Economy

BD’s July-May FDI inflow ticks up . The inflow of foreign direct investment or FDI into Bangladesh, particularly in energy, telecom and stock market has increased, reports bdnews24.com. Bangladesh received $2.65 billion in the form of gross FDI inflow during the period of July-May of the fiscal year 2016-17 against $2.33 billion in the corresponding period of the previous fiscal year. . The net inflow of FDI jumped 27.75 per cent to $1.62 billion in the July-May period, according to data released by the Bangladesh on its website. Portfolio investment in the stock market jumped about six times to $324 million. . Finance Minister AMA Muhith has mentioned "political stability" as a factor behind the growth. In his closing speech on budget in the parliament on Jun 28, while discussing FDI, he said: "A stable political situation has created a positive impact." . Trade deficit widened to $9.2 billion in the 11 months to May from $6.45 billion a year ago. Bangladesh imported goods worth $40.25 billion during the July-May period of the last fiscal year. It was about 11 per cent higher than that in the corresponding period of the fiscal 2015-16.

From: http://print.thefinancialexpress-bd.com/2017/07/13/177676

WB to assess progress in VAT digitization . A World Bank mission is expected to visit next week to assess the progress in digitisation and modernisation of the VAT system in light of the government move to shelve the implementation of the new law for two years. The team will also assess the implications for deferred implementation of the much-talked-about law that seeks to impose a uniform 15 percent VAT across the board, doing away with the multiple VAT rates under the existing VAT Act 1991. . The mission led by Raul Felix Junquera Varela, the Washington-based lender's lead public sector specialist and global lead on domestic revenue mobilisation, is expected to meet with the senior officials of the National Board of Revenue and the economic relations division. The team will hold meetings between July 16 and July 20 to assess the situation. . Officials said the appraisal by the mission would be instrumental in the WB's future financing for the VAT Online Project, which was taken by the government to improve revenue mobilisation and transparency in the VAT administration. The multilateral lender in May 2014 approved $60 million interest-free credit to help modernise Bangladesh's VAT administration system and increase tax revenue. . The project aims to increase the VAT-GDP ratio to 4.7 percent by June 30, 2020 from 3.7 percent in March 2014. It is also aiming for: operational modernisation of the VAT wing to increase voluntary compliance, introduction of an integrated VAT management system, institutional strengthening and capacity building. . A senior official of the NBR said it is a routine visit from the WB to assess the overall situation. But the appraisal by the mission will be important following the postponement of the new VAT law from this month. Until February, Tk 122 crore has been spent on the project, according to a finance ministry document. . The multilateral lender until July disbursed $20 million for automation and modernisation of the VAT system against the overall expenditure for the project by the government, which is about $18 million, according to the NBR official. . “It appears that the remaining funding from the WB will depend largely on the assessment by the team,” he added.At the prescription of the International Monetary Fund and to fulfil the conditions of its $1 billion Extended Credit Facility loan, the government in 2012 framed the new VAT law, but it changed the deadline twice for enforcing the legislation. The last deadline was July 2017. . But the government, at the eleventh hour, shelved the bid in the face of opposition from businesses and lobby groups and a fear of inflationary spiral, and decided to continue with the existing VAT Act 1991. Until yesterday, 41,081 businesses signed up online for the 9-digit Business Identification Number. Of those, 25,679 have re-registered and 15,402 got fresh BINs to run their business, according to the NBR.

From: http://www.thedailystar.net/business/banking/wb-assess-progress-vat-digitisation-1432231

Volatile euro, dollar to blame for flat exports . The volatile exchange rate of the euro and the US dollar has eaten up a substantial amount of export receipts of Bangladesh in the last fiscal year. The country logged in $34.83 billion as export receipts for fiscal 2016-17, up 1.69 percent year-on-year, according to data from the Export Promotion Bureau. . Had there been favourable exchange rates, the earnings could have been at least $3 billion more as the volume of the shipments from the country increased, but the receipts belied it. Bangladesh's international trade is conducted in the US dollars. Although the country does not transact in euro directly, its shipments to the 28-nation euro bloc were worth about $16 billion. Another $3.4 billion came from shipments to the UK. . The declining exchange trend of the US dollars against the euro continued throughout the fiscal year. In August last year, one euro was exchanged at 1.135 dollar, which came down to 1.045 in December. The trend continued until June this year, after which it reversed. In the first week of July, one euro was exchanged at 1.140 dollars. . The local exporters have also been facing challenges for the appreciation of the taka against the US dollar for many years. The appreciation is particularly large vis-à-vis the euro, but also pretty large against the US dollar, said the Policy Research Institute in a study recently. The Bangladesh taka appreciated 34 percent against the US dollar between 2006 and 2016, according to the think-tank. . “These substantial appreciations of the taka in real terms against the major global currencies that underlie Bangladesh exports and imports suggest a huge currency tax on exports and are a major factor why most exports have failed to fire after ignition,” the PRI said. . On the other hand, the exchange rates of currencies of some major garment exporting countries were devalued against the US dollars, which eventually improved their competitiveness in global trade. The Indian rupee depreciated 32 percent,

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Turkish currency 102 percent and Pakistani rupee 15 percent over the last five years, according to data from the Bangladesh Garment Manufacturers and Exporters Association. . Even a few years ago, exporters used to draw Tk 84-85 against a US dollar, but it slumped to Tk 77-78 and remained at that level for a while, he said. “My profitability declined at least 4 percent in the last fiscal year due to the volatile exchange rate,” said Asif Ibrahim, vice-chairman of Newage Group, which exported $100 million worth of garment items last fiscal year. . He said the dollar's exchange rate should be Tk 85. Babu urged the government to give garment exporters cash incentives of at least 3 percent against export receipts until the exchange rate is revised upwards. “I do not support the cash incentive to exporters or for a particular sector,” said Ahsan H Mansur, executive director of PRI.

From: http://www.thedailystar.net/business/volatile-euro-dollar-blame-flat-exports-1432228

Over 4.6m went abroad in eight years, says PM . Prime Minister and Leader of the House Sheikh Hasina said on Wednesday over 4.6 million (46.79 lakh) Bangladeshi workers went abroad in the last eight years since 2009 as her government has taken many initiatives for creating new labour markets, reports BSS. . "We have declared the overseas employment sector a thrust sector ...the government is working for expanding labour market with the support from Bangladesh embassies/high commissions abroad and the ministry of foreign affairs, " she said while replying to a starred query from treasury bench member M Ayen Uddin (Rajshahi-3) during her question- answer session in the House. . Considering the importance of the sector, she said, the government gave importance to creating new labour markets along with retaining the existing labour markets abroad. The leader of the House said workers were sent to 97 countries during the BNP-Jamaat rule, but the number now increased to 162. . Spelling out her government's measures for expanding labour markets, Sheikh Hasina said her government set up 29 labour wings at Bangladesh embassies or high commissions, with opening of the latest in Mauritius in October 2016. In addition to this, she said, a study was conducted on 50 new labour markets including Europe, Australia and Brazil. . The premier said that in February 2015 a Memorandum of Understanding (MoU) was signed between Bangladesh and Saudi Arabia on recruitment of housemaids for the kingdom. Besides, she said, due to diplomatic efforts of the government an MoU was also inked in March 2017 for sending technical interns to Japan. . "It has created job opportunity for 'technical interns' in Japan for 5 years instead of 3 years," she added. Replying to another question she said upgradation of 3,813 kilometres of national highways to four-lane ones was underway. . "We have upgraded Dhaka-Chittagong highway to four-lane for speeding up the country's economy," she said while replying to a starred question from treasury bench member Shamshul Haque Chowdhury from Chittagong-12. The Prime Minister informed the House that the government undertook zone-based cluster projects to improve quality of 1,179 kilometres of regional highways. . She said the government formulated Procurement Guidelines for Public Private Partnership Projects, 2016 and Guidelines for Unsolicited Proposal, 2016 for strengthening and expediting the PPP activities. "We have undertaken an initiative to upgrade important railway corridors to double lines along with Dhaka-Chittagong railway corridor. Initiative for constructing a railway bridge parallel to the Bangabandhu Bridge over Jamuna River had already been taken," Sheikh Hasina added.

From: http://print.thefinancialexpress-bd.com/2017/07/13/177679

Bank

Govt's net bank borrowing turns negative last fiscal . The government borrowing from the banking system turned negative in net terms during the just concluded fiscal year (FY17) as the repayments of loans were more than what it borrowed. Higher sales of savings instruments and slow implementation of development projects had helped the government refrain from borrowing much from the , according to officials. . The government paid back Tk 180.29 billion to the banks in the FY 2016-17 as against its borrowing of Tk 48.07 billion in the FY 2015-16, according to provisional data of obtained by the FE Tuesday. The government's borrowing from the banking system stood at Tk 906.60 billion at the end of June 30 this year, declining from Tk 1,086.89 billion on the same day of the previous year, showing a negative balance in net terms. . Initially, the government's bank borrowing target was set at Tk 389.38 billion for the FY 17, but was later revised down to Tk 239.03 billion. The government's borrowing was, however, higher in the last month of FY 17 partly due to financing the budget deficit, a senior official familiar with the government debt-management told the FE Tuesday. . In June last, the government's net bank borrowing stood at around Tk 170 billion, he said. Implementation of the development projects normally becomes faster during the last month of each fiscal year, he explained. The government ministries and agencies spent Tk 1.06 trillion out of total Annual Development Programme (ADP) of Tk 1.19 trillion worth of outlay in the FY 17, according to the official figures. . On the other hand, net sales of national savings certificates jumped by more than 39 per cent to Tk 469.69 billion during the July-May period of the FY17 from Tk 336.89 billion in the same period of FY16. A senior official of the BB said the government has already availed of ways and means advances (WMAs) partly to finance the budget deficit.

. The government is now empowered to borrow up to Tk 40 billion from the central bank under the WMAs to meet its day- to-day expenditures without issuing any securities. The Ministry of Finance had set a bank-borrowing target of Tk 282.03 billion for the FY18 to finance the budget deficit.

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. Under the proposed arrangement, Tk 208.87 billion will be borrowed from the banking system by issuing long-term Bangladesh Government Treasury Bonds (BGTBs) while the remaining Tk 73.16 billion through auctions of short-term treasury bills (T-bills). . Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods. Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded on the market.

From: http://print.thefinancialexpress-bd.com/2017/07/13/177677

BB takes initiative to make DIBOR vibrant . Bangladesh Bank has taken an initiative to make vibrant the Dhaka Interbank Offered Rate (DIBOR) to fix a uniform interbank interest rate for short-term loan within this year. Like London Interbank Offered Rate, which is popularly known as LIBOR, a benchmark rate that some of the world’s leading banks charge each other for short-term loans, the BB wants to activate the DIBOR. . The BB hopes that once the DIBOR is established full-fledged, the country’s commercial banks and businesspeople will be able to use the rate as a benchmark to set the interest rate for short-term loans, a BB official told New Age on Wednesday. The central bank issued a letter to managing directors and chief executive officers of 15 commercial banks including 12 primary dealers on June 14 asking them to place their opinion before the BB in the shortest possible time on how to make the DIBOR vibrant. . The official said that the central bank had recently taken a number of measures to activate the DIBOR with a view to establishing a uniform rate for the banks, corporate bodies and individuals. The central bank asked Bangladesh Foreign Exchange Dealers Association, an organisation of the country’s scheduled banks, in June 2016 to draw up a code of conduct over the DIBOR after which the BFEDA has recently placed a draft proposal in this regard, he said. . The BB issued a circular to all banks in December 2009 asking them to submit the interest rate on both lending and borrowing of one-day, one-week and three-month to the BFEDA to set the DIBOR. But the vast majority of the banks did not follow the directive resulting that the central bank failed to make the DIBOR effective, the official said. . The clients will be able to bargain with the banks to set the interest rate on their short-term borrowing like letters of credit and cash credit (CC loan) based on the DIBOR. The BFEDA in its recent proposal said that all banks would have to submit their interest rate on lending of one-day, seven-day, 14-day, one-month, three-month and six-month within 3:00pm on every working day. . The BFEDA will calculate the weighted average of the rates given by all banks to set the DIBOR and it (BFEDA) will publish the rate by 6:00pm on its website. BFEDA chairman Nurul Amin told New Age that the banks were now setting the interest rate in their own manner resulting in different rates of interest for one lending product of the banks. . Discipline will be ensured while setting the interest rate once DIBOR becomes effective full-fledged, Amin, also managing director of Ltd, said. The BB official said that the central bank had arranged a meeting on April 23 with 15 banks including Sonali, Janata, Mercantile, National, Southeast, Citibank NA, and HSBC to seek their opinion. . The central bank also issued the letter to some 15 banks as they are now dominating the banking sector in terms of their market share, he said. ‘Our neighbouring country India introduced such system called Mumbai Interbank Offered Rate many years ago that is now highly vibrant. So, we lag behind India to bring discipline in calculating the rate of interest for the short-term loans’. The central bank asked the BFEDA to form a monitoring committee to make the DIBOR effective within this year, he said.

From: http://print.thefinancialexpress-bd.com/2017/07/12/177552

BB may raise pvt sector growth target in MPS . The government Tuesday approved a project to construct the country's second elevated expressway in Chittagong at a Bangladesh Bank may increase the private sector growth target slightly in the coming monetary policy statement (MPS) for July-December of 2017 with a view to achieving the GDP growth of 7.40 per cent set by the government for this fiscal year. . The central bank will unveil the MPS on July 25, a BB official told New Age on Wednesday. The central bank, however, feared that the country would face an inflationary pressure due to higher amount of money supply than that of the January-June period of this year. . He said that the recent flood in different parts of the country had already damaged the crops that would increase the price of food commodities in the local market. Besides, the food and non-food inflation is now maintaining an upward trend in the global market which would also fuel the inflationary pressure in the months to come, he said. . The government, on the other hand, would make hefty amount of borrowing from the banking sources this fiscal year to implement its large mega projects ahead of national election which is scheduled to be held in the beginning period of 2019, he said. ‘Against the backdrop, the BB is facing a tough situation to draft the monetary policy targeting to contain the inflation while ensuring an uninterrupted credit flow to the government’, he said. . He said the BB would not increase the ceiling of the private sector credit growth much even it might keep unchanged the target of 16.50 per cent, which was set for the January-June period of FY17. The central bank may increase maximum 0.50 per cent credit growth in the private sector for the July-December period of FY18, he said. . In April, the year-on-year private sector credit growth stood at 16 per cent. Despite a higher credit growth in the private sector in recent months, there was no large investment in the productive zone which created an alarming situation for the country’s banking sector, the BB official said.

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. The private sector credit growth stood at 16.56 per cent in FY16 against the central bank target of 14.80 per cent. The official said that the projected target of private investment against GDP posted a stagnant situation as it registered 23 per cent in the outgoing fiscal year against the same ratio of FY16. . For this reason, a question has been raised as to where the disbursed loans were being invested by the borrowers, he said. He feared that some banks might have disbursed loans aggressively in favour of a few borrowers who might launder the money abroad. . The defaulted loans in the banking sector rose by Tk 11,236.68 crore in just three months (January-March) of this year as the banks distributed the loans breaching the credit discipline. The BB data showed that the amount of defaulted loans including written-off loans in the banking sector stood at Tk 1,11,347 crore until April 2017, according to the BB data.

From: http://www.newagebd.net/article/19646/bb-may-raise-pvt-sector-growth-target-in-mps

Fuel & Power

PDB to finance Tk 763cr Sylhet power plant . Bangladesh Power Development Board will use Tk 763 crore from its own resources to increase the capacity of a power plant in Sylhet after the Islamic Development Bank withdrew its financial support for the project. . The proposal to upgrade the 150-megawatt power plant to 250MW with own financing was approved yesterday by the cabinet committee on purchase. The Executive Committee of the National Economic Council first approved the project in 2013 for implementation with the IDB financing at a cost of Tk 707 crore. . In 2014, the government and the IDB signed a lease financing agreement of $85 million (about Tk 680 crore), but the development bank in November 2016 pulled out from the project due to complexities in appointing a contractor. . The power division last year had sent the details of its nominated contractor, who was the lowest bidder, to the IDB for consent. But the Jeddah-based multilateral lender instead suggested awarding the work to the second lowest bidder, a Sri Lankan consortium. . The BPDB and the IDB exchanged views several times over the matter, after which the development lender withdrew from the project. However, the IDB said the funds can be used for any other project of the energy sector. Subsequently, the BPDB turned its attention to implementing the project on its own. Chinese firm Shanghai Electric Group, the lowest bidder, will implement the project.

From: http://www.thedailystar.net/business/pdb-finance-tk-763cr-sylhet-power-plant-1432225

2,000 industries wait for gas connection: minister . At least 2,000 industrial units waiting for going to production would have to wait further until April 2018 for want of gas connection, state minister for power, energy and mineral resources Nasrul Hamid said on Wednesday. . The country is now running short of gas supplies to meet current demand, he said at the closing ceremony of the two-day Bangladesh Power Summit--2017 at a city hotel. . In April 2018, the government would be able to increase gas supplies by 500 million cubic feet per day from imported liquefied natural gas and another 500 mmcfd in next few months, he said. . It is very crucial for the country’s economy to ensure gas supplies as well as power supply to the industrial units, he said, adding that the government would be ready to meet the power demand by next year. . Three large coal-fired power plants — Matarbari, Rampal and Payra — with about 3,500MW combined capacity would be commissioned in three years, adding that another 5,000MW-6,000MW power generation capacity would be added by 2023. . Petrobangla — the state-run Oil, Gas and Mineral Resources Corporation — supplies approximately 2,750 mmcfd gas against the demand for more than 3,500 mmcfd. . The shortage of gas supplies interrupts power generation, industrial productions and household cooking while their expansion has been stuck for the past one decade, said officials.

From: http://www.newagebd.net/article/19647/2000-industries-wait-for-gas-connection-minister

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