; and relatively stable Price Index (CPI) infl ation came down component of CPI) recorded noticeable sharply in 2014/15 to 4.50 percent, from declines during the year. 8.60 percent last year – this was well below both, the target of 8.00 percent for the year, The impact of a sharp fall in international and State Bank of Pakistan (SBP) projections commodity prices was more evident in the at the beginning of the year. Several factors case of Wholesale Price Index (WPI) which explain this slowdown in infl ation. registered defl ation or disinfl ation throughout the year. This was because the WPI includes Foremost is the sharp fall in global commodity more imported items (e.g., furnace oil, prices which moderated CPI infl ation in fertilizer, cement, steel/metals, glass sheet, many other countries as well. The impact on and timber) compared to CPI. domestic infl ation in Pakistan was signifi cant, as the Government largely passed on the Monetary Policy and Liquidity benefi t of lower POL prices to consumers. Management Further gains came when the spillover effect of low POL prices also contained infl ation in The growing comfort on external account, a other commodities of the CPI basket. sharp reduction in infl ation and infl ationary expectations, and contained fi scal defi cit, The Pakistan’s Rupee (PKR) remained allowed SBP change its monetary policy stronger vis-à-vis the US Dollar during July- stance from a more conservative to a February 2014/15, compared to the same considerable easing. Specifi cally, during the period last year. Therefore, imports were less four consecutive monetary policy decisions costly in Rupee terms during the same period. from the middle of November 2014 to May 2015, SBP cut the ceiling rate of the Interest The combined impact of stable PKR and low Rate Corridor (IRC) by a cumulative 300 bps
1 State Bank of Pakistan, in collaboration with Institute of Business Administration, regularly conducts telephonic surveys after every two months to capture infl ation expectations of households. The information gathered from this exercise helps in the process of designing a forward-looking monetary policy in the country. Further information on these surveys are available at http://dsqx.sbp.org.pk/ccs/index.php
121 Country Performance / Pakistan ANNUAL REPORT 2015
to a multi-decade low of 7.00 percent. The credit to private sector, however, could expand by Rs. 208.70 billion in 2014/15, In terms of liquidity management, the key compared to Rs. 371.40 billion in the previous challenge for the central bank stemmed from year. Several factors explain this slowdown: government efforts to contain its borrowing (a) a sharp fall in commodity prices that from SBP within the ceiling prescribed reduced the demand for working capital and by International Monetary Fund (IMF). In trade fi nancing loans during the year; (b) doing so, the Government retired Rs. 434.30 nonprice constraints (e.g., power shortages, billion to the central bank in 2014/15, against and weak external demand); (c) a steeper the net borrowing of Rs. 159.80 billion in decline in infl ation than in lending rates that 2013/14. This created pressure on domestic increased the real cost of borrowing; and (d) Rupee liquidity, as the Government funded some sector specifi c developments like lower its retirement to SBP through borrowing from production of sugarcane. Encouragingly, commercial banks. fi xed investment loans (having maturity of more than one year) increased by Banks were also eager to lock-in their funds Rs. 126.90 billion in 2014/15, compared to in government securities in anticipation Rs. 72.30 billion in 2013/14. Most of these of further softening of interest rates. As a loans were concentrated in construction and result, investment of commercial banks in allied industries, which have strong forward government securities saw an increase of and backward linkages with other sectors of Rs. 1.40 trillion to reach an all time high of the economy. Rs. 5.50 trillion by the end of June 2014/15. SBP responded, particularly during the second The overall commodity loans expanded by quarter, by stepping up its liquidity injections Rs. 71.80 billion in 2014/15 – this increase through Open Market Operations (OMOs) to was three times higher than the rise seen in ensure adequate supply of loanable funds for 2013/14. This pushed the outstanding stock of the private sector. These liquidity injections commodity operations loans to all time high also made monetary policy more effective level of Rs. 564.50 billion by the end of June by improving the pass through of policy 2015. signals to retail rates. The volumes of OMOs increased sharply to near Rs. 1.00 trillion, and Fiscal Policy remained high for rest of the year. Interestingly, the large borrowing needs of the government, The fi scal defi cit improved slightly to 5.30 along with sizeable OMO injections, provided percent of GDP in 2014/15, from 5.50 commercial banks room to fund some of percent recorded last year. This is a welcome their investments in government papers using development, given that the sharp decline short-term liquidity from SBP. in oil prices and subdued manufacturing
122 Country Performance / Pakistan ANNUAL REPORT 2015 activities during the year had made already percent for 2014/15 became more diffi cult sluggish tax collections more diffi cult. due to a steep decline in provincial surplus; the actual surplus was Rs. 87.30 billion in Specifi cally, the tax revenues could increase 2014/15, against the target of Rs. 289.00 by 17.70 percent during 2014/15, considerably billion. This was mainly because (1) the lower than the target of 30.10 percent. shortfall in Federal tax revenues this year, Federal Board of Revenue (FBR) mobilized also lowered the amount that provinces Rs. 2,588.00 billion in 2014/15, which even receive from the divisible pool (as provinces fell short of the downward revised target of continue to rely on transfers from the federal Rs. 2,605.00 billion. While administrative government); (2) the growth in their own weakness and issues in tax enforcement tax collection is now tapering off, refl ecting continue to hamper tax collection, challenges capacity constraints and procedural issues; for FBR compounded due to the collapse of and (3) provinces increased their current the global oil prices. This not only suppressed expenditures by 18.20 percent in 2014/15, the growth in sales tax on domestic sales, but compared to 7.00 percent last year. also contained other energy related revenues (i.e., royalties on oil and gas, discount With tax collection and provincial surplus retained and windfall levy on crude oil) for falling short of the target, the burden of fi scal the Government. consolidation fell more on development expenditures. Specifi cally, the Government Within direct taxes, the Government has slashed the development outlays by 16.70 been focusing more on raising revenue percent of the target. At the same time, the through withholding taxes. As a result, federal government also contained the growth contribution of withholding tax in direct in current expenditure to 7.30 percent in taxes increased to around 65.00 percent in 2014/15, compared to 10.40 percent in the 2014/15 from 50.00 percent in 2009/10. On year before. Among other factors, lower a positive note, income tax ‘on demand’ saw subsidies on power sector also contributed a sharp growth in 2014/15. The need to tap to the subdued growth in current expenses more potential taxpayers using information during 2014/15. base available with National Database and Registration Authority (NADRA) cannot be Although the Government was able to overemphasized, as the current tax-to-GDP largely contain the fi scal defi cit, the ratio of 11.00 percent, though marginally fi nancing pressures on domestic sources higher than the last year, is still one of the were signifi cantly higher than the last lowest in the region. year. This was because, unlike 2013/14 when Pakistan Development Fund (PDF) Achieving the fi scal defi cit target of 4.90 and issuance of Eurobonds, provided
123 Country Performance / Pakistan ANNUAL REPORT 2015
considerable comfort, the external infl ows domestic debt which started improving in during 2014/15 remained subdued. Within the second half of 2013/14, continued well domestic sources, the Government relied more into 2014/15. In overall terms, the share of on commercial banks. As mentioned earlier, Pakistan Investment Bonds (PIBs) in total government also retired the central bank’s debt stock reached 33.90 percent by the end debt through borrowing from commercial of June 2015, from 29.40 percent a year earlier. banks. However, the pace of this transition changed during the FY in response to market liquidity Public Debt conditions and the interest rate outlook.
The improvement in current account balance The change in ownership and maturity profi le and a largely contained fi scal defi cit helped has its implication for interest payments. in tapering off the debt build-up. Further As the Government paid off Treasury Bills support came from the revaluation gain of (T-bills) held by SBP, this led to an increase USD 4.20 billion (due to appreciation of in interest payments. The impact of change US Dollar against major currencies). As in the maturity profi le however was mixed. a result, country was able to marginally In the case of PIBs, semi-annual coupon reduce its public debt-to-GDP ratio to 64.80 payment on instruments issued in recent years percent in 2014/15 from 65.10 percent last (when interest rate were high), fell due in year. This was despite the successful launch January 2015 – this led to a sharp increase in of 5-year Sukuk bond in November 2014, interest payments. On the other hand, as the which allowed the Government to raise maturity of most of the T-bills picked up by USD 1.00 billion against the initial target of commercial banks would fall in 2015/16, the USD 500.00 million. interest payment on T-bills (auctioned) was lower in 2014/15. Within the domestic debt, the ownership structure witnessed a gradual shift away Lastly, the public debt-to-GDP ratio that from SBP, towards commercial banks, as still exceeds the 60.00 percent limit stipulated the Government retired large debt to central in the Fiscal Responsibility and Debt bank during 2014/15, mainly to contain Limitation (FRDL) Act 2005, is a concern its borrowing from SBP within the IMF for policymakers. In a bigger picture, after ceiling. As a result, the share of central bank releasing the divisible pool under the 7th in domestic debt fell to 18.60 percent at the National Finance Commission (NFC) Award end of June 2015, from 26.00 percent in June and the 18th amendment, federal government 2014. is left with limited resources which can only meet interest payments and defence expenses. More importantly, the maturity profi le of This structural bottleneck in the fi scal account
124 Country Performance / Pakistan ANNUAL REPORT 2015 has made achieving targets in the FRDL more While the gains in external account are challenging for the Government. encouraging, these primarily stemmed from higher remittances and more external External Sector borrowings. Clearly, the country can not rely for ever on these two sources to fi nance The improvement in the external sector higher import of capital, industrial input, and recorded last year strengthened further in machinery – a precondition for accelerating 2014/15. The current account defi cit narrowed economic growth. to USD 2.60 billion, from USD 3.10 billion last year. This was because the robust growth Indeed, the excessive reliance on external in worker remittances more than compensated borrowing is not desirable (as repayment the widening defi cit in the trade account and burden further tightens FX constraints for the higher repatriation of profi ts. The trade defi cit economy). Similarly, while the remittance grew due to both, a decline in exports and a infl ows are strong, their growth is already rise in imports. The overall imports increased tapering off. Although the collapse of the oil by 1.70 percent even with a contraction prices in the global market created challenges of USD 3.20 billion in petroleum imports for Gulf Cooperation Council (GCC) following a slump in oil market. The reason countries, their heavy spending in non-oil was the strong non-oil imports during this sector (mainly in physical infrastructure) has period. Nonetheless, the infl ows in the so far sustained economic activities in these fi nancial account were suffi cient to fund the economies, and supported remittance infl ow current account defi cit. In this situation, the into Pakistan. Hence, around 80.00 percent of IMF support of USD 2.00 billion made the the incremental remittance infl ow in 2014/15 overall external account more comfortable. came from GCC countries alone. Indeed, the future remittance growth is at risk, if the The comfort in the external account slump in the oil market persists. was well refl ected in country’s Foreign Exchange (FX) reserves which increased On the other hand, exports and Foreign by USD 4.60 billion, reaching an all time Direct Investment (FDI) – more sustainable high of USD 18.70 billion by the the end of sources of foreign exchange earnings – are not June 2015. These reserves can comfortably showing any encouraging picture. The decline fi nance more than fi ve months of the country’s of 5.70 percent in 2014/15 exports compared import of goods and services. The Pakistan’s to an increase of 2.70 percent last year, is Rupee also remained largely stable vis-à-vis disappointing. In particular, export volumes US Dollar through most of the year. Thus, not fell sharply in the fourth quarter of 2014/15 surprisingly, rating agencies also upgraded after remaining stable for most of the year. country’s credit standing. Similarly, FDI infl ow remained low, reaching
125 Country Performance / Pakistan ANNUAL REPORT 2015
nearly half of volume realized in 2013/14, Industry is moving in the right direction, mainly due to divestment (in cement, metal as LSM recorded a Year-on-Year (YoY) and pharmaceuticals), and lower infl ows in oil growth of 4.40 percent during July- and gas exploration (following the decline in November 2015/16, compared with a growth crude oil prices) and telecom. of 3.10 percent during the same period last year. Sectors such as food and beverages, The recent slowdown in China and the surge automobiles, cement, pharmaceutical and in capital outfl ows from emerging markets fertilizers contributed to the LSM growth. expecting monetary tightening by the Fed – these global events are making it challenging Services sector is likely to benefi t from for Pakistan to generate FX earning. However, healthy profi tability of the banking the on-going implementation of China sector. Furthermore, transportation and Pakistan Economic Corridor (CPEC); and communication sector is likely to get benefi t improvement in domestic security situation, from the ongoing investments under CPEC. offer an opportunity to better integrate with regional markets, and push up exports and Headline CPI infl ation remains low, as the investment. In order to capitalize on this average infl ation for July-January 2015/16 opportunity, we need substantive reforms in remained at 2.30 percent, considerably lower key regulatory and policy institutions. than 5.80 percent last year.
Recent Economic Developments The credit to private sector expanded by Rs. 310.60 billion during 1st July to 29th The real GDP is targeted to grow by 5.50 January 2016, compared with expansion of percent in 2015/16, compared with 4.20 Rs. 164.30 billion during the same period percent in 2014/15. Investments in energy and previous year. Within advances to business, infrastructure projects under CPEC not only loans for fi xed investment recorded a net bode well for industry, but its spillover impact increase of Rs. 89.70 billion during July- on transport, storage and communication December 2015, against a net expansion of would support growth in the services sector. Rs. 37.00 billion in the same period last year. Moreover, average monthly disbursements The agriculture sector shows signs of distress during July-December 2015 stood at as major Kharif crops incurred heavy losses Rs. 960.20 billion, compared with Rs. 867.30 due to depressed prices of agriculture billion during the same period last year. products, and unfavorable weather conditions. However, the performance of livestock, wheat In the fi scal sector, the budget defi cit slightly and other crops would be decisive for growth improved to 1.10 percent of GDP in the fi rst in this sector. quarter of 2015/16, compared with 1.20
126 Country Performance / Pakistan ANNUAL REPORT 2015 percent in the fi rst quarter of 2014/15. Total also observed. revenues grew by 11.60 percent during the fi rst quarter of 2015/16, compared with a Worryingly, exports also showed a decline marginal growth of 1.20 percent in the fi rst of 11.00 percent YoY during July-December quarter of 2014/15. Recent data shows that 2015/16. Both the fall in quantum and unit FBR collected Rs. 1,375.70 billion taxes values explain this decline. As a result, during July-December 2015/16, showing a the country’s trade defi cit narrowed from YoY growth of 17.40 percent. USD 9.90 billion in July-December 2014/15, to only USD 9.10 billion in July-December Expenditures grew by 7.20 percent during the 2015/16. Services defi cit also remained lower period under review, which were considerably than last year mainly as freight payments lower than 12.70 percent increase during the declined. Encouragingly, worker remittances same period last year. On a positive note, the increased from USD 9.20 billion in slowdown was entirely concentrated in current July-December 2014/15, to USD 9.70 billion expenditures of the federal Government. in July-December 2015/16. Public Sector Development Program (PSDP), on the other hand, surged by 57.40 percent Financial infl ows improved during July- during the fi rst quarter of 2015/16, compared December 2015/16, which were more than with a growth of 16.90 percent during the suffi cient to fi nance the modest current same period last year. account defi cit. FDI infl ows of USD 624.00 million came into the country during this The external account continued to post period. In addition to private infl ows, the improvement due to higher fi nancial infl ows, Government also mobilized USD 500.00 growth in worker remittances, and a sharp fall million via issuance of Eurobond in in international oil prices. Current account September 2015. Some support also came defi cit reduced to only USD 1.30 billion in from various project and program loans. July-December 2015/16, compared with Further support came from the release of 10th a defi cit of USD 2.50 billion in the same tranche of the Extended Fund Facility (EFF) period last year. Major improvement came program (USD 500.00 million) by the IMF. from depressed global commodity prices, As a result, the country’s FX reserves stood which led to a 10.00 percent reduction in the at USD 20.30 billion by 29th January 2016; country’s import bill. The reduction in oil this amount can fi nance over 7 months of the bill was particularly sharp, though a modest country’s import bill. decline in the import of other items was
127 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Major Economic Indicators
Year 2010/11 2011/12 2012/13 2013/14 2014/15 Item Growth Rate (percent)
Large scale manufacturing 1.86 1.18 4.12 5.68 3.38
Exports (FOB) 28.90 -2.56 0.34 1.11 -3.95
Imports (FOB) 14.98 12.78 -0.53 3.76 -0.86
Total revenue 8.80 13.50 16.20 22.00 7.50
Tax revenue (FBR) 17.30 20.90 3.40 15.80 13.00 Consumer Price Index (CPI), 13.70 11.00 7.40 8.60 4.53 (12 months moving average) Private sector credit 4.02 7.49 -0.56 11.06 5.60
Money supply (M2) 15.89 14.14 15.89 12.54 13.20
In millions of USDs
Total liquid reserves 18,243.80 15,288.60 11,019.60 14,141.10 18,699.20
Home remittances 11,200.90 13,186.60 13,921.60 15,837.70 18,719.80
Foreign private investment 1,999.30 760.60 1,576.00 2,321.40 1,786.10
In millions of USDs
Fiscal defi cit 13,969.31 15,349.20 18959.51 13,500.99 14,381.06
Trade defi cit 10,427.30 15,651.40 15,354.60 16,590.20 17,221.60
Current account (defi cit/surplus) 214.00 -4,658.00 -2,496.00 -3,130.00 -2,627.00
Source: State Bank of Pakistan, Ministry of Finance
128 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (In thousands of USDs)
Bangladesh
Item Commodity Exports Imports Arms and ammunition, parts and accessories thereof 26.00 - Articles of stone, plaster, cement, asbestos, mica or similar materials 1,075.00 - Base metals and articles of base metal 1,714.00 32.00 Footwear, headgear, umbrellas, walking sticks, etc. 154.00 178.00 Live animals and animals products 2,088.00 89.00 Machinery and mechanical appliances 21,615.00 212.00 Mineral products 883.00 - Miscellaneous manufactured articles 775.00 891.00 Optical, photographic, cinematographer, measuring, checking, precision 790.00 123.00 apparatus Plastics and articles thereof; rubber and articles thereof 6,264.00 147.00 Prepared foodstuffs; beverages, spirits, vinegar and tobacco 1,094.00 2,827.00 Products of chemical or allied industries 10,380.00 2,327.00 Pulp of wood or of other fi brous cellulosic material 447.00 352.00 Raw hide and skins, leather, fur skins and articles thereof 15,314.00 472.00 Textiles and textile articles 607,049.00 42,983.00 Vegetable products 13,580.00 1,000.00 Vehicles, aircraft, vessels and associated transport equipment 1,426.00 - Wood and articles of wood - 12.00 Works of arts, collectors, pieces, antiques and special transactions NES1 2.00 2.00
Sub-Total 684,676.00 51,647.00
Services Item Exports Imports
Transport 18.00 2,719.00 Travel 10.00 68.00 Insurance and pension services - 33.00 Financial services 9.00 493.00 Charges for the use of intellectual property n.i.e. 0.00 5.00 Telecommunications, computer, and information services 107.00 126.00
129 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Bangladesh
Item Exports Imports Services Other business services 218.00 1,079.00 Government goods and services n.i.e. 1,662.00 4,170.00 Sub-Total 2,024.00 8,693.00 Total 686,700.00 60,340.00
Bhutan
Item Commodity Exports Imports Animal or vegetable fats, oils and waxes - 139.00 Base metals and articles of base metal - 195.00 Live animals and animals products 10.00 - Miscellaneous manufactured articles 81.00 - Optical, photographic, cinematographer, measuring, checking, precision 5.00 20.00 apparatus Products of chemical or allied industries - 31.00 Textiles and textile articles 296.00 67.00 Vegetable products 32.00 80.00 Sub-Total 424.00 532.00
Item Services Exports Imports Transport - 19.00 Telecommunications, computer, and information services 11.00 - Government goods and services n.i.e. - 4,923.00 Sub-Total 11.00 4,942.00 Total 435.00 5,474.00
130 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
India
Item Commodity Exports Imports Animal or vegetable fats, oils and waxes 9.00 2,800.00 Articles of stone, plaster, cement, asbestos, mica or similar materials 6,715.00 4,204.00 Base metals and articles of base metal 2,073.00 49,980.00 Footwear, headgear, umbrellas, walking sticks, etc. 197.00 260.00 Live animals and animals products 828.00 17,054.00 Machinery and mechanical appliances 586.00 51,386.00 Mineral products 190,942.00 16,498.00 Miscellaneous manufactured articles 1,571.00 4,281.00 Natural or cultured pearls, precious or semi precious stones, metals 140.00 329.00 Optical, photographic, cinematographer, measuring, checking, precision 8,795.00 2,524.00 apparatus
Plastics and articles thereof; rubber and articles thereof 11,071.00 135,012.00
Prepared foodstuffs; beverages, spirits, vinegar and tobacco 2,996.00 120,935.00 Products of chemical or allied industries 23,248.00 335,301.00 Pulp of wood or of other fi brous cellulosic material 1,079.00 7,039.00 Raw hide and skins, leather, fur skins and articles thereof 26,240.00 1,415.00 Textiles and textile articles 62,133.00 571,585.00 Vegetable products 73,695.00 222,728.00 Vehicles, aircraft, vessels and associated transport equipment 6.00 510.00 Wood and articles of wood 89.00 827.00 Works of arts, collectors, pieces, antiques and special transactions NES - 191.00 Sub-Total 412,413.00 1,544,859.00 Item Services Exports Imports Maintenance and repair services n.i.e. 8.00 - Transport 209.00 71,870.00 Travel 50.00 2,310.00
131 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
India
Item Services Exports Imports Insurance and pension services 2.00 835.00 Financial services 208.00 390.00 Charges for the use of intellectual property n.i.e. 68.00 522.00 Telecommunications, computer, and information services 208.00 2,772.00 Other business services 5,712.00 2,956.00 Personal, cultural, and recreational services 34.00 210.00 Government goods and services n.i.e. 3,996.00 71.00 Sub-Total 10,495.00 81,936.00 Total 422,908.00 1,626,795.00
Iran
Item Commodity Exports Imports Articles of stone, plaster, cement, asbestos, mica or similar materials 18.00 - Base metals and articles of base metal - 3.00 Live animals and animals products 12.00 - Machinery and mechanical appliances 15.00 2.00 Miscellaneous manufactured articles 9.00 - Optical, photographic, cinematographer, measuring, checking, precision 51.00 15.00 apparatus Pulp of wood or of other fi brous cellulosic material 23,786.00 - Textiles and textile articles 137.00 - Vegetable products 3,810.00 - Articles of stone, plaster, cement, asbestos, mica or similar materials 18.00 -
Sub-Total 27,856.00 20.00
132 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Iran
Item Services Exports Imports Transport - 1.00 Other business services 36.00 - Government goods and services n.i.e. 77.00 414.00 Sub-Total 113.00 415.00 Total 27,969.00 435.00
Maldives
Exports Imports Commodity Item Base metals and articles of base metal 5.00 - Live animals and animals products 15.00 - Machinery and mechanical appliances 25.00 8.00 Mineral products 1,465.00 - Optical, photographic, cinematographer, measuring, checking, precision 44.00 - apparatus Plastics and articles thereof; rubber and articles thereof 23.00 - Prepared foodstuffs; beverages, spirits, vinegar and tobacco 572.00 - Products of chemical or allied industries 1,145.00 - Pulp of wood or of other fi brous cellulosic material 2.00 - Raw hide and skins, leather, fur skins and articles thereof 12.00 - Textiles and textile articles 331.00 228.00 Vegetable products 4,321.00 - Works of arts, collectors, pieces, antiques and special transactions NES 10.00 - Sub-Total 7,970.00 236.00
133 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Maldives
Item Services Exports Imports Transport 1.00 15.00 Travel - 3.00 Telecommunications, computer, and information services 75.00 - Other business services 2.00 14.00 Government goods and services n.i.e. 135.00 3,192.00 Sub-Total 213.00 3,224.00 Total 8,183.00 3,460.00
Myanmar
Item Commodity Exports Imports Base metals and articles of base metal 2.00 - Live animals and animals products 63.00 - Machinery and mechanical appliances 3.00 - Mineral products 17.00 - Optical, photographic, cinematographer, measuring, checking, precision 75.00 - apparatus Plastics and articles thereof; rubber and articles thereof 8.00 - Prepared foodstuffs; beverages, spirits, vinegar and tobacco 377.00 - Products of chemical or allied industries 3,480.00 - Raw hide and skins, leather, fur skins and articles thereof 496.00 - Textiles and textile articles 1,987.00 - Vegetable products 22.00 145.00 Sub-Total 6,530.00 145.00
134 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Myanmar
Item Services Exports Imports Transport - 6.00 Insurance and pension services 1.00 - Telecommunications, computer, and information services 75.00 - Other business services 63.00 - Government goods and services n.i.e. 248.00 567.00 Sub-Total 387.00 573.00 Total 6,917.00 718.00
Nepal
Item Commodity Exports Imports Articles of stone, plaster, cement, asbestos, mica or similar materials 183.00 - Footwear, headgear, umbrellas, walking sticks, etc. 10.00 - Machinery and mechanical appliances - 3.00 Mineral products 9.00 - Miscellaneous manufactured articles 6.00 - Natural or cultured pearls, precious or semi precious stones, metals 3.00 - Optical, photographic, cinematographer, measuring, checking, precision 376.00 228.00 apparatus Plastics and articles thereof; rubber and articles thereof 17.00 - Prepared foodstuffs; beverages, spirits, vinegar and tobacco 27.00 - Products of chemical or allied industries 52.00 - Raw hide and skins, leather, fur skins and articles thereof 7.00 - Textiles and textile articles 1,546.00 - Vegetable products 846.00 - Sub-Total 3,082.00 231.00
135 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Nepal
Item Services Exports Imports
Transport 1.00 13.00 Travel - 7.00 Financial services - 4.00 Charges for the use of intellectual property n.i.e. - 1.00 Other business services 79.00 119.00 Government goods and services n.i.e. 310.00 1,300.00 Sub-Total 390.00 1,444.00 Total 3,472.00 1,675.00 Sri Lanka Item Commodity Exports Imports Animal or vegetable fats, oils and waxes 18.00 480.00 Articles of stone, plaster, cement, asbestos, mica or similar materials 4,422.00 111.00 Base metals and articles of base metal 15,005.00 621.00 Footwear, headgear, umbrellas, walking sticks etc. 43.00 1.00 Live animals and animals products 6,014.00 5.00 Machinery and mechanical appliances 1,044.00 1,379.00 Mineral products 37,782.00 83.00 Miscellaneous manufactured articles 624.00 200.00 Natural or cultured pearls, precious or semi precious stones, metals 1.00 - Optical, photographic, cinematographer, measuring, checking, precision 358.00 51.00 apparatus Plastics and articles thereof; rubber and articles thereof 7,417.00 5,365.00 Prepared foodstuffs; beverages, spirits, vinegar and tobacco 9,861.00 1,333.00 Products of chemical or allied industries 21,229.00 1,645.00
136 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Sri Lanka
Item Exports Imports Commodity Pulp of wood or of other fi brous cellulosic material 900.00 731.00 Raw hide and skins, leather, fur skins and articles thereof 2,849.00 316.00 Textiles and textile articles 113,693.00 4,272.00 Vegetable products 49,836.00 33,639.00 Vehicles, aircraft, vessels and associated transport equipment 566.00 - Wood and articles of wood 34.00 7,905.00 Works of arts, collectors, pieces, antiques and special transactions NES - 35.00 Sub-Total 271,696.00 58,172.00
Sri Lanka
Item Services Exports Imports Transport 18.00 4,750.00 Travel 35.00 72.00 Construction 14.00 - Insurance and pension services - 29.00 Financial services 281.00 126.00 Charges for the use of intellectual property n.i.e. 3.00 5.00 Telecommunications, computer, and information services 2,491.00 6,926.00 Other business services 5,562.00 1,403.00 Personal, cultural, and recreational services 1.00 2.00 Government goods and services n.i.e. 230.00 492.00 Sub-Total 8,635.00 13,805.00 Total 280,331.00 71,977.00
137 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Overall
Item Commodity Exports Imports Animal or vegetable fats, oils and waxes 27.00 3,418.00 Arms and ammunition, parts and accessories thereof 26.00 - Articles of stone, plaster, cement, asbestos, mica or similar materials 12,412.00 4,315.00 Base metals and articles of base metal 18,799.00 50,830.00 Footwear, headgear, umbrellas, walking sticks, etc. 404.00 438.00 Live animals and animals products 9,032.00 17,147.00 Machinery and mechanical appliances 23,290.00 52,990.00 Mineral products 231,098.00 16,582.00 Miscellaneous manufactured articles 3,065.00 5,372.00 Natural or cultured pearls, precious or semi precious stones, metals 144.00 329.00 Optical, photographic, cinematographer, measuring, checking, precision 10,495.00 2,962.00 apparatus Plastics and articles thereof; rubber and articles thereof 24,800.00 140,524.00 Prepared foodstuffs; beverages, spirits, vinegar and tobacco 14,926.00 125,096.00 Products of chemical or allied industries 59,533.00 339,305.00 Pulp of wood or of other fi brous cellulosic material 26,215.00 8,122.00 Raw hide and skins, leather, fur skins and articles thereof 44,918.00 2,204.00 Textiles and textile articles 787,172.00 619,134.00 Vegetable products 146,142.00 257,593.00 Vehicles, aircraft, vessels and associated transport equipment 1,997.00 510.00 Wood and articles of wood 123.00 8,744.00 Works of arts, collectors, pieces, antiques and special transactions NES 11.00 227.00 Sub-Total 1,414,629.00 1,655,842.00 Item Services Exports Imports
Maintenance and repair services n.i.e. 8.00 - Transport 247.00 79,392.00 Travel 95.00 2,460.00
138 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Main Items of Goods and Services Traded with ACU Member Countries in 2015 (Contd.) (In thousands of USDs)
Overall
Item Services Exports Imports Construction 14.00 - Insurance and pension services 4.00 898.00 Financial services 498.00 1,013.00 Charges for the use of intellectual property n.i.e. 71.00 532.00 Telecommunications, computer, and information services 2,966.00 9,824.00 Other business services 11,673.00 5,572.00 Personal, cultural, and recreational services 35.00 213.00 Government goods and services n.i.e. 6,658.00 15,128.00 Sub-Total 22,269.00 115,032.00 Total 1,436,898.00 1,770,874.00
1It stands for not elsewhere specifi ed.
139 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Trade with ACU Member Countries during 2014-2015 (In thousands of USDs)
Item Exports of Commodities Imports of Commodities Country 2014 2015 2014 2015
Bangladesh 689,147.00 684,676.00 53,032.00 51,647.00
Bhutan 388.00 424.00 279.00 532.00
India 434,872.00 412,413.00 1,763,751.00 1,544,859.00
Iran 41,818.00 27,856.00 380.00 20.00
Maldives 8,310.00 7,970.00 820.00 236.00
Myanmar 10,668.00 6,530.00 167.00 145.00
Nepal 2,587.00 3,082.00 526.00 231.00
Sri Lanka 248,403.00 271,696.00 55,107.00 58,172.00
Sub-Total 1,436,193.00 1,414,647.00 1,874,062.00 1,655,842.00
Item Exports of Services Imports of Services Country 2014 2015 2014 2015
Bangladesh 2,006.00 2,024.00 9,094.00 8,693.00
Bhutan 1.00 11.00 16.00 4,942.00
India 11,905.00 10,495.00 120,222.00 81,936.00
Iran 949.00 113.00 2,023.00 415.00
Maldives 735.00 213.00 239.00 3,224.00
Myanmar 98.00 387.00 278.00 573.00
Nepal 632.00 390.00 763.00 1,444.00
Sri Lanka 1,264.00 8,635.00 10,032.00 13,805.00
Sub-Total 17,590.00 22,268.00 142,667.00 115,032.00
Total 1,453,783.00 1,436,915.00 2,016,729.00 1,770,874.00
Source: State Bank of Pakistan
140 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Trade with ACU Member Countries during 2011-2015 (In millions of USDs)
Item Exports of Commodities Country 2011 2012 2013 2014 2015 Bangladesh 899.39 668.03 726.91 689.15 684.68 Bhutan 0.40 0.36 0.37 0.39 0.42 India 286.70 350.37 369.51 434.87 412.41 Iran 136.00 128.55 56.09 41.82 27.84 Maldives 7.18 8.72 8.25 8.31 7.97 Myanmar 4.53 7.78 7.60 10.67 6.53 Nepal 1.86 2.16 3.36 2.59 3.08 Sri Lanka 334.97 312.06 331.43 248.40 271.70 Total 1,671.03 1,478.04 1,503.52 1,436.20 1,414.63
Item Imports of Commodities Country 2011 2012 2013 2014 2015 Bangladesh 78.97 59.52 55.36 53.03 51.65 Bhutan 0.04 2.09 0.36 0.28 0.53 India 1,426.02 1,302.99 1,744.23 1,763.75 1,544.86 Iran 129.55 88.36 2.70 0.38 0.02 Maldives 0.13 0.07 0.09 0.82 0.24 Myanmar 0.42 0.29 1.21 0.17 0.15 Nepal 1.34 1.68 0.18 0.53 0.23 Sri Lanka 53.88 67.93 59.06 55.11 58.17 Total 1,690.35 1,522.93 1,863.19 1,874.07 1,655.85
Source: State Bank of Pakistan
141 Country Performance / Pakistan ANNUAL REPORT 2015
Pakistan: Trade with ACU Member Countries during January-December, 2014-2015 (In thousands of USDs) Item Exports of Commodities Imports of Commodities Month 2014 2015 2014 2015 January 135,530.00 117,932.00 237,141.00 139,737.00 February 113,454.00 107,111.00 222,905.00 130,442.00 March 113,247.00 130,481.00 207,380.00 144,982.00 April 139,087.00 114,436.00 182,713.00 125,104.00 May 118,252.00 121,779.00 118,270.00 98,386.00 June 122,000.00 124,993.00 127,063.00 109,354.00 July 95,640.00 119,697.00 149,314.00 96,113.00 August 111,481.00 103,123.00 117,792.00 104,251.00 September 138,708.00 114,600.00 121,503.00 104,621.00 October 124,154.00 133,900.00 129,633.00 113,732.00 November 104,824.00 98,410.00 114,397.00 202,110.00 December 119,817.00 128,170.00 145,952.00 287,010.00 Sub-Total 1,436,194.00 1,414,632.00 1,874,063.00 1,655,842.00
Item Exports of Services Imports of Services Month 2014 2015 2014 2015 January 1,378.00 876.00 16,132.00 9,904.00 February 1,660.00 943.00 14,955.00 9,357.00 March 1,385.00 1,193.00 14,915.00 10,364.00 April 1,745.00 1,610.00 12,497.00 9,386.00 May 1,489.00 1,313.00 9,985.00 7,778.00 June 1,418.00 1,550.00 9,913.00 20,482.00 July 1,196.00 1,148.00 11,941.00 6,347.00 August 1,452.00 1,050.00 9,919.00 6,337.00 September 1,730.00 1,300.00 10,722.00 5,869.00 October 1,120.00 3,888.00 9,424.00 6,817.00 November 1,236.00 3,657.00 9,437.00 10,264.00 December 1,784.00 3,740.00 12,825.00 12,129.00 Sub-Total 17,593.00 22,268.00 142,665.00 115,034.00 Total 1,453,787.00 1,436,900.00 2,016,728.00 1,770,876.00 Notes: Data is based on reporting by the banking channel only. Data for 2015 is provisional.
Source: State Bank of Pakistan
142 Country Performance / Pakistan ANNUAL REPORT 2015
Sri Lanka
Overview
The Sri Lankan economy grew by 4.80 percent, on a YoY basis in February 2015, percent in Financial Year (FY)1 2015, to reach 4.50 percent at the end of the year. compared with 4.90 percent in 2014. A This was driven primarily by the enhanced slowdown in the growth of demand in growth of bank credit as well as higher Sri Lanka’s traditional export markets wages afforded to government workers and impacted the growth of the export sector employees in other sectors of the economy. while a strengthening US economy prompted Meanwhile, despite substantial gains from the short-term capital outfl ows. The impact lower oil prices and continued positive trends of these developments was offset to some in the tourism sector, slowing down of net extent by lower international commodity foreign exchange infl ows, including worker prices. Nevertheless, domestic consumption remittances, and capital outfl ows, generated rebounded as incomes grew, particularly an overall defi cit in the Balance of Payments among public sector workers. Agriculture (BOP). Efforts to reverse the downward trend and services related activities grew by in government tax and non-tax revenues 5.50 and 5.30 percent, respectively, while were moderately successful, but overruns industry related activities grew by 3.00 on the expenditure side of the Government percent during 2015. Infl ation, as measured budget meant that the budget defi cit grew by the Year-on-Year (YoY) change in the to 7.40 percent of Gross Domestic Product Colombo Consumers’ Price Index (CCPI), (GDP), as against the targeted defi cit of 4.40 was in negative territory during July- percent. Central government debt grew to September 2015, mainly due to subdued 76.00 percent of GDP by the end of 2015. commodity prices. This was the fi rst time The new coalition Government formed that infl ation turned negative since March after the presidential election in January 1995. However, by the end of 2015, YoY 2015 focused on implementing the 100-day headline infl ation was recorded at 2.80 program before the general election that was percent, compared to 2.10 percent at the end held in August 2015. The policy responses of 2014. Correspondingly, core infl ation, to volatile global economic conditions took which switches out energy and selected food time to evolve after the general election items from the CCPI basket, grew from 0.80 held in August 2015. In order to address the
1 Financial Year stands for beginning of January to the end of December.
143 Country Performance / Sri Lanka ANNUAL REPORT 2015
adverse implications of growing demand (24.90 percent) during the year. As per the pressures on price and fi nancial stability expenditure approach, the growth in real GDP and help cushion pressure on the BOP, in 2015 was largely driven by an increase the Central Bank took early corrective in consumption demand, while investment action by imparting greater flexibility activities made a modest contribution. The in the management of the exchange unemployment rate increased to 4.60 percent rate, enforcing the new macro-prudential during 2015, compared to 4.30 percent regulation of Loan to Value (LTV) ratio as recorded in 2014, amidst a marginal increase a selective demand management instrument in labour force participation, particularly by and tightening monetary policy through an females. upward adjustment of the Statutory Reserve Requirement (SRR) and also later increasing The agriculture sector accelerated its growth the Central Bank’s policy interest rates. momentum, increasing its GDP share A renewed focus on export led economic marginally to 7.90 percent in 2015. The value growth and the buttressing of collection of added from agriculture, forestry and fi shing government revenue to contain the overhang activities grew by 5.50 percent in 2015, in of government debt are the key drivers of comparison to the growth of 4.90 percent in the Government’s medium-term economic the previous year. This was largely driven strategy, and structural reforms proposed by the expansion in growing of rice, which by the Government towards this end are recorded a high growth of 23.30 percent. expected to be endorsed by the International Paddy production, which was severely Monetary Fund (IMF) as well. affected by extreme weather conditions in 2014, increased signifi cantly during both Real Sector Developments 2014/15 Maha and 2015 Yala seasons supported by favourable weather conditions All three sectors of the economy contributed and the increased purchase price of paddy. to real economic growth of 4.80 percent in The value addition from several other key 2015. Services activities, which account for sub-sectors, including coconut (growth of 56.60 percent of GDP, grew by 5.30 percent, 5.10 percent), fruits (growth of 16.50 percent), and industry activities, which account and vegetables (growth of 24.90 percent), also for 26.20 percent of GDP, grew by 3.00 increased in 2015 compared to the previous percent, mainly supported by the growth year due to the favourable weather conditions. in manufacturing activities (4.70 percent). However, the growing of tea contracted for Agriculture activities, which account for 7.90 the second consecutive year, registering a percent of GDP, expanded by 5.50 percent, 2.60 percent decline due to supply side factors mainly due to the signifi cant growth in as well as in response to demand conditions, growing of rice (23.30 percent) and vegetables including lower demand from major export
144 Country Performance / Sri Lanka ANNUAL REPORT 2015 destinations. The rubber also declined by products recorded no growth during 2015. 10.10 percent, partly due to the slowdown The Government continued to extend of tapping operations of smallholders in incentives for the development of the industry response to declining global prices of rubber. with fi scal concessions, technical assistance In contrast, animal production activities grew and upgrading of infrastructure facilities in 2015, with the increase in milk production to promote regional industry development owing to favourable producer prices for raw initiatives. milk and increased capacity of milk factories. However, value addition from the fi sheries The services sector, which accounts sector contracted with lower production for 56.60 percent of GDP, grew by 5.30 from inland fi shing as well as marine fi shing. percent in value added terms in 2015, in Meanwhile, the Government introduced comparison to a growth of 5.20 percent in several measures which contributed to the 2014. The robust growth of 15.80 percent in increase in output in the agriculture sector. fi nancial service activities, which benefi ted from the relaxed monetary policy stance, The industry sector growth slowed down to largely contributed to the services sector 3.00 percent in 2015, marginally reducing growth. Meanwhile, wholesale and retail the share of industry in GDP to 26.20 trade, and transport activities, the two percent. The contraction in construction major services components grew by 4.70 and mining and quarrying activities largely and 5.50 percent, respectively. Moreover, contributed to the slower growth in the IT programing, telecommunication, real industry sector. However, the major estate activities, including the ownership of component of the industry sector, dwellings and insurance services notably manufacturing activities, supported the grew during 2015, supporting the momentum growth in the sector with an expansion of in services activities. However, the setback 4.70 percent, largely driven by the observed in education services, professional manufacturing of food, beverages services, postal and courier activities, and and tobacco products. In addition, the accommodation, food and beverage services manufacture of machinery and equipment, affected the overall growth in services metals and metal products, and furniture activities. also supported the growth momentum in manufacturing activities. Meanwhile, Infl ation, based on CCPI (2006/07=100), electricity, water and waste treatment remained below mid-single digit levels, activities also contributed positively to supported by the downward adjustment the overall growth in industry activities. of prices of several key consumer items, The value addition in the manufacture of favourable supply side developments in textiles, wearing apparel and leather related the domestic and international markets, and
145 Country Performance / Sri Lanka ANNUAL REPORT 2015
well contained infl ation expectations. the restrictions placed on the access to its YoY headline infl ation declined sharply Standing Deposit Facility (SDF) under Open from 3.20 percent in January 2015 to 0.60 Market Operations (OMO) that was in effect percent in February 2015, with the price since September 2014. Consequent to this revisions introduced in the interim budget for measure, to address the excessive volatility 2015. YoY infl ation remained below 1.00 of short-term interest rates, the Central Bank percent there after until September 2015, lowered its key policy interest rates, namely while recording negative infl ation during the Standing Deposit Facility Rate (SDFR) July-September 2015. Infl ation picked up and the Standing Lending Facility Rate in the fourth quarter of 2015, and recorded (SLFR), by 50 basis points to 6.00 and 2.80 percent by the end of 2015. The core 7.50 percent, respectively, in April 2015. infl ation based on CCPI increased to 4.50 Nevertheless, as credit and monetary percent by the end of 2015 from 3.20 percent aggregates continued to expand at a at the end of 2014, although core infl ation in faster pace than projected, the Central terms of the annual average declined from Bank commenced tightening monetary 3.50 percent in 2014 to 3.10 percent in 2015. policy gradually towards the end of 2015. Meanwhile, infl ation based on National Accordingly, the SRR applicable on all Commitments and Policies Instrument Rupee deposit liabilities of commercial (NCPI) was at 4.20 percent on a YoY basis banks was raised by 1.50 percentage points and 3.80 percent on an annual average basis to 7.50 percent to be effective from the by the end of 2015. reserve period commencing 16 January 2016, signalling the end of the relaxation Monetary Sector Developments cycle of monetary policy. Even prior to the commencement of monetary tightening, The Central Bank continued to maintain several policy measures were introduced in an accommodative monetary policy stance the last quarter of 2015 to contain excessive during the year in an environment of credit fl ows to selected sectors. Accordingly, persistently low infl ation, but initiated a a minimum cash margin requirement was gradual tightening of monetary policy from imposed on Letters of Credit (LCs) opened the end of 2015 with a view to preempting for the importation of motor vehicles, which excessive demand pressures on infl ation, was replaced later on by a maximum LTV emanating from high credit and money ratio, a macro prudential measure, on loans expansion. Considering the sustained increase and advances granted for the purpose of in credit fl ows to the private sector encouraged purchase or utilisation of motor vehicles. by the low interest rate environment that These measures, along with greater fl exibility was maintained during the past few years, allowed in the determination of the exchange in March 2015, the Central Bank removed rate and the changes to the tax structure
146 Country Performance / Sri Lanka ANNUAL REPORT 2015 made by the Government, were expected to increased purchases of T-bills by the Central contain excessive growth of personal loans Bank in the primary market, and the purchase and advances, while strengthening macro- of a part of the proceeds of the International economic and fi nancial system stability. Sovereign Bond (ISB) by the Central Bank. Nevertheless, considering the possible aggravation of demand driven infl ationary With regard to the monetary aggregates Broad pressures due to continued high monetary Money (M2b) growth accelerated to 17.80 expansion, as a preemptive policy measure, percent, YoY, by the end of 2015 compared the Central Bank raised its SDFR and the to a growth of 13.40 percent at the end of SLFR by 50 basis points each, to 6.50 and 2014, mainly due to the expansion in Net 8.00 percent, respectively, effective from the Domestic Assets (NDA), while the average close of business on 19 February 2016. M2b growth was 15.20 percent during the year. NDA expanded by 26.00 percent in Rupee liquidity in the domestic money 2015, driven by increased credit fl ows to market, although lower than the levels both public and private sectors. Within observed in 2014, continued to be in NDA, Net Credit to the Government (NCG) excess throughout 2015. Excess liquidity extended by the banking system increased remained high at the beginning of the year substantially by Rs. 323.60 billion, exceeding due to Treasury Bill (T-bill) purchases and the levels envisaged in the Government provisional advances to the Government budget. Meanwhile, the expansion in credit by the Central Bank. However, excess obtained by public corporations from the liquidity declined gradually until August banking sector moderated marginally to 2015, refl ecting the continued supply of Rs. 76.90 billion in 2015 in comparison to foreign exchange to the domestic foreign the increase of Rs. 80.90 billion observed exchange market, foreign loan repayments, in 2014. Meanwhile, refl ecting low interest early retirements and outright sales of T-bills rate conditions underpinned by the relatively held by the Central Bank as well as high relaxed monetary policy stance, credit currency withdrawals from the Central Bank, extended to the private sector by the banking particularly during the general election. The system expanded by 25.10 percent on a YoY Central Bank managed excess liquidity in basis, compared to the 8.80 percent growth the domestic money market on overnight, recorded at the end of 2014. short term and long term bases, with a view to maintaining the stability in short-term Market interest rates remained low during interest rates. Nevertheless, since September 2015 although some upward movement 2015, excess liquidity in the money market was observed during the latter part of the increased due to the purchase of proceeds of year. Average Weighted Call Money Rate the Sri Lanka Development Bonds (SLDBs), (AWCMR), which had remained below the
147 Country Performance / Sri Lanka ANNUAL REPORT 2015
SDFR since September 2014, due to the performance deteriorated in 2015, resulting restrictions placed on SDF, moved upward in deviations from the budgetary targets in March 2015 consequent to the removal stipulated in the Interim budget for 2015. The of the restrictions. Although AWCMR lower than expected collection of government declined with the reduction in policy interest revenue, high level of recurrent expenditure, rates in April 2015 and remained close to the particularly on salaries and wages, welfare lower bound of the policy rate corridor until expenditure, and higher than estimated outlay August 2015, it displayed some upward on interest payments, exerted a signifi cant trend thereafter refl ecting the decline in excess pressure on the overall budget defi cit in liquidity in the domestic money market. 2015. Accordingly, the budget defi cit Meanwhile, deposit rates and lending rates increased from 5.70 percent of GDP in 2014 continued to remain low during the year, to 7.40 percent of GDP in 2015, signifi cantly while rates gradually started increase towards overshooting the Government’s original latter part of the year. However, yields target of 4.40 percent of GDP. The current on government securities also increased account defi cit, which refl ects government substantially during 2015. dis-savings, increased to 2.20 percent of GDP in 2015 from 1.20 percent in the previous Fiscal Sector Developments year, while the primary defi cit, which excludes interest payments from the overall Although the Interim budget for 2015 defi cit, increased to 2.90 percent of GDP from expected a signifi cant reduction in the 1.50 percent in 2014. The budget defi cit was budget defi cit during the year, a number of largely fi nanced by domestic sources, given developments challenged fi scal management, the slow down in foreign fi nancing during hindering the envisaged fi scal consolidation the year. The central government debt to path.The Interim budget, which was presented GDP ratio increased to 76.00 percent in 2015 following the Presidential election in January from 70.70 percent in 2014, refl ecting the 2015, introduced several fi scal reforms aimed relatively high budget defi cit, lower nominal at realising the expected outcomes of the GDP growth and the impact of exchange rate fi scal consolidation process. The Government variation. This highlights the need for strong expected to reduce the budget defi cit to 4.40 fi scal reforms to reduce the budget defi cit and percent of GDP in 2015 from 5.70 percent accumulation of debt. recorded in 2014, while maintaining the central government debt to GDP ratio at 72.00 External Sector Developments percent in 2015, as per the targets outlined in the Medium-Term Macro Fiscal Framework The performance of Sri Lanka’s external 2014/17 of the Fiscal Management Report sector refl ected the impact of the changing for 2015. Nevertheless, the fi scal sector global economic environment as well
148 Country Performance / Sri Lanka ANNUAL REPORT 2015 as a number of developments in the foreign exchange outfl ows on account of domestic economy. In spite of the benefi t increased imports, debt service payments of lower expenditure on fuel imports, and the reversal of foreign investments from the merchandise trade defi cit widened the Government securities market exerted a marginally by 1.70 percent over the previous substantial pressure on the domestic foreign year, due to the increase in non-oil imports exchange market. In this context, the Central and the slowdown in export earnings. Bank supplied USD 1.90 billion, on a net Continued increase in tourist arrivals and basis, to the domestic foreign exchange higher spending by tourists resulted in a market during the fi rst eight months of the growth in earnings from tourism, which year to curb excessive volatilities in the contributed substantially to the improved exchange rate. Consequently, the Rupee performance of the services account during depreciated marginally by 2.57 percent until the year. The defi cit in the primary income the policy decision of the Central Bank, account continued to widen in 2015. However, on 3 September 2015, to accommodate the surpluses in the secondary income and greater fl exibility in the determination of the services accounts helped abate a large defi cit exchange rate. Subsequent to this decision in the external current account. In absolute and till the end of the year, the Rupee recorded terms, the current account defi cit expanded a depreciation of 6.64 percent against the marginally in 2015, although as a percentage US Dollar, resulting in an overall depreciation of GDP, the current account defi cit reduced of 9.03 percent against the US Dollar during marginally to 2.40 percent in 2015 from 2.50 the year. In line with the nominal depreciation percent in 2014. The modest performance of the Sri Lankan Rupee against the of the current account, together with the US Dollar, and relatively low levels of decline in infl ows to the fi nancial account, in domestic infl ation compared to most trading the form of Foreign Direct Investment (FDI) partners, both the 5-currency and 24-currency and loans to the Government, banking and Real Effective Exchange Rate (REER) private sectors and the withdrawal of foreign indices depreciated by 3.07 and 2.26 percent, investments from the Government securities respectively, by the end of 2015. market, resulted in the BOP recording a defi cit of USD 1,489.00 million. Along with Financial Sector Developments the deterioration of the BOP, the country’s gross offi cial reserves declined to USD 7.30 The fi nancial sector demonstrated its billion by the end of 2015 from USD 8.20 resilience to volatile market conditions billion at the end of 2014. emanating from domestic and global uncertainties in 2015. Business operations of Lower than expected infl ows to the current the banking sector expanded, supported by and fi nancial accounts, high volume of increased credit demand against the backdrop
149 Country Performance / Sri Lanka ANNUAL REPORT 2015
of the low interest rate regime, increased Government securities market. Contractual profi ts and internal capital generation, savings institutions secured a return close to which augmented the cushion available in levels in previous years in spite of low market the sector for absorbing risks arising from interest rates. Other non-banking fi nancial any adverse shocks. Asset quality of the institutions also recorded business growth, banking sector improved during the year. The but with mixed operating performances fi nance and leasing companies sector also given their business models and fi nancial recorded improved performance as refl ected market conditions. During the year, domestic in its increased relative share in terms of total fi nancial markets operated with relatively assets of the domestic fi nancial system. The high volatility consequent to monetary and Central Bank continued to take regulatory BOP conditions that emanated partly from measures in 2015 to protect depositors’ and global developments. Meanwhile, large and investors’ interest in a few liquidity threatened retail value national payments systems of fi nance companies. The Primary Dealers the country operated smoothly without any of government securities showed moderate major disruption and stability concerns, operating results in spite of rapid business while facilitating the growing and changing expansion, while the liquidity issues faced payment needs of the fi nancial sector and the by one primary dealer necessitated regulatory general public, with improved effi ciency and intervention to maintain investor confi dence safety. and facilitate smooth operations in the
150 Country Performance / Sri Lanka ANNUAL REPORT 2015
Sri Lanka: Major Economic Indicators
Year 1 Item 2011 2012 2013 2014 2015 Output and Infl ation (percent change) Real Gross Domestic Product (GDP)2 8.40 9.10 3.40 4.90 4.80 Infl ation (annual average) 6.70 7.60 6.90 3.30 0.90 Infl ation (point to point) 4.90 9.20 4.70 2.10 2.80 Unemployment 4.20 4.00 4.40 4.30 4.60 Government Finance (percent of GDP)2 Total revenue 13.60 12.20 12.00 11.50 13.10 Expenditure and net lending 19.90 17.80 17.40 17.20 20.50 Budget defi cit -6.20 -5.60 -5.40 -5.70 -7.40 External Sector Exports (percent change) 22.41 -7.43 6.34 7.08 -5.62 Imports (percent change) 50.69 -5.32 -6.19 7.85 -2.48 Trade balance (million US dollar) -9,710.00 -9,417.00 -7,609.00 -8,287.00 -8,430.00 Overall balance (million US dollar) -1,061.00 151.00 985.00 1,369.00 -1,489.00 Total external assets (million US dollar) 7,989.46 8,584.92 8,573.69 9,884.44 9,336.90 Months of imports coverage 4.70 5.40 5.70 6.10 5.90 Monetary Aggregates (percent change) Broad money (M2b) 19.10 17.60 16.70 13.40 17.80 Reserve money 21.90 10.20 0.90 18.30 16.50 Narrow money 7.70 2.60 7.70 26.30 16.80 Private sector credit 34.50 17.60 7.50 8.80 25.10 Interest Rates (percent) Repurchase rate (overnight) 7.00 7.50 6.50 6.50 6.00 Reverse repurchase rate (overnight) 8.50 9.50 8.50 8.00 7.50 Weighted average prime lending rate (AWPR) 10.77 14.40 10.13 6.26 7.53 Treasury-bill rate (91 days) 8.68 10.00 7.54 5.74 6.45 Treasury-bill rate (364 days) 9.31 11.69 8.29 6.01 7.30
1 Provisional data.
2 Revised data during 2011-2014.
Source: Central Bank of Sri Lanka
151 Country Performance / Sri Lanka ANNUAL REPORT 2015
Sri Lanka: Major Indicators (In percent)
Year Item 2011 2012 2013 20141 20152
Licensed Commercial Banks
Non-performing loans to gross loans3 3.47 3.40 5.16 3.58 2.90
Non-performing loans to capital4 9.89 14.30 24.43 13.07 9.70
Regulatory capital to risk-weighted assets (RWA) 15.47 15.83 17.50 16.98 14.16
Return on assets (ROA)-before tax 2.40 2.55 2.02 2.04 1.91
Return on equity (ROE) 20.33 21.66 17.35 16.72 15.71
Interest margin to gross income 40.39 35.53 30.94 34.84 39.04
Non-interest expense to gross income 30.11 24.13 21.91 25.62 27.15
1 Revised data.
2 Provisional data.
3 Non-Performing Loans (Net of Interest in Suspense (IIS)).
4 Non-Performing Loans (Net of Interest in Suspense (IIS)) and Specifi c Provisions.
Source: Bank Supervision Department, Central Bank of Sri Lanka
152 Country Performance / Sri Lanka ANNUAL REPORT 2015 1 10.04 23.01 2 2011 2012 2013 2014 2015 1 (In millions of USDs) during 2011-2015 Export Import Sri Lanka: Trade with ACU Member Countries ACU Member with Trade Sri Lanka: 0.11 0.00 0.02 0.02 0.02 0.00 0.00 0.00 0.00 0.00 0.180.64 0.59 1.12 1.20 5.01 5.23 3.80 1.64 3.60 7.67 0.31 3.61 0.16 8.94 0.06 29.73 0.04 21.46 0.02 75.29 82.76 83.08 74.29 73.18 333.84 353.37 378.33 279.60 297.28 46.34 56.67 82.15 90.1655.50 92.82 52.64 24.35 59.26 26.53 88.35 25.06 77.32 26.06 20.50 37.75 16.12 13.10 519.04180.38 567.47 195.96 543.52 204.98 624.81 181.03 643.30 4,430.70 155.75877.48 3,639.51 1,602.40 3,170.75 957.21 778.15 4,023.14 979.22 4,268.40 11.51 1,067.69 1,047.63 7.85 6,419.77 4,817.45 7.02 3,607.75 4,376.46 4,654.94 2011 2012 2013 2014 2015 10,558.82 9,773.53 10,394.25 11,130.07 10,504.93 20,268.80 19,190.20 18,002.75 19,416.77 18,934.60 Item Central Bank of Sri Lanka and Customs Provisional data. Revised data. Nepal Pakistan Myanmar Sources: Bangladesh Bhutan India Iran Maldives with Trade Total ACU Countries with Trade Total the World 1 2 Country
153 Country Performance / Sri Lanka ANNUAL REPORT 2015
Sri Lanka: Trade through Free Trade Zone in 2015
Export Import Item As a Percentage of As a Percentage of Total Value (FOB) Total Value (CIF) Total Exports of the Total Imports of the Country (In millions of USDs) Relevant Country (In millions of USDs) Relevant Country
Bangladesh 70.79 76.26 8.55 22.65
Bhutan 0.02 100.00 0.00 -
India 570.03 88.65 735.97 17.22
Iran 155.31 99.71 1.63 23.25
Maldives 52.34 67.92 15.96 79.61
Myanmar 1.52 93.03 1.81 8.43
Nepal 1.30 36.15 0.00 0.00
Pakistan 68.66 93.92 113.72 38.26
Total 919.96 - 877.63 -
Sources: Central Bank of Sri Lanka and Sri Lanka Customs
154 Country Performance / Sri Lanka ANNUAL REPORT 2015
Sri Lanka: Main Items of Goods and Services Exported to ACU Member Countries in 2015
Sector/Country Bangladesh Frozen fi sh, vegetables, coconuts - desiccated and fresh, fruits, cocoa powder, copra, smoked Agriculture rubber – Ribbed Smoked Sheets (RSS 3), new pneumatic tyres Coral and similar, lactose and lactose syrup, insecticides, essential oils, mosquito coils, petroleum Industry gases, paints, yarn, machinery, paper or paperboard, textile materials India
Black tea, cloves, coconut milk powder, coconuts desiccated, sugar confectionery, vegetable, pepper, crude palm oil, new pneumatic tyres, smoked rubber, pale crepe and brown crept, fruits, Agriculture fresh arecanuts, nutmeg, mace, fl owers, fresh fruits, cocoa nuts, oil cake, cuttle fi sh and squid cinnamon, turmeric, copra, margarine Billets of refi ned copper, aluminium alloys, single or multi-cored wire and cable, stranded wire, cables of copper, unbleached kraft paper or paperboard, waste and scrap of stainless steel, wire of aluminium not alloyed, antibiotics, anodized wire or lacqueres enameled, electric conductors, electrical discharge or fi lament lamps, fi breboard of a density, zinc not alloyed, Industry magnetic or optical readers, marble, travertine and alabaster, refi ned copper unwrought, pains and varnishes, fats and oils, coral and similar balsams, lead oxides, tetrahydrofuran, organic compounds, connectors, apparel and clothing accessories, glycerol, ash and residues, stearic acid, fatty acids and acidoils, surgical gloves, trunks and suitcases, lorries, soap, yarn, woven fabric, air-conditioning machines Iran Agriculture Black tea, coconuts – in shell (fresh) and desiccated, coir fi ber, rubber products, copra Industry Fiberboard of a density, textile materials Myanmar Agriculture Tyres of rubber, nutmeg Industry Paints, garments, accessories Nepal Agriculture Black tea, desiccated coconuts, copra Industry Labels, articles of apparels clothing accessories, copper waste and scrap Pakistan Black tea, green tea and other, betel leaves, copra, coconuts-in shell (fresh) and desiccated, Agriculture smoked rubber, pale brown scrap crepe, fruits, nutmeg, rice, rubber, pepper, mace, cloves, coir yarn Industry Fibreboard of a density, paper and paperboard, balls, activated carbon
Source: Central Bank of Sri Lanka
155 Country Performance / Sri Lanka ANNUAL REPORT 2015
Sri Lanka: Main Items of Goods and Services Imported from ACU Member Countries in 2015
Sector/Country Bangladesh Potatoes, seeds of coriander, rice, multiple (folded) or cabled yarn of jute, unbleached woven Agriculture fabrics of jute or other textile, medicaments of fi xed or unmixed products Measuring equipments, hydrocarbons, perfumes, plastics, clothing accessories, paper or Industry paperboard India
Fruits of genus capsicum – chilies, rice, turmeric, maize, millet, masoor dhal, medicaments, oil cake and other solid residues of soya bean, onions and shallots fresh or chilled, wheat grain, palm oil, Agriculture dried vegetables, semi milled or wholly milled rice, white crystalline cane sugar, cigarettes, beedi leaves, potatoes, crude palm oil, milk and milk products, natural rubber Stainless steel tanks, aluminum, auto trishaws, carbon, chassis, crude oil, diesel, petrol and other petroleum, kerosene typeset fuel, crude palm oil, fl at rolled iron or non-alloy steel, buses and lorries, trankers and bowsers, motor cars and motor vehicles, motor cycles, cement, knitted Industry or crocheted fabrics, paper and paperboard, polyethylene, printed: plain weave, thread, tractors, wire of refi ned copper, wire of brass, books machinery and equipments, motor accessories, denim, fi sh frozen or dried, sodium hydroxide, sulphuric acids, inorganic acids, sulphates, yeasts, diamonds, pharmaceutical goods, tyres, tubes and pipes Iran Agriculture Dried grapes and dates, synthetic rubber products, medicaments Industry Petroleum oils and oil products, urea, urea resins, strip, carbon, copper waste and scrap Myanmar Agriculture Seeds of coriander, maize seed, black gram, vegetables Industry Blow moulding machines for working rubber or plastics, precious stones, wood Nepal Industry Ash and residues containing mainly copper, scoops of base metal, buttons of base metal, books Pakistan Beans of the species, rice, cotton sewing thread, fruits, onions, potatoes, denim, seeds of cumin, Agriculture fruits, semi-milled and wholly milled rice, dried vegetables, medicaments Unbleached: plain weave, woven fabrics, agricultural tractors, carbon, carboys, bottles, fl asks Industry and similar articles of plastics, cross twill, gloves, mittens and mitts of other textiles, knitted or crocheted, measuring equipments, fabrics, zinc not alloyed
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
156 Country Performance / Sri Lanka ANNUAL REPORT 2015
157 Auditor’s Report ANNUAL REPORT 2015
ACU Operations
Clearing Operations
In 2015, volume of transactions1 (one In percentage terms, Maldives with 60.97 way plus accrued interest) booked at the percent increase registered the highest ACU Secretariat reached to USD 10,525.80 annual growth rate, followed by Sri Lanka, million, refl ecting an increase of 3.41 Bhutan, and India with respectively 25.06, percent compared to the last year. The total 5.85, and 3.43 percent. In contrast, Myanmar, transactions (incl. receipts, payments, and Nepal, Pakistan, and Bangladesh booked accrued interest) channeled through the negative growth of 17.78, 8.16, 6.93 and 2.17 ACU mechanism amounted USD 21,051.60 percent, respectively. (Table 2) million, revealing USD 694.98 million increases over the previous year. (Tables 1 Over the year under review, 11.68 and 2) percent of total transactions amounting to USD 1,229.27 million were cleared through On average, monthly total transactions the ACU mechanism, while the outstanding credited/debited to the member central banks amount of USD 9,296.53 million was settled picked up to USD 877.15 million compared in hard currency. Payments in hard currency with USD 848.19 million a year before. The rose by USD 305.81 million, illustrating level of total annual transactions indicates 3.40 percent growth. Myanmar with 51.36 that India was at the top with USD 9,520.44 percent clearing in the system stood at the million, an increase of USD 315.39 million top, followed by Pakistan, Nepal, Sri Lanka, over the previous year. It was followed by Bangladesh, Bhutan, and India with 46.78, Bangladesh, Sri Lanka, Pakistan, Maldives, 13.87, 8.97, 2.02, 1.40, and 1.35 percent, Nepal, Bhutan, Myanmar, and Iran with respectively. (Tables 1 and 3) USD 5,887.01, 3,291.61, 2,220.75, 50.61, 48.85, 28.97, 3.33, and 0.03 million, respectively. (Tables 1 and 2)
1 It includes ACU dollar and ACU euro transactions.
158 ACU Operations ANNUAL REPORT 2015
Transactions Cleared/Settled through the ACU Mechanism Transactions1 Credited to the Member during 2005-20151 Central Banks in 2015 (In millions of USDs) (In millions of USDs)
Bangladesh Bhutan 22,000 Sri Lanka Pakistan ()116.59 ()28.57 20,000 ()270.87 ()707.74 Iran 18,000 Myanmar ()0.03 ()2.20 16,000 Nepal 14,000 ()5.95 12,000 10,000 8,000 6,000 4,000 2,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 India Cleared in the System Settled in Hard Currency ()9,393.85
1 1 Figures include ACU dollar and ACU euro transactions, and accrued interest . Figures include ACU dollar and ACU euro transactions, and accrued interest .
During 2015, the Secretariat has issued a The share of India in the total credit number of accounting vouchers, weekly transactions reached 89.25 percent which statements, monthly statements, Allocation remained unchanged compared to the tables, monthly Newsletter, Annual Report, previous year. Over the year under survey, MMM1 messages, faxes, letters, and e-mails. Pakistan’s share dropped by 0.40 percentage Since May 1, 2010, the Secretariat ceased points, approaching 6.72 percent. (Table 6) dispatching accounting vouchers and monthly statements via mail. The Allocation tables In percentage terms, transactions credited and weekly statements were published to Sri Lanka grew remarkably by 25.54 electronically since February 2012 and May percent. It was followed by Bangladesh, 10, 2013, respectively. (Table 4) Bhutan, and India with 16.62, 5.85, and 3.41 percent growth. However, Maldives, Nepal, Credit positions Myanmar, and Pakistan, encountered with negative growth rate of 100.00, 75.88, 12.70, In 2015, India was the main creditor among and 2.28 percent, respectively. (Table 7) the ACU member countries, registering USD 9,393.85 million credit position. The Debit positions credit positions of Pakistan, Sri Lanka, Bangladesh, Bhutan, Nepal, Myanmar, and During the period, Bangladesh with Iran respectively were USD 707.74, 270.87, USD 5,770.42 million was the main debtor, 116.59, 28.57, 5.95, 2.20, and 0.03 million. followed by Sri Lanka, Pakistan, India, (Table 5) Maldives, Nepal, Myanmar, and Bhutan with USD 3,020.74, 1,513.01, 126.59, 50.61, 42.90, 1.13, and 0.40 million, respectively. (Table 8)
1 It stands for Message Management Module.
159 ACU Operations ANNUAL REPORT 2015
Transactions1 Debited to the Member main net debtor was Bangladesh with the Central Banks in 2015 amount of USD 5,653.83 million followed (In millions of USDs) by Sri Lanka, Pakistan, Maldives, and Sri Lanka ()3,020.74 Nepal. (Tables 3, 11 and 12) Bhutan India ()0.40 ()126.59 Credit/Debit Positions1 of the Member Pakistan ()1,513.01 Central Banks in 2015 (In millions of USDs)
Nepal ()42.90 10,000 Bangladesh Myanmar Maldives 9,000 ()1.13 ()50.61 ()5,770.42 8,000 7,000 1 Figures include ACU dollar and ACU euro transactions, and accrued interest . 6,000 5,000 4,000 3,000 In percentage terms, Bangladesh was the 2,000 1,000 0 major contributor to total debit transactions Bangladesh Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka with share of 54.83 percent. Sri Lanka and Credit Debit 1 Figures include ACU dollar and ACU euro transactions, and accrued interest . Pakistan with 28.70 and 14.37 percent respectively, stood the next. India, Maldives, Nepal, and Myanmar totally booked the Interest received/paid remaining share of 2.10 percent. (Table 9) In 2015, the accrued interest credited/ Maldives experienced the highest annual debited to the member central banks payment growth of 61.23 percent, amounted to USD 0.86 million which was followed by Nepal, Sri Lanka, Bhutan, less than 0.01 percent of central banks’ and India with 50.42, 25.02, 5.26, and 4.64 net positions and less than 0.01 percent of percent, respectively. In contrast, Myanmar, the total transactions routed through the Pakistan, and Bangladesh faced with ACU mechanism. In the year under review, 26.14, 8.96, and 2.48 percent negative annual total interest received/paid was USD 0.42 payment growth, respectively. (Table 10) million more than that of the preceding year. (Tables 3, 13 and 14) Net credit/debit positions On average, monthly US Dollar and Euro In 2015, India was the main net creditor interest rates applied in the ACU mechanism among the ACU member central banks during 2015, were respectively 0.09 and with the amount of USD 9,267.26 million, 0.00 percent. During 2015, the applied representing 3.39 percent growth compared to US Dollar interest rate has experienced that of a year ago. The second net creditor was an upward trend. However, the applied Bhutan with USD 28.17 million, followed Euro interest rate remained unchanged. by Myanmar and Iran. Nevertheless, the (Table 15)
160 ACU Operations ANNUAL REPORT 2015
Monthly Interest Rates Applied in the applied Swap facility in 2015. Since the ACU Mechanism in 2015 inception of this arrangement (September (In percent) 1989-December 2015), the total amount of
0.24 0.22 Swap facility used by the ACU members 0.20 0.18 amounted USD 1,081.83 million. (Table 17) 0.16 0.14 0.12 0.10 0.08 Contribution to growth 0.06 0.04 0.02 0.00 Jan.15 Feb.15 Mar.15 Apr.15 May.15 Jun.15 Jul.15 Aug.15 Sep.15 Oct.15 Nov.15 Dec.15 In 2015, total transactions (incl. accrued interest) increased by 3.41 percent, of which One-Month USD Deposit Rate One-Month EUR Deposit Rate Sri Lanka had the highest contribution (3.24 percentage points), followed by India, Swap facility Maldives, and Bhutan. In the meantime, Pakistan along with Bangladesh and In accordance with the Article (VIIA) of Nepal shared negative contribution of 1.47 the Agreement Establishing the ACU, percentage points. (Table 20) the Currency Swap Arrangement became available to all debtor participants during a Measures and Achievements settlement period, to avail two-month facility for settling imbalances in clearing. The ACU was established in December 1974 when the countries in the region were facing Every eligible participant shall be entitled to settlement diffi culties, mainly due to resource the facility from every other participant up to constraints. The ACU started its operations 20.00 percent of the average gross payment a year later in November 1975. Over the made by it through the ACU mechanism to years, the ACU has displayed a sense of other participants during the three previous true commitment, consolidated and nurtured calendar years. throughout its operations. By applying sound strategies, it achieved predetermined In 2015, the total entitlement of each member objectives to facilitate settlement on a central bank to avail Swap facility of other multilateral basis, to promote the use of members were allocated as Bangladesh participants’ currencies, to improve monetary stood at the top with USD 1,019.12 million, and banking cooperation, and to expand trade followed by Sri Lanka, Pakistan, India, Iran, and economic activity among the countries Nepal, Maldives, Myanmar, and Bhutan. of the Economic and Social Commission for (Table 16) Asia and the Pacifi c (ESCAP) region.
None of the ACU member central banks The results of long-term initiatives to raise
161 ACU Operations ANNUAL REPORT 2015
the Union achievements are evident from the 4) Quality management and information following facts: technology: Believing in the fact that developing an online access to information 1) Timely settlement: Under the ACU would be a worldwide requirement; the Procedure Rules, the debtor members should ACU has developed both the quality and pay up their dues in convertible currencies quantity of the system. In order to accelerate within 4 working days of the receipt of the the process of presenting services and to make notice of payment from the Secretary dispersion of information smoother, the General. There has been no default by any participants were enabled to access their member so far in meeting its obligation for ACU accounts on a daily basis through the the settlement of its net position within the Internet since May 1, 2010. Accordingly, stipulated time. Allocation tables and weekly statements were published on the ACU website 2) Establishment of multi-currency since February 2012 and May 10, 2013, settlement system: Based on the approval respectively. of the ACU Board of Directors at the 37th Meeting in Myanmar (June 2008), the The ACU website has been furnished with accounts of the ACU are held in “Asian Message Management Module (MMM) since Monetary Units” (AMUs), comprising February 19, 2012. The Module is intended to ACU dollar and ACU euro with effect from better facilitate communication amongst the January 1, 2009. Since then, the participants participants and the ACU Secretariat. are authorized to settle transactions either in US Dollar or Euro within the ACU mechanism. The ACU Secretariat has developed a web-based accounting system, operating since 3) Regulation of the Membership May 1, 2015. The new system has a number Application Policy and Procedure: Based of signifi cant advantages over traditional on “ACU Membership Application Policy and on-premise ones. Procedure” approved by the ACU Board of Directors (BODs) at the 39th Meeting in Over the year under scrutiny, the Bhutan (June 11, 2010), a central bank or ACU Secretariat has been in the process monetary authority that is not a member of of developing a web-based application for the United Nations Economic and Social ACU messaging. Commission for Asia and the Pacifi c (ESCAP) may apply to become a participant 5) Expansion of the ACU: Based on a and be admitted as a participant if the Board so decision made at the 36th Board of Directors decides by unanimous vote of all the Directors. Meeting in Bangladesh (May 2006), the
162 ACU Operations ANNUAL REPORT 2015 expansion of the Union was put at the top Sri Lanka (June 16, 2009). MMA commenced of its agenda. In this regard, representatives operations within the ACU mechanism since of target countries were invited to attend May 2010. the annual meetings of the BODs as observers. Seminars/scheduled meetings Nevertheless, there is still a long way to were also conducted to introduce the go. The ACU challenges are to strengthen, ACU mechanism. Consequently, Maldives smoothen, and streamline the mechanism to Monetary Authority (MMA) was admitted cope with fast pacing developments in the to the Union in 2009 by unanimous vote international markets. of all the Directors at the 38th Meeting in
163 ACU Operations ANNUAL REPORT 2015
Asian Clearing Union Transactions1 Channeled through the ACU Mechanism during 1975-2015 (In millions of USDs)
Table (1)
Item Yearly Transactions Cleared in the System Settled in Hard Currency Share in yearly Share in yearly Growth Amount 2 Amount transactions Amount transactions (percent) Year (percent) (percent) 1975 0.44 - 0.09 20.00 0.35 80.00
1976 25.72 5,745.45 4.12 16.00 21.60 83.98
1977 79.36 208.55 16.67 21.01 62.69 78.99
1978 137.60 73.39 39.90 29.00 97.70 71.00
1979 161.31 17.23 83.88 52.00 77.43 48.00
1980 182.94 13.41 98.79 53.99 84.15 46.01
1981 269.39 47.26 166.92 61.96 102.47 38.05
1982 300.41 11.51 196.63 65.45 103.78 34.55
1983 498.66 65.99 192.32 38.57 306.34 61.44
1984 662.84 32.92 322.24 48.62 340.60 51.39
1985 605.20 -8.70 373.50 61.72 231.70 38.28
1986 690.62 14.11 581.12 84.14 109.50 15.86
1987 625.34 -9.45 396.97 63.48 228.37 36.50
1988 940.84 50.45 698.52 74.24 242.32 25.76
1989 1,041.78 10.73 832.39 79.90 209.39 20.10
1990 1,366.54 31.17 947.79 69.36 418.75 30.64
1991 1,851.44 35.48 1,424.35 76.93 427.09 23.07
1992 1,928.32 4.15 1,172.46 60.80 755.86 39.20
1993 1,448.88 -24.86 1,018.00 70.26 430.88 29.74
1994 1,965.38 35.65 1,110.71 56.51 854.67 43.49
1995 2,702.90 37.53 1,353.42 50.07 1,349.48 49.93
1996 3,161.10 16.95 1,448.30 45.82 1,712.80 54.18
1997 2,654.95 -16.01 1,251.60 47.14 1,403.35 52.86
164 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Transactions1 Channeled through the ACU Mechanism during 1975-2015 (Contd.) (In millions of USDs)
Table (1)
Item Yearly Transactions Cleared in the System Settled in Hard Currency Share in yearly Share in yearly Growth Amount 2 Amount transactions Amount transactions (percent) Year (percent) (percent) 1998 2,842.77 7.07 1,130.61 39.77 1,712.16 60.23
1999 2,630.74 -7.46 1,057.39 40.19 1,573.35 59.81
2000 3,383.54 28.62 1,634.66 48.31 1,748.88 51.69
2001 3,553.67 5.03 1,643.56 46.25 1,910.11 53.75
2002 3,448.40 -2.96 1,446.40 41.94 2,002.00 58.06
2003 4,546.30 31.84 1,877.95 41.31 2,668.35 58.69
2004 6,679.79 46.93 3,163.25 47.36 3,516.54 52.64
2005 8,199.62 22.75 4,512.16 55.03 3,687.46 44.97
2006 12,049.84 46.96 5,864.27 48.67 6,185.57 51.33
2007 15,830.57 31.38 6,977.33 44.08 8,853.24 55.93
2008 20,966.74 32.44 8,031.32 38.31 12,935.42 61.69
20093 14,072.42 -32.88 5,780.46 41.08 8,291.96 58.92
20103 20,634.21 46.63 8,900.70 43.14 11,733.51 56.86
20113 14,542.39 -29.52 4,974.53 34.21 9,567.86 65.79
20123 9,095.79 -37.45 1,344.15 14.78 7,751.64 85.22
20133 8,411.12 -7.53 1,098.81 13.06 7,312.31 86.94
20143 10,178.31 21.01 1,187.59 11.67 8,990.72 88.33
20153 10,525.80 3.41 1,229.27 11.68 9,296.53 88.32
Total 194,893.98 - 75,585.10 38.78 119,308.88 61.22
1 Figures indicate one-way transactions, and accrued interest.
2 Figures relevant to years 1975 to 1995 converted from SDRs to US Dollars.
3 Figures for years 2009 to 2015 include ACU dollar and ACU euro transactions.
165 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Total Transactions1 Routed through the ACU during 2014-2015 (In millions of USDs)
Table (2)
2014 2015 Item Growth Share in Total Share in Total Change Amount Transactions Amount Transactions (percent) Country (percent) (percent)
Bangladesh 6,017.40 29.57 5,887.01 27.96 -130.39 -2.17
Bhutan 27.37 0.13 28.97 0.14 1.60 5.85
India 9,205.05 45.22 9,520.44 45.22 315.39 3.43
Iran 0.03 0.00 0.03 0.00 0.00 0.00
Maldives 31.44 0.15 50.61 0.24 19.17 60.97
Myanmar 4.05 0.02 3.33 0.02 -0.72 -17.78
Nepal 53.19 0.26 48.85 0.23 -4.34 -8.16
Pakistan 2,386.11 11.72 2,220.75 10.55 -165.36 -6.93
Sri Lanka 2,631.98 12.93 3,291.61 15.64 659.63 25.06
Total 20,356.62 100.00 21,051.60 100.00 694.98 3.41
1 Figures include two-way ACU dollar and ACU euro transactions, and accrued interest.
166 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Transactions1 Cleared/Settled in the ACU Mechanism in 2015 (In millions of USDs)
Table (3)
Item Cleared in the Settled in Hard Total Credit Total Debit Net Balance System Currency Country (percent) (percent)
Bangladesh 116.59 5,770.42 -5,653.83 2.02 97.98
Bhutan 28.57 0.40 28.17 1.40 98.60
India 9,393.85 126.59 9,267.26 1.35 98.65
Iran 0.03 0.00 0.03 0.00 100.00
Maldives 0.00 50.61 -50.61 0.00 100.00
Myanmar 2.20 1.13 1.07 51.36 48.64
Nepal 5.95 42.90 -36.95 13.87 86.13
Pakistan 707.74 1,513.01 -805.27 46.78 53.22
Sri Lanka 270.87 3,020.74 -2,749.87 8.97 91.03
Total 10,525.80 10,525.80 ±9,296.532 11.68 88.32
1 Figures include one-way ACU dollar and ACU euro transactions, and accrued interest.
2 Figure indicates net credit / net debit position.
167 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Paper Works and Communications of ACU Secretariat during 2011-2015 (Number)
Table (4) Year Item 2011 2012 2013 2014 2015
Incoming Messages and Letters via SWIFT 3,254 3,571 - - -
Outgoing Messages and Letters via SWIFT 593 588 - - -
Incoming Messages and Letters via MMM1 - 2,469 3,486 3,194 3,450
Outgoing Messages and Letters via MMM - 290 569 563 552
Outgoing UNION Messages 153 135 127 147 163
Incoming Faxes 86 69 63 65 30
Outgoing Faxes 104 48 43 90 29
Incoming E-mails 382 330 294 434 532
Outgoing E-mails 324 467 422 572 712
Accounting Vouchers2 4,412 4,182 4,152 4,609 4,676
Weekly Statements3 - 702 864 1,162 1,174
Monthly Statements2 781 839 698 780 526
Allocation Table4 -12121212
Newsletter 1,501 1,512 1,524 1,524 1,680
Annual Report 236 260 260 260 350
1 It stands for Message Management Module.
2 The ACU Secretariat ceased dispatching accounting vouchers and monthly statements via mail on May 1, 2010.
3 Since May 10, 2012, the ACU Secretariat commenced publishing the weekly statements.
4 The allocation table has been published since February 2012 by the ACU Secretariat.
168 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Transactions1 Credited to the Member Central Banks during 2011-2015 (In millions of USDs)
Table (5)
Year 2011 2012 2013 2014 2015 Country
Bangladesh 329.85 176.29 112.68 99.97 116.59
Bhutan 21.11 21.49 25.01 26.99 28.57
India 8,578.00 7,140.53 7,401.57 9,084.07 9,393.85
Iran 4,558.33 862.10 0.04 0.03 0.03
Maldives 0.05 0.19 0.43 0.05 0.00
Myanmar 0.59 1.68 1.42 2.52 2.20
Nepal 30.52 37.30 26.29 24.67 5.95
Pakistan 676.91 623.57 670.85 724.25 707.74
Sri Lanka 347.03 232.64 172.83 215.76 270.87
Total 14,542.39 9,095.79 8,411.12 10,178.31 10,525.80
1 Figures include one-way ACU dollar and ACU euro transactions, and accrued interest.
169 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Share of the Member Central Banks in Total Credit Transactions1 during 2011-2015 (In percent)
Table (6)
Year 2011 2012 2013 2014 2015 Country
Bangladesh 2.27 1.94 1.34 0.98 1.11
Bhutan 0.15 0.24 0.30 0.27 0.27
India 58.99 78.50 88.00 89.25 89.25
Iran 31.34 9.47 0.00 0.00 0.00
Maldives 0.00 0.00 0.01 0.00 0.00
Myanmar 0.00 0.02 0.02 0.02 0.02
Nepal 0.21 0.41 0.31 0.24 0.06
Pakistan 4.65 6.86 7.97 7.12 6.72
Sri Lanka 2.39 2.56 2.05 2.12 2.57
Total 100.00 100.00 100.00 100.00 100.00
1 Figures include ACU dollar and ACU euro transactions, and accrued interest.
170 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Annual Growth of Transactions1 Credited to the Member Central Banks during 2011-2015 (In percent)
Table (7)
Year 2011 2012 2013 2014 2015 Country
Bangladesh 99.56 -46.55 -36.08 -11.28 16.62
Bhutan 0.14 1.80 16.38 7.92 5.85
India 19.24 -16.76 3.66 22.73 3.41
Iran -63.32 -81.09 -100.00 -25.00 0.00
Maldives 400.00 280.00 126.32 -88.37 -100.00
Myanmar -87.17 184.75 -15.48 77.46 -12.70
Nepal -47.43 22.21 -29.52 -6.16 -75.88
Pakistan 19.88 -7.88 7.58 7.96 -2.28
Sri Lanka 75.23 -32.96 -25.71 24.84 25.54
Total -29.52 -37.45 -7.53 21.01 3.41
1 Figures include ACU dollar and ACU euro transactions, and accrued interest.
171 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Transactions1 Debited to the Member Central Banks during 2011-2015 (In millions of USDs)
Table (8)
Year 2011 2012 2013 2014 2015 Country
Bangladesh 5,401.74 4,450.66 4,919.93 5,917.43 5,770.42
Bhutan 0.00 0.00 0.00 0.38 0.40
India 3,213.80 134.65 114.93 120.98 126.59
Iran 375.78 137.83 0.00 0.00 0.00
Maldives 10.51 3.10 2.40 31.39 50.61
Myanmar 3.78 2.13 0.80 1.53 1.13
Nepal 39.36 38.58 29.04 28.52 42.90
Pakistan 1,432.45 1,246.19 1,633.89 1,661.86 1,513.01
Sri Lanka 4,064.97 3,082.65 1,710.13 2,416.22 3,020.74
Total 14,542.39 9,095.79 8,411.12 10,178.31 10,525.80
1 Figures include ACU dollar and ACU euro transactions, and accrued interest.
172 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Share of the Member Central Banks in Total Debit Transactions1 during 2011-2015 (In percent)
Table (9)
Year Country 2011 2012 2013 2014 2015
Bangladesh 37.14 48.93 58.49 58.13 54.83
Bhutan 0.00 0.00 0.00 0.00 0.00
India 22.10 1.48 1.37 1.19 1.20
Iran 2.59 1.53 0.00 0.00 0.00
Maldives 0.07 0.03 0.03 0.31 0.48
Myanmar 0.03 0.02 0.01 0.02 0.01
Nepal 0.27 0.42 0.35 0.28 0.41
Pakistan 9.85 13.70 19.42 16.33 14.37
Sri Lanka 27.95 33.89 20.33 23.74 28.70
Total 100.00 100.00 100.00 100.00 100.00
1 Figures include ACU dollar and ACU euro transactions, and accrued interest.
173 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Annual Growth of Transactions1 Debited to the Member Central Banks during 2011-2015 (In percent)
Table (10)
Year 2011 2012 2013 2014 2015 Country
Bangladesh 23.06 -17.61 10.54 20.27 -2.48
Bhutan -100.00 - - θ2 5.26
India -71.02 -95.81 -14.65 5.26 4.64
Iran -50.73 -63.32 -100.00 - -
Maldives -23.84 -70.50 -22.58 3 61.23
Myanmar 76.64 -43.65 -62.44 91.25 -26.14
Nepal 182.35 -1.98 -24.73 -1.79 50.42
Pakistan -20.85 -13.00 31.11 1.71 -8.96
Sri Lanka 59.25 -24.17 -44.52 41.29 25.02
Total -29.52 -37.45 -7.53 21.01 3.41
1 Figures include ACU dollar and ACU euro transactions, and accrued interest.
2 Calculation of percentage change is not possible.
3 Growth is more than 500 percent.
174 ACU Operations / Tables ANNUAL REPORT 2015 Table (11) Table Credited to the Member Central Banks in 2015 to the Member Credited 1 (In millions of USDs) Asian Clearing Union Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total 7.83 4.549.15 841.369.81 2.84 0.00 0.90 852.895.59 783.95 0.00 0.00 1.878.58 0.00 0.70 753.878.24 0.00 1.74 0.00 0.40 0.00 2.96 0.00 762.408.00 0.00 63.33 711.357.24 0.00 0.44 0.00 0.75 20.42 0.38 0.00 3.05 0.00 69.84 772.72 0.00 938.57 1,037.57 58.54 0.00 24.86 0.01 0.00 0.20 17.61 0.00 960.02 0.80 57.96 0.00 871.20 1.40 0.00 19.92 0.77 0.00 61.67 839.22 0.30 59.85 19.14 0.01 0.05 20.73 855.12 52.49 804.70 60.16 14.09 20.07 848.06 1,128.44 11.79 1.13 700.44 0.00 0.00 0.00 1.24 50.02 17.20 781.82 17.77 5.54 736.0912.01 0.03 1.39 689.08 0.00 0.00 0.2010.59 0.00 1.01 1.86 0.00 52.32 752.14 45.55 0.03 0.00 858.51 57.93 0.00 32.48 0.00 792.92 0.21 63.63 18.79 847.23 Bangladesh Monthly Distribution of Total Transactions Total Monthly Distribution of Country Figures include ACU dollar and ACU euro transactions, and accrued interest. ACU dollar and Figures include
Month January February March April May June July August September October November December Total1 116.59 28.57 9,393.85 0.03 0.00 2.20 5.95 707.74 270.87 10,525.80
175 ACU Operations / Tables ANNUAL REPORT 2015 Table (12) Table Debited to the Member Central Banks in 2015 Debited to the Member 1 (In millions of USDs) Asian Clearing Union Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total 539.60495.09 0.40544.41 0.00 11.45477.47 0.00 8.61441.70 0.00 0.00 14.74479.05 0.00 0.00 14.22 3.80435.66 0.00 0.00 20.34 1.00491.85 0.00 0.00 0.02 5.80 7.39442.58 0.00 0.00 0.00 3.30 5.34 2.15465.35 0.00 0.00 0.00 5.63 6.82417.27 125.37 1.66 0.00 0.00 0.00 8.81 2.85 4.45540.40 0.00 116.55 0.50 0.00 255.78 14.37 2.13 3.50 123.65 0.00 0.00 0.00 235.59 10.35 938.57 6.73 5.14 110.02 0.00 268.56 0.00 7.78 858.51 4.18 81.99 2.54 0.00 264.06 0.00 960.02 3.72 6.55 102.09 0.00 232.41 0.00 871.20 4.93 5.80 0.00 87.10 243.71 792.92 5.16 3.23 94.09 0.11 243.68 1.73 839.22 93.86 0.50 251.43 100.99 1.86 781.82 252.06 2.04 855.12 155.24 261.07 804.70 322.07 261.92 847.23 250.49 848.06 1,128.44 Bangladesh Monthly Distribution of Total Transactions Total Monthly Distribution of Country Figures include ACU dollar and ACU euro transactions, and accrued interest. ACU dollar and Figures include
Month January February March April May June July August September October November December Total1 5,770.42 0.40 126.59 0.00 50.61 1.13 42.90 1,513.01 3,020.74 10,525.80
176 ACU Operations / Tables ANNUAL REPORT 2015 Table (13) Table 1 (In USDs) Asian Clearing Union Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total 0.000.00 73.710.00 113.11 18,834.660.00 18,281.68 43.000.00 0.87 191.41 10,501.78 0.610.00 71,012.23 111.79 0.000.00 1.13 179.15 43,424.81 0.00 3.83 7.240.00 78,564.36 86.17 0.00 10.91 4.530.00 180.01 0.00 46,137.93 0.00 4.93 1.46 0.000.00 217.04 91,057.70 0.00 0.000.00 0.00 5.09 437.56 62,851.06 0.00 0.00 0.00 0.00 5.66 110,836.150.00 162.64 0.00 0.00 0.00 0.00 7.67 0.00 490.26 58,182.93 0.00 0.00 0.00 6.79 18,916.48 0.00 252,305.16 0.00 0.00 0.00 18,406.31 14.44 0.00 0.00 7.12 0.00 0.00 0.00 13.02 77.83 10,547.37 0.00 0.00 0.00 82.77 0.00 71,207.47 0.00 0.00 0.00 0.00 23.14 43,541.13 0.00 0.00 19.81 78,748.44 0.00 0.00 0.00 0.00 0.00 0.00 46,229.19 0.00 91,257.81 0.00 0.00 0.00 63,153.60 111,363.27 0.00 0.00 58,375.83 252,828.25 Monthly Distribution of Accrued Interest Credited to the Member Central Banks in 2015 to the Member Credited Accrued Interest Monthly Distribution of Bangladesh Country Figures include accrued interests of ACU dollar and ACU euro transactions. ACU dollar and Figures include accrued interests of
January Total1 0.00 2,285.85 861,990.45 61.25 0.00 237.60 0.00 0.00 0.00 864,575.15 February March April May June July August September October November December Month
177 ACU Operations / Tables ANNUAL REPORT 2015 Table Table (14) 1 (In USDs) Asian Clearing Union Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total Monthly Distribution of Accrued Interest Debited to the Member Central Banks in 2015 Debited to the Member Accrued Interest Monthly Distribution of 6,377.88 0.00 0.00 0.00 62.84 0.00 24.70 819.68 3,262.27 10,547.37 11,682.14 0.00 0.00 0.00 68.57 0.00 33.23 1,411.95 5,210.42 18,406.31 12,260.18 0.00 0.0044,357.53 0.0025,961.97 0.0050,250.70 52.58 0.00 0.0029,343.76 0.00 0.00 0.00 0.0057,141.66 0.00 0.00 445.08 0.00 49.0733,516.15 0.00 0.00 278.67 0.0068,981.61 0.00 1,143.05 0.00 0.00 544.75 0.0031,803.48 0.00 21.11 5,411.60 0.00 194.96 180.64 0.00 0.00 37.50 490.47 0.00 4,865.27 18,916.48 432.32 0.00 858.19 7.50 0.00 2,189.50 21,344.63 409.62 0.00 0.00 342.53 3,774.57 14,599.41 556.06 0.00 71,207.47 0.00 715.06 23,282.73 2,492.38 299.58 43,541.13 0.00 298.77 4,395.12 13,862.38 78,748.44 0.00 362.99 3,012.22 28,573.65 46,229.19 244.10 5,218.31 25,916.84 91,257.81 5,164.06 36,244.30 63,153.60 20,864.61 111,363.27 58,375.83 131,014.19 0.00 0.00 0.00 1,294.77 0.00 582.39 46,144.95 73,791.95 252,828.25 Bangladesh Country Figures include accrued interests of ACU dollar and ACU euro transactions. ACU dollar and Figures include accrued interests of
Month January February March April May June July August September October November December Total1 502,691.25 0.00 0.00 0.00 4,625.48 66.11 4,196.46 80,631.06 272,364.79 864,575.15
178 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Interest Rates1 Applied in the ACU Settlement Mechanism during 2011-2015 (In percent)
Table (15)
Year 2011 2012 2013 2014 2015
Month USD EUR USD EUR USD EUR USD EUR USD EUR
January 0.20 0.25 0.01 0.01 0.17 0.00 0.07 0.04 0.03 0.00
February 0.18 0.64 0.04 0.00 0.13 0.00 0.07 0.07 0.02 0.00
March 0.14 0.58 0.08 0.01 0.14 0.00 0.07 0.05 0.02 0.00
April 0.10 0.70 0.09 0.01 0.12 0.00 0.07 0.08 0.07 0.00
May 0.04 0.89 0.11 0.01 0.09 0.00 0.03 0.12 0.08 0.00
June 0.03 0.74 0.05 0.00 0.05 0.00 0.03 0.07 0.09 0.00
July 0.03 1.00 0.10 0.00 0.09 0.00 0.05 0.00 0.09 0.00
August 0.01 1.11 0.10 0.00 0.08 0.00 0.04 0.00 0.10 0.00
September 0.02 0.56 0.12 0.00 0.07 0.00 0.04 0.00 0.14 0.00
October 0.00 0.37 0.16 0.00 0.06 0.00 0.04 0.00 0.12 0.00
November 0.02 0.47 0.17 0.00 0.06 0.00 0.03 0.00 0.13 0.00
December 0.02 0.06 0.17 0.00 0.07 0.00 0.05 0.00 0.23 0.00
1 The interest rate applicable for a settlement period is the closing rate on the fi rst working day of the last week of the previous calender month offered by the Bank for International Settlements (BIS) for one month US Dollar (USD) and Euro (EUR) deposits.
179 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Entitlement of the ACU Member Central Banks to Swap Facility during 2011-2015 (In millions of USDs)
Table (16)
Year 2011 2012 2013 2014 2015 Country Bangladesh 729.86 843.23 938.21 984.74 1,019.12
Bhutan 0.01 0.00 0.00 0.00 0.03
India 1,933.59 1,358.46 864.83 228.70 24.70
Iran 88.64 96.04 85.09 34.24 9.19
Maldives - - 1.83 1.07 2.46
Myanmar 0.21 0.46 0.54 0.45 0.30
Nepal 2.49 4.51 6.13 7.13 6.41
Pakistan 367.15 327.22 299.20 287.48 302.78
Sri Lanka 479.94 542.48 646.61 590.48 480.57
Total 3,601.89 3,172.40 2,842.44 2,134.29 1,845.56
180 ACU Operations / Tables ANNUAL REPORT 2015 Payments Table (17) Table Receipts 1 Payments Receipts Payments Receipts Payments Receipts Payments (In millions of USDs) Asian Clearing Union Receipts Payments Receipts Payments Swap Receipts / Payments by the ACU Member Central Banks during 1989-2015 ACU Member Swap Receipts / Payments by the 0.00 0.00 0.000.00 210.25 0.000.00 0.00 0.00 0.000.00 0.00 0.00 18.01 0.00 0.00 0.000.00 0.00 0.00 10.97 0.00 0.00 0.00 0.00 0.00 0.00 0.00 16.41 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 124.00 0.00 0.00 0.00 1.50 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1989-1998 1999 2000 2001 2002-2007 2008 2009-2015 27.20 19.63 0.00 0.00 0.00 3.18 150.00 4.63 0.00 0.00 0.0031.32 1.60 70.97 0.00 0.00 0.00 0.00 0.00 3.46 0.00 6.55 0.00 0.00 451.00 0.00 0.00 0.00 172.09 67.52 0.00 0.00 0.00 11.24 0.00179.26 150.99 23.50 0.00 0.00 0.00 0.00 0.00 28.87 315.80 0.00 0.00 42.07 0.00 12.00 0.00 0.00 0.00 9.60 0.00 0.00 Receipts Item None of the ACU member central banks applied Swap facility during 1999, 2002-2007, and 2009-2015. None of the Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Bangladesh Total1 409.88 409.88 0.00 0.00 28.87 28.87 192.08 192.08 0.00 0.00 451.00 451.00 0.00 0.00 Country
181 ACU Operations / Tables ANNUAL REPORT 2015 0.00 403.56 1,128.67 Table (18) Table 50,602.35 42,892.69 126,591.45 5,769,919.76 1,512,930.26 3,020,471.49 1 (In thousands of USDs) Asian Clearing Union Transactions Matrix in 2015 Transactions Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total 0.00 28,409.85 5,074,812.97 3.49 0.00 2,201.00 5,571.31 544,092.67 114,828.47 0.000.00 0.00 0.00 0.00 49,398.45 0.00 3.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,200.00 0.00 400.00 0.00 0.00 3.56 0.00 0.00 0.00 0.00 0.00 1,105.79 0.00 0.00 3.49 0.00 0.00 0.00 0.00 19.39 32,266.80 0.00 0.0036,438.97 5.31 154.6024,142.42 0.0022,237.07 0.00 0.00 0.00 1,417,489.23 0.00 2,851,288.72 3.94 0.00 4.48 14,492.59 3.94 79,826.75 0.00 0.00 0.00 0.00 0.00 192.99 0.00 0.00 190.00 2,399.99 0.00 146,751.77 3,895.20 71,101.15 0.00 Bangladesh Creditor Figures include ACU dollar and ACU euro transactions, excluding accrued interest. ACU dollar and Figures include
Bangladesh Total1 116,591.04 28,564.45 9,392,989.36 32.10 0.00 2,201.00 5,954.30 707,737.02 270,870.96 10,524,940.23 Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Debtor
182 ACU Operations / Tables ANNUAL REPORT 2015
Table (19) Table Growth (percent) 2014 2015
Growth (percent) 2014 2015 (In millions of USDs) Asian Clearing Union Routed Cumulatively through the ACU during 2014-2015 the Routed Cumulatively through 1 Growth Growth (percent) Credit Debit Transactions Total Total Transactions Total 0.030.05 0.032.52 0.00 0.00 2.20 -100.00 0.00 -12.70 31.39 0.00 1.53 50.61 61.23 1.13 - -26.14 31.44 0.03 50.61 4.05 0.03 60.97 3.33 0.00 -17.78 99.9726.99 116.59 28.57 16.62 5,917.43 5.85 5,770.42 0.3824.67 -2.48 6,017.40 0.40 5.95 5,887.01 -75.88 5.26 -2.17 28.52 27.37 42.90 28.97 50.42 5.85 53.19 48.85 -8.16 724.25215.76 707.74 270.87 -2.28 25.54 1,661.86 2,416.22 1,513.01 3,020.74 -8.96 25.02 2,386.11 2,631.98 2,220.75 3,291.61 -6.93 25.06 2014 2015 9,084.07 9,393.85 3.41 120.98 126.59 4.64 9,205.05 9,520.44 3.43 Item Figures include ACU dollar and ACU euro transactions, and accrued interest. ACU dollar and Figures include
Country Bangladesh Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total1 10,178.31 10,525.80 3.41 10,178.31 10,525.80 3.41 20,356.62 21,051.60 3.41
183 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Contribution to Growth of the Member Central Banks during 2011-20151 (In percentage points)
Table (20)
Item Country 2011 2012 2013 2014 2015
Bangladesh 2.85 -3.80 2.23 5.85 -0.64
Bhutan 0.00 0.00 0.02 0.01 0.01
India -15.73 -15.53 1.33 10.05 1.54
Iran -20.00 -13.53 -5.50 0.00 0.00
Maldives -0.01 -0.02 0.00 0.17 0.09
Myanmar -0.01 0.00 -0.01 0.01 0.00
Nepal -0.01 0.02 -0.11 -0.01 -0.02
Pakistan -0.64 -0.82 2.39 0.48 -0.81
Sri Lanka 4.03 -3.77 -7.88 4.45 3.24
Total2 -29.52 -37.45 -7.53 21.01 3.41
1 Figures include two-way ACU dollar and ACU euro transactions, and accrued interest.
2 Figures are in percent.
184 ACU Operations / Tables ANNUAL REPORT 2015 Table (21) Table at the End of Each Settlement Period in 2015 1 (In millions of USDs) Asian Clearing Union Bhutan India Iran Maldives Myanmar Nepal Pakistan Sri Lanka Total 0.000.00 9.680.00 1,557.39 3.740.00 1,607.88 3.260.00 0.03 1,415.22 2.870.00 0.00 1,450.68 4.82 0.00 0.00 1,440.31 3.80 0.00 0.00 1,795.78 0.88 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.00 0.00 0.00 0.80 0.00 0.00 0.00 0.00 0.00 0.00 1,567.96 0.00 0.00 0.00 1,611.62 0.00 0.00 1,418.48 0.00 0.00 1,453.76 0.00 1,445.94 0.00 1,799.58 903.15907.14 0.00889.10 0.00942.43 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 10.08 0.00 8.64 0.00 0.50 7.90 0.00 12.85 10.09 0.00 9.71 68.18 0.31 3.98 423.72 69.50 3.84 1,418.48 71.37 458.77 364.66 1,453.76 473.61 478.23 1,445.94 1,799.58 1,009.091,002.92 0.00 0.00 0.00 0.00 0.00 0.00 4.80 9.10 0.00 0.00 2.40 4.17 126.27 105.29 425.40 1,567.96 490.14 1,611.62 Net Creditor / Net Debtor Positions / Net Debtor Net Creditor Bangladesh Country
Month February February April June August October December April June August October December
Net Creditors Net Debtors Net Figures include ACU dollar and ACU euro transactions, and accrued interest. ACU dollar and Figures include Total (A)Total 0.00 28.17 9,267.26 (B)Total (B) (A)-Total Total 0.031 -5,653.83 0.00 5,653.83 28.17 9,267.26 1.88 0.00 0.00 0.03 0.00 -50.61 0.00 0.00 1.07 0.00 50.61 -36.95 9,297.34 -805.27 0.81 -2,749.87 36.95 0.00 805.27 2,749.87 9,297.34
185 ACU Operations / Tables ANNUAL REPORT 2015
Asian Clearing Union Exchange Rates Applied in the ACU Settlement Mechanism during 2011-2015 (US dollar per Euro)
Table (22)
Year 2011 2012 2013 2014 2015 Month
January 1.3692 1.3176 1.3550 1.3516 1.1305
February 1.3834 1.3443 1.3129 1.3813 1.1240
March 1.4207 1.3356 1.2805 1.3788 1.0759
April 1.4860 1.3214 1.3072 1.3850 1.1215
May 1.4385 1.2403 1.3006 1.3607 1.0970
June 1.4453 1.2590 1.3080 1.3658 1.1189
July 1.4260 1.2284 1.3275 1.3379 1.0967
August 1.4450 1.2611 1.3235 1.3188 1.1215
September 1.3503 1.2930 1.3505 1.2583 1.1203
October 1.4001 1.2993 1.3641 1.2524 1.1017
November 1.3418 1.2986 1.3596 1.2475 1.0579
December 1.2939 1.3183 1.3783 1.2141 1.0887
Source: International Monetary Fund (IMF).
186 ACU Operations / Tables ANNUAL REPORT 2015
Acronyms and Abbreviations
ACU Asian Clearing Union ADB Asian Development Bank AMUs Asian Monetary Units ASEAN Association of Southeast Asian Nations ATM Automated Teller Machine AWCMR Average Weighted Call Money Rate BB Bangladesh Bank BFIs Bank and Financial Institutions BODs Board of Directors BOP Balance of Payments BP British Petroleum BSBDAs Basic Savings Bank Deposit Accounts BSE Bombay Stock Exchange CAD Current Account Defi cit CBI Central Bank of Iran CBM Central Bank of Myanmar CBSL Central Bank of Sri Lanka CCPI Colombo Consumers’ Price Index CCS Consumer Confi dence Survey CHAKAVAK Electronic System for Checks Image Transfer and Clearance CIS Commonwealth of Independent States CMIE Centre for Monitoring Indian Economy CNG Compressed Natural Gas COPPY Corresponding Period of the Previous Year CPEC China Pakistan Economic Corridor CPI Consumer Price Index CRAR Capital to Risk-Weighted Assets Ratio CRR Cash Reserve Ratio CSO Central Statistics Offi ce DCS Department of Census and Statistics
187 Acronyms and Abbreviations ANNUAL REPORT 2015
DGCI&S Directorate General of Commercial Intelligence and Statistics DISCOM Distribution Companies DVP Delivery Versus Payment ECB European Central Bank EFF Extended Fund Facility EMEs Electronics and Mechanical Engineers EPZ Export Processing Zone ESCAP Economic and Social Commission for Asia and the Pacifi c FBR Federal Board of Revenue FDI Foreign Direct Investment FER Foreign Exchange Reserves FESR Framework for Economic and Social Reform FIL Financial Institutions Law FL Foreign Loans FOB Free on Board FPIs Foreign Policy Instruments FR Foreign Reserves FRDL Fiscal Responsibility and Debt Limitation FX Foreign Exchange FY Financial Year GCC Gulf Cooperation Council GDP Gross Domestic Product GFD Gross Fiscal Defi cit GOI Government of India G-Secs Government Securities GST Goods and Services Tax GVA Gross Value Added HDI Human Development Index HDR Human Development Report IBA Institute of Business Administration IMF International Monetary Fund IMIDRO Iranian Mines and Mining Industries Development and Renovation Organization INR Indian Rupee IRC Interest Rate Corridor ISB International Sovereign Bond LAC Latin America and the Caribbean LCs Letters of Credit
188 Acronyms and Abbreviations ANNUAL REPORT 2015
LPA Long Period Average LSM Large-Scale Manufacturing LTV Loan to Value M1 Narrow Money M2/M2b Broad Money M3 Broad Money MAKNA Credit Control and Oversight Center MAT Miller Analogies Test MENAP Middle East, North Africa, Afghanistan and Pakistan MMA Maldives Monetary Authority MMM Message Management Module MRR Minimum Reserve Requirement NADRA National Database and Registration Authority NAMAD Information Security Management System NBFIs Non-Bank Financial Institutions NCG Net Credit to the Government NCPI National Commitments and Policies Instrument NDA Net Domestic Assets NEER Nominal Effective Exchange Rate NEM North-East Monsoon NEPSE Nepal Stock Exchange NFA Net Foreign Assets NFC National Finance Commission NGL Natural Gas Intelligence NGO Non-Governmental Organization NIGC National Iranian Gas Company NIIF National Infrastructure and Investment Fund NIOC National Iranian Oil Company NIORDC National Iranian Oil Refi ning and Distribution Company NMP Nepalese Monetary Policy NPC National Planning Commission NPLs Non-Performing Loans NRB Nepal Rastra Bank NRI Non-Resident Indian NSGM National Smart Grid Mission Nu. Ngultrum OMO Open Market Operations
189 Acronyms and Abbreviations ANNUAL REPORT 2015
OPEC Organization of Petroleum Exporting Countries OROP One Rank One Pension PDF Pakistan Development Fund PDNA Post Disaster Needs Assessment PFM Public Finance Management PIBs Pakistan Investment Bonds PIN Personal Identifi cation Number PKR Pakistan Rupee PLF Plant Load Factor PMI Project Management Institute PMJDY Pradhan Mantri Jan Dhan Yojana POL Petroleum Oil and Lubricants POS Point of Sale PPI Producer Price Index PPP Public Private Partnership PSBs Private Sector Businesses PSDP Public Sector Development Program QES Quick Employment Survey RBI Reserve Bank of India REER Real Effective Exchange Rate Rf. Rufi yaa RGOB Royal Government of Bhutan RM Reserve Money RMA Royal Monetary Authority of Bhutan RMG Ready Made Garments RSS Ribbed Smoked Sheets RTGS Real Time Gross Settlement System SAR Special Administrative Region SAYAD Bank-Wide Standard E-Checkbook Issuance SBP State Bank of Pakistan SCBs Scheduled Commercial Banks SCI Statistical Center of Iran SDF Standing Deposit Facility SDFR Standing Deposit Facility Rate SLDBs Sri Lanka Development Bonds SLFR Standing Lending Facility Rate SLR Statutory Liquidity Ratio
190 Acronyms and Abbreviations ANNUAL REPORT 2015
SNA System of National Accounts SRR Statutory Reserve Requirements SSA Sub-Saharan Africa SWM South-West Monsoon T-bills Treasury Bills TEPIX Tehran Stock Exchange Index Tk. Taka TSE Tehran Stock Exchange U.S. United States UK United Kingdom VAT Value Added Tax WPI Wholesale Price Index YoY Year-on-Year
191 Acronyms and Abbreviations