quarterly report july september - mccibd.org · about 7,500 mw while its supply is around 6,300 mw,...

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Economic Situation in BangladeshJuly-September 2013 (Q1 of FY14)

2 QUARTERLY REVIEW

General

The economy has been under some stress in recent months because of the ongoing political unrest and its adverse impact on most of the major sectors of the economy. Principal donor agencies have cut down their projection of Bangladesh’s GDP growth to 5.7 - 5.8 percent in the current fi scal year (FY14) because of widespread disruption of economic and business activities across the country.

Agriculture

Despite the political standoff, the agriculture sector performed reasonably well in the quarter under review as is indicated by the rise in agricultural exports during the quarter. Moreover, with continuing policy support from government to ensure easy and timely availability of agricultural inputs and fair price to farmers for their products, the target set for food grains production in the present fi scal should not be diffi cult to achieve. Fisheries and livestock sub-sectors have also performed well in the quarter under review.

Industry

The industrial sector was expected to do well in the quarter, particularly because of the substantial improvement in the power supply situation, but because of the present political

turmoil, low disbursements of industrial term loans, slow growth in settlement of import letters of credit (LCs) for industrial raw materials and capital machinery, a sharp decline in private sector credit growth, and infrastructural bottlenecks, it is very likely that the performance of the industrial sector in the fi rst quarter of FY14 was below that in the past fi scal year.

Construction, Power and Services

The construction sector performed well in the quarter under review. Rising urbanization and building of public sector infrastructures, including roads, bridges and fl yovers, are the main factors behind the sector’s growth. However, the shortage of energy and utility services and insuffi cient availability, and high price, of construction materials are reportedly the main obstacles to the growth of construction activities by the private sector.

The performance of the power sector was below the expected level though there was a signifi cant addition to the generation capacity and a sizeable increase in actual power generation. The overall power demand is now about 7,500 mw while its supply is around 6,300 mw, leaving a shortage of 1,200 mw per day. To combat the acute power shortage, the government plans to increase power generation to around 10,000 mw by 2015 and 24,000 mw by 2021.

The services sector growth in the fi rst quarter of the current fi scal might have been lower than the recorded 5.73 percent growth in FY13. Most of the sub-sectors, mainly wholesale and retail trade, transportation, hotels and restaurants, and fi nancial intermediation, reportedly suffered from the continuing political unrest, sporadic hartals, shutdowns and associated acts of vandalism, arson and terrorism.

EXECUTIVE SUMMARY

July-September 2013Issue 01

Public Finance

NBR tax revenue collection increased 17.1 percent during July-September of FY14 over the corresponding quarter of FY13. Total tax revenue collection (NBR & non-NBR together) also improved. These revenues increased by 20.1 percent in July, 2013 compared with the same month of the previous fi scal.

The rate of ADP implementation in Q1 of FY14 was 11 percent, 2 percentage points below the implementation rate during the corresponding period of the previous fi scal (13%). The implementing ministries and agencies utilized Tk.69.94 billion out of the total ADP outlay of Tk.658.72 billion. Of the amount used in the fi rst quarter of FY14, Tk.50.33 billion came from the government’s own fund and Tk.19.61 billion from foreign aid.

External Sector: Export, Import, Remittances, Foreign Aid, FDI and Exchange Rate

The country’s exports witnessed a robust 21.24 percent rise in Q1 of FY14 compared to that of the corresponding period of the previous fi scal year. In September of Q1, exports witnessed a spectacular 36.2 percent growth. A signifi cant increase in the shipment of RMG items, shifting of orders from China, and better competitiveness of local manufacturers contributed to the rise in export earnings.

Import payments during July-August of FY14 increased by 10.7 percent compared to the corresponding two months of FY13. However, because of lower demand for most of the importable items, import payments in August, 2013 fell by 6.4 percent to US$2,872 million from US$3,057 million in July, 2013.

Money and Capital Market

Broad money (M2) recorded a lower growth of 16.3 percent at the end of August 2013 compared to 17.5 percent increase up to the end of August 2012. Domestic credit too recorded a lower growth of 12.3 percent at the end of August 2013 compared to 18.6 percent growth at the end of August 2012. Among the components of domestic credit, private sector credit registered a far lower growth of 11.3 percent, compared to the growth of 19.9 percent recorded at the same period of 2012. Private sector credit growth slowed down mainly because of the slowdown in import growth refl ecting weak investor confi dence in the wake of the worsening of business environment. Public sector credit, however, increased by 15.9 percent at the end of August 2013 compared to the relatively lower growth of 14.1 percent at the end of August 2012.

Excess liquidity of scheduled banks stood at Tk.823 billion at the end of August, 2013, which was Tk.29 billion higher than what it was just two months ago, i.e., end-june, 2013. The continuous increase in excess liquidity refl ects weak private sector demand for bank credit because of the high cost of bank loans, shortage of energy supplies, weak infrastructure, and above all, the chaotic political situation, all of which have vitiated the business environment in the country.

The state of the country’s capital market was disappointing most of the time during the fi rst quarter of the present fi scal. Both the bourses, DSE and CSE, experienced erratic fl uctuations in stock prices and turnover. Investors remained reluctant to make fresh investment into stocks, fearing a further escalation of the political confl ict. Government has taken wide-ranging measures to stabilize the capital market but much will depend on a lasting resolution of the political confl icts, which is deemed essential for restoring investor confi dence in the market.

4 QUARTERLY REVIEW

Remittance infl ows to Bangladesh decreased by 8.1 percent in July-September 2013 over the same period of 2012. The drop in remittance ahead of the October Eid festivities was unusual as the expatriates usually send more money in times of Eid festivals. Major causes of falling remittances could be the decrease in manpower exports in the last six months, the appreciation of Taka in terms of US dollar, and the political unrest in the country.

Disbursement of foreign loans and grants to Bangladesh declined in the fi rst two months of FY14, compared with the same period of FY13. In fact, the disbursement of gross aid was lower than the amount of debt servicing (repayment of principal and interest) in that period. As a result, the net receipt of foreign aid stood at negative US$460 million during July-August, 2013 compared to the positive US$226 million during the same period of the previous fi scal year.

Trade balance recorded a lower defi cit of US$790 million in the fi rst two months of FY14 compared to the defi cit of US$885 million in the corresponding period of FY13. On the other hand, the current account surplus stood lower at US$674 million (compared to the same months of the previous fi scal) because of higher defi cits in services and secondary income accounts. As a result of the fall in current account surplus and a bigger defi cit in the fi nancial account, the surplus in the overall balance came down to US$655 million in July-August of FY14 from a larger surplus of US$1,064 million during the corresponding period of FY13.

A lackluster situation prevails in the country’s investment scenario, both in local and foreign direct investment (FDI), mainly because of political uncertainties. The ongoing political unrest, accompanied by shortage of power and energy, and scarcity of land are discouraging entrepreneurs to invest. Potential foreign investors are shying away from the country. However, BoI received 178 investment proposals worth Tk.64.67 billion in the fi rst two months of FY14. These projects, when implemented, would generate employment for a total of 16,165 people. Among these proposals, 156 were local proposals worth Tk.54.10 billion, while the other 22 were joint venture & foreign investment proposals worth Tk.10.57 billion.

At the end of September 2013, Taka appreciated marginally (by 0.01%) against US dollar from its level at the end of June 2013. The foreign exchange market thus remained stable throughout the quarter.

Infl ation

The general point-to-point infl ation dropped to 7.13 percent in September 2013 from 7.39 percent in August mainly because of the decline in both food and non-food infl ation. In July 2013, the point-to-point infl ation was 7.85 percent.

The food infl ation rate fell to 7.93 percent in September 2013 from 8.09 percent in August while non-food infl ation declined to 5.94 percent from 6.35 percent. Average general infl ation in the last 12 months (October 2012 to September 2013) stood at 7.37 percent. Infl ation has maintained a steady downward trend and the consumer price index has remained stable in recent months. The general point-to-point rural and urban infl ation also showed a downward trend.


1.1 Food Grains Situation Domestic Production

The target of domestic food grains production for FY14 was set by the Department of Agricultural Extension (DAE) at 35.881 million metric tons (mmt), which is 1.2 percent higher than that of FY13 (35.466 mmt). Farmers have already started harvesting early varieties of aman rice. It is worth noting that the actual production of food grains during FY13 stood at 35.088 mmt which exceeded the production in FY12 by 0.8 percent, but fell 1.1 percent short of the FY13 target.

Food Grains Import

As of 3 October 2013, only 988 metric tons (mt) rice was imported by the private sector. Over the same period last year, total imports of rice amounted to 12.7 thousand metric tons (tmt), of which 89 percent was imported by the private sector. As of the same date, a total of 684.3 tmt of wheat was imported, of which 69 percent was imported by the private sector. At the same time last year, total imports of wheat amounted to 396.4 tmt, 53 percent by the private sector. In the FY14 budget proposal, the government has planned to import 1.25 mmt food grains, comprising 0.26 mmt of rice and 0.99 mmt of wheat.

1.0 AGRICULTUREData on agricultural production in the fi rst quarter of the present fi scal (Q1 of FY14) is yet to be available because the harvesting of all major crops will be spread over the coming months of the fi scal. However, indirect evidence, e.g., export data for the fi rst quarter of FY14, indicates good performance of the agriculture sector in the quarter under review. Certain agricultural products are exported right from the production stage, i.e., immediately after production. Hence, increased export of a product in a given period can be strongly indicative of increased production of that product in that period.

Thus, exports of agricultural products, including vegetable, dry food and cash crop, showed a 9.9 percent growth to US$147 million in Q1 of FY14 compared to US$134 million in the corresponding quarter of FY13. According to the EPB, expatriate Bangladeshis living in the Middle East, Far-East, South-East Asia, the UK and some European countries are the main buyers of vegetables exported from the country. In Q1 of FY14, export of vegetables grew 52.5 percent compared to Q1 of FY13.

6 QUARTERLY REVIEW

Domestic Procurement

The government’s target of domestic food grains procurement for FY14 is 1.6 mmt (both rice and wheat). Of this amount, government has targeted to procure minimum 150 tmt of wheat with a price of Tk.25 per Kg directly from the farmer in order to provide price incentive to them. The drive began on 1 April 2013 and ended on 30 June 2013.

The government started procurement of at least one mmt of boro (900 tmt of rice and 150 tmt of paddy) at Tk.29 per Kg for parboiled rice, at Tk.28 per Kg for white rice and at Tk.18.50 per Kg for paddy from the domestic market to provide a price incentive to the farmers amid a continued fall in prices of both rice and paddy. The drive began on 2 May and continued till 31 October 2013. As of 8 October 2013, some 749.10 tmt of boro rice was procured and also 877.55 tmt of boro was contracted.

Public Distribution

Government has enhanced its efforts to ease poor households’ hardship by distributing subsidized grains through open market sale (OMS) and fair price card (FPC) channels.In FY14, the government has a plan to distribute a total of 2.73 mmt food grains to poor households as against the actual distribution of 2.09 mmt in FY13.

Over the fortnight ending 3 October 2013, a total of 71.12 tmt food grains was distributed mainly through OMS (22.6 tmt), VGD (16.7 tmt), EP (11.3 tmt) and TR (7.5 tmt). As of that date, a total of 392.32 tmt was distributed through PFDS. The OMS drive, which was resumed in major cities and districts, continues with rice being sold at Tk.24 per Kg and atta at Tk.22 per Kg. Atta is sold in all districts but rice is sold in only southern districts.

Public Stock

According to the Directorate General of Food, the public food grains stock, as of 3 October 2013, stood at 1,188.81 tmt; 887.78 tmt for rice and 301.03 tmt for wheat.

Domestic Market Prices

In the fortnight ending 3 October 2013, the wholesale price of rice (Swarna) in Dhaka city markets fell marginally by 0.2 percent, down to Tk.32.50 per Kg, while the retail price remained unchanged at Tk.35 per Kg. The wholesale and retail prices now are, respectively, 39.4 percent and 21.3 percent higher than a year ago. Over the same period, the wholesale prices of atta in Dhaka city markets rose slightly by 0.4 percent, to Tk.24.6 per Kg, but the retail prices dropped by 4.8 percent, to Tk.30 per Kg. The wholesale and retail prices are, respectively, 13.6 percent and 6.6 percent lower now than a year ago.


Fish supplies from rivers, beels and other open water bodies dropped by over 50 percent in the last 30 years due to natural as well as manmade factors but the supplies from closed water bodies like ponds, haors and seasonal water bodies, used for commercial fi sh production and shrimp and prawn farms, increased three and half folds during the period. Climate change, pollution and pesticides from croplands also have been damaging fi sh and other aquatic life in rivers, haors, beels and other open water bodies. Indigenous fi sh supplies from open water bodies have been decreasing due to growing population pressure and a host of geographical factors.

To meet the rising demand for fi sh, Bangladesh has been growing imported fi sh species in inland closed water bodies. The practice helped boost the country’s fi sh production. The government set up 433 sanctuaries to increase fi sh production in the country’s open water bodies and also took a host of other initiatives, including ensuring the fi shermen’s rights in open water bodies. In the last four years, the government released 2,328 tons of fi sh fries in open water to revive endangered species and improve the supply of quality fi sh. As a result, the country was getting additional fi sh supply of 5,000 tons each year, including several endangered fi sh species, particularly chital, foli, aeer, tengra, bamos, kalibaus, meni, sarputi, rani, madu pabda, ritha, kajoli, gojar and tara baim.

The livestock sector recorded a mild growth of 3.49 percent in FY13, compared to 3.39 percent growth in FY12, but its contribution to GDP declined to 2.45 percent in FY13 from 2.51 percent in FY12. However, there seems to have been a signifi cant turnaround in the production of livestock in the quarter under review as indicated by the huge supply of local breeds of cattle during Eid festivities in the local markets. Nevertheless, the country has still a defi ciency of nearly 4.4 million tons of meat as it produced just about 2.0 million tons last year against a demand of 6.4 million tons.

International Market Prices

In the fortnight ending 4 October 2013, the prices of Pakistan 5% parboiled and Thai 5% parboiled rice declined by 4.8 percent and 6.7 percent, down to US$400 per mt and US$420 per mt, respectively. By contrast, Vietnam 15% white, India 5% parboiled, and Kolkata wholesale rice prices rose by 1.4 percent, 1.2 percent and 7.9 percent, to US$355 per mt, US$420 per mt, and US$353 per mt, respectively. The wholesale price of rice in Dhaka city stood at US$421 per mt on the same date. In the fortnight ending 4 October 2013, Russian and Ukraine wheat prices increased by 1.2 percent and 0.2 percent, to US$259 per mt and US$254 per mt, respectively, while US Soft Red Winter (SRW) wheat price remained steady at US$326 per mt. On the same date, Dhaka city wholesale wheat price stood at US$326 per mt.

1.2 Fisheries, Livestock and Poultry

According to BBS data, the fi sh sector now contributes 4.4 percent, and livestock and poultry sectors contribute around 2.5 percent to GDP, which, respectively, account for 22 percent and 13 percent of the total agricultural GDP. Nearly 15.6 million people are involved in the fi sh sector. The fi sh sector also meets 60 percent of the country’s total animal protein requirement. In the absence of adequate data for the quarter under review, the present state of these sub-sectors can be gauged from available estimates for the immediate past fi scal (FY13).

The Directorate of Fisheries (DoF) estimated the production of fi sh (inland and marine) at 3.39 million tons in FY13, which is 3.99 percent higher than that of the previous fi scal year (3.26 million tons). In FY13, the sector accounted for about 2.01 percent of the country’s total export earnings. Exports of frozen food, including shrimps, showed 47.7 percent growth to US$191 million in the fi rst three months of FY14 compared to US$130 million in the corresponding period of FY13.

8 QUARTERLY REVIEW

2.0 INDUSTRYAccording to provisional estimates of the BBS, the share of the broad industrial sector in the country’s GDP increased to 31.99 percent in FY13 from 31.13 percent in FY12. Experts believe that if there were no energy and infrastructural constraints, the sector could have occupied a higher share in GDP. Despite these constraints, the broad industrial sector managed to grow by 8.99 percent in FY13, compared to 8.90 percent in the preceding fi scal year. It is not clear if even this mild growth in the past fi scal was sustained in the quarter under review, given the disruptive effects of widespread hartals and shutdowns on industrial activity throughout the country in the recent months.

Moreover, power and gas supplies remained inadequate despite some improvements and the growth in settlement of import letters of credit (LCs) for industrial raw materials and capital machinery registered a slow increase in July-August of FY14 compared to the corresponding period of FY13. Experts have attributed the slow increase

in LC opening to an unfavorable business environment caused, to some extent by the recent political violence, but largely by the Central Bank’s contractionary monetary policy, inadequate infrastructure, incompatible fi scal policy, unfavorable exchange and interest rates, problems in accessing bank loans, and weak physical infrastructure, all of which affect the performance of the industrial sector.

2.1 Manufacturing Industries

Since the end of the past fi scal (FY13), there has been no census of manufacturing industries (CMI). Data on industrial production are, therefore, not available for the quarter under review. BBS data show that the growth of large and medium scale industries decelerated to 10.32 percent in FY13 from 10.52 percent in FY12. According to representatives of business and industry, the growth of the manufacturing sub-sector might have slowed down in the quarter under review because of the political unrest alongside other obstacles created by offi cial policies and weak physical infrastructure.

2.2 Construction

The construction sector plays a strong role in the economy amid continued urbanization. According to provisional data from the BBS, the construction sector occupied 9.4 percent of GDP in FY13 compared to 9.2 percent in FY12. Rising urbanization and building of infrastructures, including roads, bridges and fl yovers, are the main factors behind the growth of the construction sector.

The increase in public sector rehabilitation of roads and highways in Q1 of FY14 indicates that construction activities were growing faster in the quarter under

According to the Department of Livestock Services (DoLS), per capita daily demand for meat is 120 gm in Bangladesh. There is also a big defi ciency in the supply of milk in the country. The country produced 3.46 million tons of milk in FY13 against a demand of nearly 13 million tons and daily per capita demand of 250 milliliter. The demand for cattle meat and milk is growing with the growth of population, and cattle rearing and cow fattening has increased signifi cantly across the country as a growing source of income of the rural people.


review than in the previous ones. As per BBS estimate, the construction sector expanded by 8.1 percent in FY13 compared to 7.6 percent in FY12. The sector has generated 3.5 million employment opportunities directly and indirectly and also created several dozens of ancillary industries, namely in steel, cement, tiles and sanitary ware, cable and electric ware, paint, glass and aluminum, brick and other building materials. Government’s ADP projects have given a big boost to the construction sector, which resulted in higher production and consumption of steel and cement. The government has a number of ongoing fl yover and other construction projects in Dhaka and Chittagong.

Apart from government projects, infl ows of remittances by migrant workers also pushed up construction of houses in sub-urban and rural areas. The real estate business is also back on track after three agonizing years as the government’s decision of resuming fresh gas connections to the households took effect.

However, shortage of energy and utility services and non-availability of raw materials, in particular cement clinker for the cement factories, are major obstacles to the growth of the construction sector. The sector also faces a few other challenges. It does not yet enjoy the status of an industry in the true sense of the term. Then there is the glaring absence of a proper urban planning. In the midst of such odds, inadequate funding support, shortage of skilled and qualifi ed manpower, phenomenal hikes in prices of land and rising manpower and material costs have all compounded the problems of the sector. High price of construction materials has signifi cantly raised the construction cost and hence the price of apartments.

2.3 Power

The power supply situation improved in the quarter under review, but the availability of power still remains insuffi cient to meet the overall demand. Country’s overall electricity generation is now hovering around 6,300 megawatt (mw) against the demand for over 7,500 mw. According to the BPDB, generation capacity (both public and private) increased to about 8500 mw in FY 2013. As of 4 November 2013, total actual generation during peak hours was 5,922 mw. The maximum generation in 2013 was 6,675 mw on 12 July 2013 and it was also the maximum generation in BPDB’s history. The government has a target to augment electricity generation to 24,000 mw by 2021 (www.bpdb.gov.bd).

A Memorandum of Understanding (MoU) was signed between Bangladesh and India in 2010 on import of a total of 500 mw power from India. Half of this power will be coming from the Indian Central Government electricity quota and the rest from its open market. The total amount of electricity, to be imported under a 35-year contract, is expected to improve the country’s power situation and lessen the dependence on costly short-term rental power plants. Bangladesh has started importing 175 mw of power from India from 6 October 2013 and it will import around 500 mw of electricity from November when all work on the Bheramara grid substation would be completed. For transmitting the power, 100 km double circuit 400 kV transmission lines were installed from Baharampur in India to Bheramara in Bangladesh (of which 73.5 km lie in Indian territory and 27.36 km in Bangladesh). The project cost was US$196.8 million or Tk.1,600 crore.

10 QUARTERLY REVIEW

3.0 MONETARY AND CREDIT DEVELOPMENTSAccording to BB data, broad money (M2) recorded a 16.3 percent increase at the end of August 2013 compared to the increase of 17.5 percent at the end of August 2012. Domestic credit recorded a lower growth of 12.3 percent at the end of August 2013 compared to 18.6 percent growth at the end of August 2012. Among the components of domestic credit, private sector credit registered a growth of 11.3 percent during the period between August 2012 and August 2013, which was lower than 19.9 percent growth recorded for the corresponding 12-month period up to August 2012. Private sector credit growth slowed mainly because of the slowdown in import growth. Public sector credit increased by 15.9 percent at the end of August 2013 compared to the increase of 14.1 percent at the end of August 2012. Among components of public sector credit, credit to government (net) decreased by 18.6 percent, while credit to the other public sector increased by 2.7 percent, during the period (Table 2).

2.4 Services Sector

As per the BBS estimates, the services sector recorded a slightly lower growth of 5.73 percent in FY13 compared to 5.96 percent in the previous fi scal. The lower growth was mainly due to lower growth in agriculture and large-scale industry, and slower expansion in trade activities. The broad services sector has nine sub-sectors, data on which are yet insuffi cient to enable an understanding of how they have fared in the quarter under review. In fact, services sector in the country is one of the grey areas where information and data are the most chaotic in the absence of any methodical attempt to put on record the scope and operation of the service providers in a vast array of activities. Nevertheless, there are indications that activities of most sub-sectors, viz., community & social services, fi nancial intermediation, transport, hotels & restaurants, education, and wholesale & retail trade suffered due to the political unrest. The overall performance of the services sector might therefore have been weakening in the quarter under review than in the past fi scal. A much faster growth of the services sector

is, however, possible in the present fi scal (FY14) if the heightened political tensions are stopped and production in real sectors increases at a greater pace.


Table 2: Monetary and Credit Indicators (Taka in crore)

Particulars

Outstanding Stock Changes in Outstanding Stock

June, 2012R

June, 2013p

August2013P FY13

July-Aug.FY14

Aug. 2013 over

Aug. 2012

July-Aug. FY13

Aug. 2012 over

Aug. 2011

Total Domestic Credit 518335 582583 591052 64248(+12.40)

8469(+1.45)

64770(+12.31)

7947(+1.53)

82689(+18.64)

Credit to Public Sector 110434 130426 129673 19992(+18.10)

(-)753(-0.58)

17811(+15.92)

1428(+1.29)

13831(+14.11)

Net Credit to Government Sector 92028 110353 110582 18325

(+19.91)229

(+0.21)17303

(+18.55)1251

(+1.36)15054

(+19.24)

Credit to Other Public Sector 18406 20073 19091 1667

(+9.06)(-)983(-4.90)

508(+2.73)

177(+0.96)

(-)1223(-6.18)

Credit to Private Sector 407902 452157 461379 44256(+10.85)

9222(+2.04)

46959(+11.33)

6519(+1.60)

68859(+19.93)

Reserve Money (RM) 97803 112489 117343 14687(+15.02)

4853(+4.31)

13892(+13.43)

5648(+5.77)

7042 (+7.30)

Broad Money (M2) 517110 603505 619989 86396(+16.71)

16484(+2.73)

86816(+16.28)

16064(+3.11)

79328(+17.48)

Note: P=Provisional; R=Revised; Figures in brackets indicate percentage changesSource: Bangladesh Bank

Total liquid assets of the scheduled banks stood higher at Tk.180,036 crore as of end August 2013 compared to Tk.174,170 crore as of end June 2013. Also the excess liquidity of scheduled banks stood higher at Tk.82,319 crore as of end August 2013 compared to Tk.79,439 crore as of end June 2013 (Table 3).

Table 3: Liquidity Position of Scheduled Banks (Taka in crore)

Bank Group

As of end June, 2013R As of end August, 2013P

Total liquid assets

Required liquidity

(SLR)

Excess liquidity

Total liquid assets

Required liquidity

(SLR)

Excess liquidity

1 2 3 4 (2-3) 5 6 7 (5-6)

State owned banks 53467 26434 27033 57041 27887 29154

Private banks (other than Islamic) 79516 47538 31978 83752 48729 35023

Private banks (Islamic) 21836 11297 10539 21007 11636 9371

Foreign banks 14274 6396 7878 14367 6216 8151

Specialized banks* 5077 3066 2011 3869 3249 620

Total 174170 94731 79439 180036 97717 82319Notes: P=Provisional; R=Revised; *= SLR does not apply to Specialized banks (except BASIC Bank) as exempted by the government

Source: Bangladesh Bank

12 QUARTERLY REVIEW

3.1 Interest Rate Developments

Bangladesh Bank (BB) employs repo, reverse repo, and BB bill rates as policy instruments for infl uencing fi nancial and real sector prices. Effective from 1 February 2013, the BB has revised downward the repo and reverse repo rates by 50 basis points and set them at 7.25 percent and 5.25 percent, respectively (Table 4).

Table 4: Interest Rate (weighted average) movements in FY13 and FY14 (in percent)

Month/Quarter Repo Reverse Repo Lending Rate Deposit Rate Interest Spread

FY13R

July 7.75 5.75 13.77 8.30 5.47

December 7.75 5.75 13.80 8.47 5.33

January 7.75 5.75 13.73 8.60 5.13

February 7.25 5.25 13.73 8.68 5.05

March 7.25 5.25 13.73 8.67 5.06

April 7.25 5.25 13.64 8.65 4.99

May 7.25 5.25 13.63 8.65 4.98

June 7.25 5.25 13.67 8.54 5.13

FY14P

July 7.25 5.25 13.63 8.61 5.02

August 7.25 5.25 13.56 8.55 5.01

September 7.25 5.25 NA NA NANotes: P=Provisional, R=Revised, NA=Not Available


Interest Rate Spread: The weighted average spread between lending and deposit interest rates offered by the commercial banks slightly narrowed down to 5.01 percent in August 2013 from 5.02 percent in July 2013. Despite BB’s persuasion and pressures from businessmen and industrialists, the spread remains above the 5.0 percent limit insisted by the Central Bank. The average lending rate and deposit rate in August 2013 was 13.56 percent and 8.55 percent, respectively. These rates were, respectively, 13.63 percent and 8.61 percent in July 2013 (Table 4).


3.2 Industrial Term Loan

Data on industrial term loans are available only up to the 4th quarter (April-June) of the past fi scal (FY13). According to BB data, the disbursement of industrial term loans during April-June of FY13 stood 4.5 percent higher at Tk.10,513 crore, compared to Tk.10,061 crore during the immediate previous quarter (January-March) of that fi scal (Table 5). The loans went mostly to energy and power, telecommunications, pharmaceuticals, textile, housing, construction and transportation sectors. The recovery of industrial term loans also increased signifi cantly by 20.6 percent to Tk.10,421 crore during April-June of FY13 from Tk.8,638 crore during January-March of FY13.

Table 5: Disbursement and Recovery of Industrial Term Loans

QuarterDisbursement (Tk. in crore) Recovery (Tk. in crore)

LSI MSI SSCI Total LSI MSI SSCI Total

October-December of FY12R 5706 3469 693 9868 (32.7) 4803 2713 845 8361 (22.8)

January-March of FY12R 5250 1993 512 7755 (-21.4) 4552 2119 505 7176 (-14.2)

April-June of FY12R 5942 3632 644 10218 (31.8) 4806 2592 491 7889 (9.9)

July-September of FY13R 6185 2906 629 9720 (-4.9) 5231 2376 585 8192 (3.8)

October-December of FY13R 8323 3237 673 12233 (25.9) 6144 2403 752 9299 (13.5)

January-March of FY13R 6162 3111 788 10061 (- 17.8) 5504 2464 670 8638 (- 7.1)

April-June of FY13P 7285 2319 909 10513 (4.5) 7409 2225 787 10421 (20.6)

Notes: LSI=Large Scale Industries, MSI=Medium Scale Industries and SSCI=Small Scale & Cott age Industries

P=Provisional; R=Revised; Figures in parentheses indicate the percentage change over the previous quarter


3.3 SME Loans

Data on loan disbursement to SME sector are not available for Q1 of FY14. According to BB data, total SME loans disbursed by all banks and non-bank fi nancial institutions (NBFIs) increased by 8.3 percent to Tk.100,864 crore at the end of June 2013 from Tk.93,148 crore at the end of June 2012. The disbursement of SME loans was 21.6 percent of total loans disbursed by all banks and NBFIs at the end of June 2013 (Table 6).

All institutional providers, viz. the foreign banks (FBs), the state-owned banks (SOBs), the specialized Banks (SBs), private banks (PBs), and non-bank fi nancial institutions (NBFIs) now provide credit support to the SME enterprises. According to BB data, the percentage share of SME loans in

14 QUARTERLY REVIEW

total loans given by each category of institutions during April-June, 2013 was as follows: SOBs 14.8 percent, PBs 24.9 percent, SBs 26.9 percent, NBFIs 12.4 percent, and FBs 10.3 percent.

Between June 2012 and June 2013, institutional category-wise SME loans increased by 52.8 percent in SBs, 26.3 percent in PBs, 16.5 percent in NBFIs and 9.5 percent in FBs. In SOBs, there was a negative growth in SME loans at the end of June 2013 as compared to the end of June 2012.

Table 6: Disbursement of SME Loans (Tk. in crore)

Quarter Types of Loans SOBs PBs FBs SBs NBFIs Total

April-June of FY12R Total LoansSME Loans

8694924434

(+28.1)

26826358421

(+21.8)

230942196

(+9.51)

259835204

(+20.0)

225722893

(+12.8)

42686293148

(+21.8)

July-Sept. of FY13R Total LoansSME Loans

8771524398

(+27.8)

27684964910

(+23.5)

233062048

(+8.8)

266705567

(+20.9)

232053078

(+13.3)

437744100001(+22.8)

Oct.-Dec. of FY13P Total LoansSME Loans

9013316371

(+18.2)

28468271985

(+25.3)

239522138

(+8.9)

273867220

(+26.4)

249443100

(+12.4)

451097100813(+22.3)

Jan.-Mar. of FY13R Total LoansSME Loans

9020812944

(+14.4)

28719469520

(+24.2)

230302222

(+9.7)

282627558

(+26.7)

258073280

(+12.7)

45450095523

(+21.0)

April-June of FY13P Total LoansSME Loans

9022513351

(+14.8)

29583673789

(+24.9)

233472403

(+10.3)

296127951

(+26.9)

271423370

(+12.4)

466162100864(+21.6)

% change of SME loans at the end of June 2013 over June 2012 -45.4 +26.3 +9.5 +52.8 +16.5 +8.3

Notes: P=Provisional, R=Revised; SOBs= State Owned Banks, PBs= Private Banks, FBs= Foreign Banks, SBs= Specialized Banks,

NBFIs= Non-bank Financial Insti tuti ons; Figures in parentheses indicate SME loans as percentage of total loans



4.0 CAPITAL MARKET Stock prices in both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) experienced massive falls on 30 September 2013 with turnover dipping below Tk.3.0 billion as investors remained reluctant to make fresh investment in stocks, fearing further escalation of the political unrest. The DSE benchmark index, DSEX, lost 31.10 points or 0.78 percent at the close of trading on 30 September 2013. Total turnover stood at only Tk.2.72 billion on the day, which was the lowest in the last 33 sessions since 13 August 2013. In turn, the CSE key index, CSCX, lost 56.41 points at the close of the day, when the value of the traded issues was Tk.240.20 million.

Portfolio investment in the DSE dropped 12.28 percent in September 2013, compared to August 2013 due to poor performance of the stock market. The DSE received around Tk.2.50 billion foreign investment in September against Tk.2.85 billion in August, while it was Tk.3.25 billion in July 2013. Foreign investors bought shares worth Tk.1.68 billion and sold stocks worth Tk.829.0 million while net investment stood at Tk.846.49 million in September 2013 (Table 8). The DSE data also show that in the fi rst three months of FY14 i.e., July, August and September, portfolio investments showed a downward trend amid political turmoil and also the ‘go slow’ strategy followed by foreign investors as there was no visible progress in resolving the political stalemate.

3.4 Agricultural Credit and Non-farm Rural Credit

The Bangladesh Bank (BB) has set a Tk.14,595 crore target for disbursement of agricultural credit and non-farm rural credit for FY14, which is 3.3 percent higher than the target set for the previous fi scal year (FY13). In FY13, disbursement of agricultural credit and non-farm rural credit exceeded the target as the BB strengthened its monitoring and supervision to the lenders from the very beginning of the fi scal and also took punitive measures against six commercial banks that failed to achieve the target.

In the quarter (Q1) under review, the disbursement of agricultural credit and non-farm rural credit by banks increased by 24.8 percent or Tk.2,862 crore over the corresponding period of the previous fi scal (Table 7 and Fig. 1). The recovery, however, increased by 15.5 percent to Tk.3,108 crore in Q1 of FY14 from Tk.2,691 crore in the corresponding period of the previous fi scal year. The improvement in recovery was partly the result of strong monitoring by the BB.

Table 7: Disbursement and Recovery of Agricultural Credit and Non-farm Rural Credit

(Taka in crore)

MonthFY14P FY13R

Disbursement Recovery Disbursement Recovery

July 981.95 800.23 737.32 1605.56

August 567.55 1000.82 619.21 537.01

September 1312.08 1306.45 936.00 548.22

Total of Q1

2861.58(24.8)

3107.50(15.5)

2292.53(11.7)

2690.79(-16.0)

Notes: P=Provisional, R=Revised; Figures in parentheses indicate the percentage change over the previous fi scal year


16 QUARTERLY REVIEW

5.0 PUBLIC FINANCENBR tax revenue collection during July-September (Q1) of FY14 was Tk.24,626 crore, which is 17.1 percent higher than the collection of Tk.21,032 crore during July-September of FY12 (Table 9 and Fig. 2). Total tax revenue collection (NBR & non-NBR together) in July 2013 stood at Tk.8,164 crore which was 20.1 percent higher than the collection of Tk.6,795 crore in the same month of the previous fi scal.

The NBR has set a revenue collection target of Tk.136,090 crore for FY14. The highest amount of Tk.51,000 crore is to be collected from VAT, Tk.48,300 crore from income tax, Tk.35,790 crore from customs duties, and Tk.1,000 crore from supplementary duty, travel tax, and other taxes.

Table 9: Government Tax Revenue Collections

Month

Tax Revenue Collections ( in crore Taka)

NBRNon-NBR

GrandTotal Customs

Duties VAT IncomeTax Others* Total

FY14P

July 1212 3408 1838 1314 7772 392 8164

August 950 2983 1995 1279 7207 NA NA

September 1167 3411 3483 1586 9647 NA NA

July –Sept. 3329 9802 7316 4179 24626 NA NA

FY13R

July 1139 2829 1434 1030 6432 363 6795

August 946 2698 1518 1234 6396 221 6617

September 1101 2876 2751 1476 8204 327 8531

July –Sept. 3186 8403 5703 3740 21032 911 21943

Notes: P=Provisional; R=Revised, NA=Not Available, *=include supplementary duti es and travel tax

Sources: NBR and Offi ce of the Controller General of Accounts

5.1 Public Expenditure

Total allocation for ADP in FY14 budget is Tk.739.84 billion, which is 34.5 percent bigger than the original allocation of Tk.550.00 billion in the budget for the previous fi scal (FY13). The rate of implementation of the ADP in Q1 of FY14 was 11 percent, 2 percentage points below the implementation rate achieved in the corresponding period of the previous fi scal (13%). All ministries and agencies utilized Tk.69.94 billion during the quarter out of the total ADP outlay (except self-fi nanced) of Tk.658.72 billion. Of the amount used in the fi rst three months of FY14, Tk.50.33 billion came from the government’s own fund and Tk.19.61 billion from foreign aid.

According to provisional data of IMED, the Local Government Division spent 21 percent of its allocation in the fi rst three months, the highest among the 10 biggest ministries and divisions. In contrast, the implementation rate in nine other big ministries and divisions, such as, the Power Division, the Bridges Division, the Energy and Mineral Resources Division, the Ministry of Housing and Public Works, the Ministry of Health and Family Welfare and the Roads Division ranged between 0.16 percent and 10 percent. Among the 54 ministries and divisions, 23 implemented 0 to 8 percent of their allocations. The Bridges Division, which got the third highest allocation in

Table 8: Performance of Foreign Investors during Q1 of FY14

Months of

FY14

Buy Shares (Taka)

Sell Shares (Taka)

Total Investment

(Taka)

Net Investment

(Taka)

July 2.57 billion

684.70 million

3.25 billion

1.88 billion

August 2.20 billion

649.52 million

2.85 billion

1.55 billion

September 1.68 billion

829.00 million

2.50 billion

846.49 million

Source: DSE


the ADP to fi nance the Padma Bridge Project, utilized only 0.16 percent of its allocation. The Ministry of Health and Family Welfare continued with its poor implementation from the last fi scal year, utilizing only 9 percent of its allocation in the fi rst three months. The Roads Division implemented only 10 percent of its share, due to no signifi cant progress in many big projects like the Dhaka-Chittagong four-lane highway project.

6.0 EXPORTSAccording to provisional fi gures of the Export Promotion Bureau (EPB), the country’s export earnings witnessed a robust 21.24 percent growth in Q1 of FY14 over the corresponding period of the previous fi scal year. The increase owes much to the spectacular 36.24 percent export growth in September 2013, which may be attributed to the signifi cant growth in the shipment of readymade garments (RMG) despite slow global economic recovery, shifting of export orders from China, and above all, the competitiveness of local manufacturers. The overall export earnings stood at US$7.63 billion during July-September period of the current fi scal year. During the corresponding quarter of FY13, the country’s merchandise export stood at US$6.29 billion (Table 10 and Fig. 3).

Of the total export earnings, knitwear items fetched US$3.16 billion, registering a 24.43 percent growth, and exports earnings from woven garments rose by 23.89 percent to US$3.04 billion during July-September of FY14. Among other products, frozen food exports grew by 47.66 percent, engineering products by 55.99 percent, footwear by 33.32 percent, and leather by 58.20 percent during Q1 of FY14. On the other hand, jute & jute goods and home textile witnessed 18.18 percent and 9.81 percent negative growth, respectively, during the quarter under review.

Table 10: Monthly Trends in Exports

Month Exports (million US$) Growth Rate

FY14P FY13R

July 3024 2439 23.99

August 2014 1952 3.18

September 2590 1901 36.24

Total of Q1 7628 6292 21.24

Notes: P=Provisional; R=Revised Sources: EPB and Bangladesh Bank

7.0 IMPORTSImport payments during July-August of FY14, for which Q1 data are available till now, stood at US$5,929 million, which is 10.7 percent higher than import payments during the corresponding months of FY13 (Table 11 and Fig. 4). Import payments in August, 2013 rose 14.0 percent over the same month of 2012, but because of lower demand for most of the importable items, import payments in August, 2013 fell by 6.4 percent to US$2,872 million from US$3,057 million in the previous month (July, 2013). The import of essential commodities and capital machinery fell signifi cantly as political turmoil gripped the country.

18 QUARTERLY REVIEW

Table 11: Monthly Trends in Imports

Month

Imports (million US$)

Growth RateFY14P FY13R

July 3057 2836 7.8

August 2872 2520 14.0

September NA 2977 -

July-August 5929 5356 10.7

Notes: P=Provisional; R=RevisedSource: Bangladesh Bank

According to BB data, the settlement of import Letters of Credit (LCs) increased by 6.8 percent during July-August of FY14 compared to the corresponding period of the previous fi scal. The opening of fresh LCs against imports, too, increased by 17.9 percent during July-August period of FY14. The increasing trend in both opening and settlement of import LCs is likely to continue once the root causes behind political violence, blockades and shutdowns are resolved.

8.0 REMITTANCESIn the quarter under review, the infl ow of remittances declined by 8.12 percent over the same period in FY13. The expatriates sent US$3.270 billion during July-September of FY14 compared to US$3.559 billion in the same period of FY13. The drop in remittance infl ow in the months just ahead of the October Eid festivals was unusual as expatriates used to remit more money on such occasions in the past. A major cause of falling remittances is a decrease in manpower exports in the last six months. The signifi cant decline in the value of the US dollar against the taka in recent months could be another cause, which discouraged the expatriates to send their hard-earned incomes to the country. Also, the recent spate of political violence that has created an unfriendly business situation in the country might have discouraged inward remittances.

Table 12: Monthly Trends in Remittances

Month

Remittances (million US$)Growth

RateFY14P FY13R

July 1239 1201 3.16

August 1005 1179 (-) 14.76

September 1026 1179 (-) 12.98

Total of Q1 3270 3559 (-) 8.12



Net disbursement of foreign aid stood at a negative US$460 million during July-August, 2013 compared to the positive US$226 million during the same period of the previous fi scal year. According to the ERD, the government had to pay back US$169 million, US$128 million in principals and US$41 million in interest on loans.

Earlier, the government had set the target of mobilizing a record US$3.30 billion as foreign assistance in the current fi scal year to implement its major development projects.

10.0 FOREIGN DIRECT INVESTMENT (FDI)The Board of Investment (BoI) received 178 investment proposals worth Tk.64.67 billion in the fi rst two months of FY14. These projects, when implemented, would generate employment for a total of 16,165 people. Among these proposals, 156 were local proposals worth Tk.54.10 billion, while the other 22 were joint venture & foreign investment proposals worth Tk.10.57 billion.

The recent suspension of GSP benefi ts by US may not have any immediate adverse effect on Bangladesh’s exports but the US move may have negative signaling effects and hurt FDI infl ows to the country.

Most private commercial banks along with the state-owned ones have been trying to increase the fl ow of inward remittances from the Middle East, the United Kingdom, Malaysia, Singapore, Italy and the United States. In September 2013, the private commercial banks (PCBs) channeled US$659.42 million of remittances, the state-owned commercial banks (SCBs) US$334.83 million, foreign commercial banks US$20.18 million, and specialized banks US$11.90 million. Among the PCBs, the Islami Bank Bangladesh Limited received the highest amount of remittance (US$238.06 million), while the Sonali Bank Limited received the highest remittance (US$116.38 million) among the SCBs.

Bangladesh is now ranked seventh in the list of top ten remittance recipient countries. According to the World Bank’s ‘Migration and Development Brief’ on global migration and remittances, Bangladeshi expatriates are expected to remit US$15 billion in 2013, followed by Pakistan. The WB also projected that the developing world would receive US$414 billion in migrant remittances in 2013, a 6.3 percent increase over the previous year. The amount is projected to rise to US$540

billion by 2016.

9.0 FOREIGN AID According to the Economic Relations Division (ERD) data, disbursement of foreign loans and grants declined in the fi rst two months of the current fi scal year (July-August, 2013) while the amount of repayment as principals and interest on the previous years’ loans increased during the period. External debt servicing marked a steady rise in July-August, 2013 but fresh foreign aid fl ows as well as new commitments of external assistance signifi cantly declined. In July-August of FY14, the disbursement of foreign aid stood lower by US$52 million or 16 percent to US$274 million compared to US$326 million during July-August of FY13. Out of US$274 million, lenders disbursed US$215 million in loans while donors provided US$59 million as grants.

20 QUARTERLY REVIEW

11.0 BALANCE OF PAYMENTSBalance of payments data, available for only the fi rst two months (July and August) of FY14, are presented in Table 13. Trade balance recorded a lower defi cit of US$790 million in the fi rst two months of FY14 compared to the defi cit of US$885 million in the corresponding period of FY13. On the other hand, despite the larger infl ow of workers’ remittances, higher defi cits in services and secondary income accounts led to a smaller current account surplus of US$674 million during July-August of FY14, compared to the corresponding months of FY13. The relatively lower surplus in the current account balance together with a big defi cit in the fi nancial account resulted in a lower surplus of US$655 million in the overall balance during July-August of FY14 compared with the larger surplus of US$1064 million during the corresponding period of FY13.

Table 13: Balance of Payments (in million US$)

Items July-August of FY14P July-August of FY13R ChangeTrade Balance -790 -885 +95 Exports f.o.b (including EPZ)* 4993 4345 Imports f.o.b (including EPZ)* 5783 5230Services -560 -498 -62 Credit 456 447 Debit 1016 945Primary Income -333 -360 +27 Credit 93 36 Debit 426 396 Of which: Offi cial Interest Payment 77 68Secondary Income 2357 2430 -73 Offi cial Transfers 4 2 Private Transfers 2353 2428 Of which: Workers’ Remittances (current a/c portion) 14338 12734 +1604Current Account Balance 674 687 -13Capital Account 54 25 Capital Transfers 54 25Financial Account -169 321 -490 Foreign Direct Investment (net) 290 266 Portfolio Investment (net) 102 37 Of which: Workers’ Remittances (fi nancial a/c portion) 22 22 Other Investment (net) -561 18Errors and Omissions 96 31 +65Overall Balance 655 1064 -409

Notes: P=Provisional; R=Revised; * = Exports and Imports both are compiled on the basis of shipment dataSource: Bangladesh Bank

FDI inflow in Bangladesh is very small as the figure produced in Table 13 would indicate. The major impediments to FDI lie in difficulties in getting access to land, and problems like lack of continuity in policies, bureaucratic red tape, weak governance, political instability, and inadequate utilities, including gas, electricity and water. Government policy is under way to address these problems.

In addition, the present government has taken various measures to attract FDI and boost investment. The steps, include arrangement of seminars and road

shows, simplification of financial institutions and tax system, providing various facilities to set up new mills and factories through the time-befitting National Industry Policy-2010, meting out equal treatment to local and foreign investors under the Investment Promotion and Protection Act-1980, giving tax holiday on area basis, treating investment of non-resident Bangladeshis (NRBs) as foreign investment, and extending special facilities and risk fund support to export-oriented industries.


12.0 EXCHANGE RATE Between end-June and end-September of 2013, Taka appreciated marginally (by 0.01%) in terms of US dollar, showing stability in the foreign exchange market. On the inter-bank market, the US dollar was quoted at Tk.77.7505 at the end of September 2013 and Tk.77.7593 at the end of June 2013 (Table 14).

Table 14: Monthly Exchange Rate

Month2013-14P (Taka per US$) 2012-13R (Taka per US$)

Month Average

End Month

Month Average

End Month

June - - 77.7550 77.7593

July 77.7570 77.7500 81.7715 81.6049

August 77.7537 77.7500 81.5160 81.7199

September 77.7502 77.7505 81.7286 81.5900Note: i) P=Provisional; R=Revisedii) Exchange rate represents the mid-value of buying and selling ratesSource: Bangladesh Bank

13.0 FOREIGN EXCHANGE RESERVESBB’s gross foreign exchange reserves stood at US$16.155 billion (with ACU liability of US$480 million) as of end September, 2013. The reserves were US$16.252 billion (with ACU liability of US$879 million) at the end of August, 2013 (Table 15 and Fig. 6). The gross foreign exchange reserves, without ACU liability is equivalent to import payments of 5.46 months according to imports of US$2.888 billion per month based on the preceding 12 months average (September,12-August,13). The reserves were above US$16 billion mainly due to the rise in inward remittances and foreign aid as well as lower

import pressure. The BB has continued purchasing US dollars from the commercial banks directly, which has also contributed to the increase in the foreign exchange reserve. The latest available information indicates that the foreign exchange reserves rose to US$17.321 billion on 29 October 2013.

Table 15: Monthly Trends in Foreign Exchange Reserves

MonthForeign Exchange Reserve (million US$)

FY14P FY13R

July 15534 10570

August 16252 11435

September 16155 11252


14.0 EMPLOYMENT SITUATIONOverseas employment of Bangladesh migrant workers was much lower in the fi rst 9 months of 2013, in comparison with the corresponding nine months of the calendar year 2012. This was mainly due to various types of restrictions imposed by major labor-importing countries, in particular the UAE, which has been the biggest recruiter of Bangladeshi workers in recent years. A total of 308,589 workers went abroad with jobs in January-September of 2013. The number was 514,484 in the same months of 2012.

22 QUARTERLY REVIEW

15.0 PRICE SITUATIONAccording to the Bangladesh Bureau of Statistics (BBS), the general point-to-point infl ation dropped further in September, third month in a row in this fi scal year (FY14), to 7.13 percent from 7.39 percent in August mainly because of the fall in both food and non-food infl ation. In July 2013, the point-to-point infl ation was 7.85 percent (Table 16). Since July 2013, the BBS has been using FY2005-06 as the base year in the calculation of consumer price index (CPI) and infl ation. Earlier, it calculated CPI and infl ation considering FY1995-96 as the base year.

Food infl ation declined to 7.93 percent in September from 8.09 percent in August while non-food infl ation declined to 5.94 percent from 6.35 percent. Average general infl ation in the last 12 months (October 2012 to September 2013) stood at 7.37 percent. Infl ation has maintained a downward trend and the consumer price index has remained stable in recent months.

The scenario for Bangladeshi workers seeking employment in Japan, Iraq, Egypt and Saudi Arabia is not very encouraging either. Manpower export to the UAE has come down heavily as the country slapped a restriction on issuing all kinds of visas for Bangladeshi passport holders. Government is, of course, trying to revive the employment situation in the oil-rich Middle East and send workers to emerging economies in Southeast Asia as well as to remote regions such as Australia and New Zealand, Europe, Latin America, and Africa. The concerned ministry offi cials are hopeful of a healthy growth of foreign jobs shortly. Some potential labor receiving countries, like UAE, Qatar, Bahrain and Hong Kong, will start recruitment within a short period. Malaysia has started recruiting workers from April 2013. The government has planned to send nearly 0.6 million local workers abroad in the present calendar year. At present, nearly 8.0 million Bangladeshis are working in 158 countries across the world. Of them, only some 20 countries have absorbed the bulk of the overseas Bangladeshi workers.

The overseas employment of female workers during the fi rst nine months of 2013 increased remarkably to 41,064 in 2013 from 27,515 in 2012, according to the Bureau of Manpower, Employment and Training (BMET) data. In the quarter (Q1) under review, the monthly overseas employment of Bangladesh migrant workers was, 37,097 in July, 27,949 in August and 35,203 in September. Among them, female workers were 6,071, 3,124 and 4,818, respectively.

According to the BMET, over 0.2 million overseas job seekers have been enlisted till 30 September 2013 under government’s online registration program in different divisions. The online registration for overseas job seekers started on 22 September 2013 and the aspirants, including women, who will be enlisted under the program can go to any country according to their skill. The jobseekers who will fail to register their names will not be able to go abroad within two years as the government will not hold such program within this period. But the people who will be 18 years old after holding of the registration program can get their names registered during the period of two years on production of their birth certifi cates. The candidates are registering their names in respective union-level information service centres, city information and service centres and pourashava information and service centres spending Tk.250 each as service charge. Earlier, nearly 1.4 million aspirants were registered for Malaysia. Of them only around 400 workers got opportunities to go to the job destination after resumption of the market. Also, the Kingdom of Saudi Arabia (KSA) is likely to resume recruiting Bangladeshi workers soon, as a ministerial panel of the country has recently advised the administration to lift the ban imposed in 2008 on recruitment of Bangladeshi workers.


According to the BBS data, rural and urban infl ation indicators showed downward trend.In the urban areas the general point-to-point infl ation rate declined to 7.82 percent in September from 8.34 percent in August while in the rural areas it dropped to 6.77 percent from 6.90 percent. Food infl ation declined in the rural areas to 7.43 percent in September from 7.50 percent a month before and non-food infl ation came down to 5.59 percent from 5.83 percent. In the urban areas, food infl ation dropped to 9.11 percent in September from 9.52 percent in August and non-food infl ation fell to 6.44 percent from 7.08 percent. A total of 318 items from the rural index basket and 422 items from the urban index basket were taken into account to calculate infl ation.

Table 16: Monthly Trends in Infl ation (Base: 2005-06=100) (Percent)

PeriodPoint to Point-All Point to Point-Rural Point to Point-Urban

General Food Non-food General Food Non-food General Food Non-food

FY13R

July 5.21 2.23 9.94 4.84 2.07 10.19 5.92 2.62 9.59August 4.97 2.25 9.29 4.60 2.07 9.48 5.68 2.71 9.03September 4.96 1.75 10.18 4.46 1.61 10.04 5.93 2.09 10.36October 5.86 2.51 11.28 5.14 2.16 10.97 7.26 3.35 11.72November 6.55 3.94 10.68 5.60 3.15 10.30 8.41 5.88 11.23December 7.14 5.28 10.03 6.17 4.31 9.67 9.04 7.65 10.55January 6.62 5.02 9.09 5.69 4.02 8.82 8.44 7.50 9.45February 7.84 7.45 8.44 7.27 6.77 8.18 8.97 9.10 8.82March 7.71 7.50 8.04 7.16 6.88 7.66 8.80 9.02 8.58April 8.37 8.68 7.91 7.80 7.96 7.52 9.46 10.42 8.47May 7.98 8.13 7.76 7.42 7.40 7.47 9.04 9.89 8.17June 8.05 8.26 7.75 7.53 7.58 7.43 9.08 9.94 8.21FY13 avg. 6.78 5.22 9.17 6.14 4.64 8.94 8.02 6.64 9.50

FY14P

July 7.85 8.14 7.40 7.43 7.52 7.27 8.64 9.65 7.59August 7.39 8.09 6.35 6.90 7.50 5.83 8.34 9.52 7.08September 7.13 7.93 5.94 6.77 7.43 5.59 7.82 9.11 6.44

Notes: i) P=Provisional; ii) Food includes food, beverages and tobaccoSource: Bangladesh Bureau of Stati sti cs

16.0 CHAMBER’S PROJECTION ON SOME SELECTED ECONOMIC INDICATORSOn the basis of observations in the previous nine months, projections on some selected economic indicators are made here for the second quarter of FY14 (Table 17).

Table 17: Projection on Some Selected Indicators in Q1 of FY14

IndicatorsFY13 FY14

Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.Export(million US$) 2554 2247 2303 2088 2539 2696 3024 2014 2590 2570 2560 2660

Import (million US$) 3369 2608 2913 2840 2953 2948 3057 2872 2830 2820 2800 2080

Remittance(million US$) 1327 1163 1229 1194 1087 1058 1239 1005 1026 1235 1100 1150

Forex Reserve(million US$) 13076 13848 13971 14839 14531 15315 15534 16252 16155 17400 18000 18500

Infl ation, Point to Point (percent) 6.62 7.84 7.71 8.37 7.98 8.05 7.85 7.39 7.13 7.80 8.00 8.50

Note: January 2013 – September 2013: actual fi gures except September value of Import; October - December 2013: projecti ons Sources: Bangladesh Bank and Bangladesh Bureau of Stati sti cs

A slower change in all indicators is anticipated in the next quarter (October-December of FY14), because of the uncertain political environment in the country. The rate of infl ation may go up because of disruptions in supplies.

24 QUARTERLY REVIEW

Despite an uneasy political situation, the economy remained resilient in the fi rst three months of the present fi scal year (FY14). The economy would, however,

perform better if it were able to operate in a peaceful environment. Despite all odds, the rate of infl ation has come down. Exports experienced a good recovery. Trade defi cit has shrunk and the foreign currency reserves have hit a new high of US$17.321 billion. The agriculture sector has remained largely immune from the political unrest. However, the performance of manufacturing and services sectors is believed to have been below their potential. These sectors had long been suffering due to bottlenecks in physical infrastructure and the persistent crisis in power and energy. The political unrest and the associated programmes of hartals, shutdowns and blockade by opposition political parties have compounded their problem. In order to achieve economic growth and infl ation targets, the ongoing political confl ict must be resolved. Violence caused by the political unrest hurts economic activity, hinders growth, and by disrupting the supply chains pushes up infl ation.

The economy faces problems in several other areas, which require urgent solution. Businesses involved in export and import trade are now facing a tough situation as majority of the banks demand large margins for opening letters of credit. Besides, the credit growth in the private sector remains subdued and has remained much below the BB’s program for credit growth, mainly because of the high costs of bank loans that discourage private sector investors to seek bank credit. In fact, discouraged by the high offi cial and unoffi cial costs of bank credit, investors are increasingly moving out to obtain bank loans from abroad. Growing reliance on foreign loans to start and operate business will have adverse implications for the country’s balance of payments in the future. Unless the costs of bank credit are brought down to reasonable levels, private investment will not rise, and the expected GDP growth will be diffi cult to achieve.

17.0 CONCLUDING OBSERVATIONS

quarterly report july september - mccibd.org · about 7,500 mw while its supply is around 6,300 mw,...

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Transcript of quarterly report july september - mccibd.org · about 7,500 mw while its supply is around 6,300 mw,...