The central bank yesterday asked all commercial banks -- including the scam-ridden Sonali Bank -- to give acceptance to genuine inland bill purchases (IBPs) for the sake of the country's exports.

The instruction came at a meeting with the leaders of the apparel exporting and bankers' bodies at the Bangladesh Bank (BB) headquarters. When an exporter receives an order, he/she opens a 'back-to-back' letter of credit (LC) account at a bank to procure the raw materials to fulfil the order.

The exporter then sells the 'back-to-back' LC on to banks at a discounted rate, which is called the IBP.

SK Sur Chowdhury, deputy governor of the BB, told journalists that the commercial banks cannot delay the purchase of genuine bills under any condition.

“Some commercial banks showed reluctance towards the purchase of acceptance bills after the loan scam of Hall-Mark Group. But, there is no reason to be panicky as every indicator of the banking system is giving positive signs.”

The central bank is yet to bring out a fresh circular, though, regarding the development, added Chowdhury.

The BB deputy governor further said Sonali Bank, too, will start releasing the stalled funds against the IBPs soon.

“Banks will pay special attention when it comes to the acceptance of the garment sector's IBP so that businesses do not face any crisis before the Eid festival,” said Nurul Amin, chairman of Association of Bankers Bangladesh, a platform of chief executives of commercial banks.

“The environment of mistrust that has been created in the bankers and clients relationship due to the Hall-Mark loan scam is not right,” Amin said, while pressing Sonali Bank to accept the valid IBPs.

Shafiul Islam Mohiuddin, the president of Bangladesh Garment Manufacturers and Exporters Association, said the garment exporters are facing difficulties as some commercial banks are showing reluctance in purchasing IBPs.

Mohammad Hatem, the acting president of Bangladesh Knitwear Manufacturers and Exporters Association, and Jahangir Alamin, the president of Bangladesh Textile Mills Association, were also present.

News: The Daily Star/Bangladesh/16th-Oct-12

Bangladesh Bank Governor Dr. Atiur Rahman said price volatility in global commodity markets remain a major vulnerability for Developing Asia pacific (DAP) countries as sudden sharp food price spikes increased risk of hunger, particularly for the urban poor.

Food grain growers, on contrary, suffer for steep price fall as supplies improve, he said adding, commodity price stability beneficial for both producers and consumers can be usefully supported by maintaining modest publicly-owned buffer stocks as cushion.

Low income DAP countries while building up such food grain buffer stocks may usefully be assisted by budget support financing from the International Monetary Fund (IMF).

Atiur, presently in Tokyo as a member of the Bangladesh delegation to the IMF-World Bank Annual Meetings 2012, said this at a special event for Frontier and Developing Asia and Pacific countries on October 14, 2012.

Atiur said Bangladesh and other low income DAP countries need continuing support in growth and poverty eradication efforts.

He was exchanging views on continuing vulnerabilities to global shocks and the role of IMF in supporting the region’s growth momentum.

The event was chaired by the IMF Managing Director Christine Lagarde and was participated by senior government and central bank officials and IMF senior management team.

Expressing concerns over the global economic slowdown, Lagarde stressed on greater surveillance for risk mitigation to overcome the situation.

In his speech, Dr Atiur said IMF’s global policy surveillance needs to remain proactive in countering these trends, to protect and further widen openness of advanced economy markets to goods and services from the DAP.

Countries in South Asia and the broader DAP region have in recent past concluded several new agreements for freer bilateral and regional trade, he quoted saying, “The DAP region can benefit from IMF support in activating trade under these initiatives.”

“Despite low levels of policy interest rates in and outside the region, access to trade financing has remained relatively more constrained and expensive following the global crisis,” he added.

In recent years, speculative position taking by financial institutions in commodity futures markets has tended to exacerbate price volatility, Atiur said adding, IMF’s global policy surveillance may proactively pursue adoption of global discipline barring speculative position taking in commodity futures by financial institutions or other entities with no stake in supply chains of the commodities concerned.

Upholding domestic demand driven component of output growth in low income member economies would require IMF financing support agreements to avoid imposing conditions hurting well-being of the poor, instead keeping the brunt of adjustment burden on the better off.

To this end, IMF assistance programmes may also include financing for member country’s own targeted initiatives supporting output activities of farm and non- farm small businesses including start ups, stressed the BB chief.

Low income DAP countries also need IMF support in putting in place sustainable, affordable social safety nets for the poor; in appropriately structured retirement and pension savings schemes.

IMF can increase its presence in local field offices for first-hand appraisal of the needs and concerns of DAP countries facing shocks from turbulences in the global economy, Atiur recommended.

The representatives are very effective and generally so are the TA support. But still compared to other partners, the IMF is very HQ centric in staffing and this could be rebalanced, he suggested.

Dr Atiur also attended the SAARC Finance meeting on the same day which was participated by finance secretaries and central bank governors of all South Asian nations.

Caption

Bangladesh Bank Governor Dr. Atiur Rahman seen with IMF Managing Director Christine Lagarde in the IMF-World Bank Annual Meetings 2012 in Tokyo, Japan.

News: The Daily Sun/Bangladesh/15th-Oct-12

 Bangladesh Bank (BB) will start to exchange newly printed notes of different denominations from today (Sunday) on occasion of Eid-ul-Azha and Durga Puja for meeting the additional demand for cash during the upcoming festivals.

The new notes will be distributed from the Dhaka office and other offices of the central bank until the last working day before Eid.

The new notes will also be available in 11 branches of nine commercial banks in the city, said a BB statement on Saturday. Anyone willing to collect the notes can visit those 11 bank branches in the city.

Like every year, this year the BB will gradually release notes and coins worth more than Tk 200 billion in the festivals, said a BB official. It will issue the new coins and notes of various denominations, such as Tk 2, Tk 5, Tk 10, Tk 20, Tk 50, Tk 100, Tk 500 and Tk 1,000 on the occasion of Eid and Puja, he said.

Along with the new banknotes, all existing paper notes in the same denominations will also remain in circulation.
The central bank has already taken necessary measures against circulation of counterfeit currencies in the cattle markets.

Another BB official said that the BB had urged home and law ministries, and police and Rapid Action Battalion to take necessary measures against fake currencies so that counterfeit notes could not enter the money market during the festivals.

The name of the banks braches are: Press Club Branch and Elephant Road Branch of Agrani Bank, Ramna Branch and Bangabandhu Branch of Sonali Bank, New Market Branch of Janata Bank, Sadarghat Branch of Pubali Bank, Bashundhara City Market Branch of Social Islami Bank, Gulshan Branch of Dutch- Bangla Bank, Kawran Bazar Branch of Southeast Bank, Malibagh Branch of Prime Bank and Jatrabari Branch of Islami Bank Bangladesh Ltd. respectively.

The central bank would launch campaign in print and electronic media about the counterfeit notes to create awareness among people.

Besides, the teams of the BB and the commercial banks would also visit the cattle markets to detect the counterfeit notes.

The BB asked all deputy commissioners to take measures at the main cattle markets of the districts to detect the counterfeit notes. Generally, during Eid demand for new notes increases many folds as it has become a custom to distribute fresh notes among the kids and youngsters as Eid selami (gift) in Bangladesh. Many Hindu people also pay money to their relatives on the occasion of Dashami of Durga Puja. The money is meant to be spent in the Puja fair.

News: The Daily Independent/Bangladesh/14th-Oct-12

Md Khurshid Alam has been promoted to General Manager of Bangladesh Bank (BB).

Before his new assignment, he was Deputy General Manager of SME and Special Programmes Department of the BB, said a press release Wednesday.

Alam joined the central bank as an assistant director in 1988.

News: The Daily Sun/Bangladesh/11th-Oct-12

Naoyuki Shinohara

Bangladesh will need to grow by 7 percent to 8 percent a year to achieve its development objectives for the next decade, said Naoyuki Shinohara, deputy managing director of International Monetary Fund.

The skill set of the country's young labour force, along with the basic infrastructure, will need to be enhanced as well, Shinohara said in an exclusive interview with The Daily Star.

“The resilience of the Bangladesh economy over the past several years has been impressive, and GDP growth has been broad-based, thus helping the country achieve 6 percent growth on average.”

The agricultural sector, Shinohara thought, has benefited from the good weather conditions, continued policy support, and better access to credit, as well as favourable price trends.

While export-oriented industries, in particular ready-made garments, propelled the manufacturing sector, with a vibrant private sector taking advantage of the low unit labour costs to expand into new markets.

Finally, services have gained from relatively strong domestic demand bolstered by remittances and new policy initiatives allowing more private participation and increased competition, Shinohara added.

Despite the vast progress made over the past two decades, the fact that a large number of households still live below the poverty line concerns Shinohara.

"The IMF is with the government in its fight against poverty by designing policies that help strengthen governance, reduce waste and excesses, and channel resources to growth-critical areas,” he said.

“We see it as a two-pronged approach: higher income through higher growth and targeted benefits for those most vulnerable to adjustment.”

The government will need to make a concerted effort to ensure the safety net operations reach the society's neediest, Shinohara said.

The government can, however, expect the other development partners to provide vital support in this regard.

He expects the various reform measures taken under the current external credit facility (ECF) arrangement to consolidate higher growth in the medium-term.

Given Bangladesh's young demographic, vibrant private sector and the fact that it is sitting at the crossroads of the world's most dynamic economies, Bangladesh has great potential going forward, according to Shinohara.

"To take full advantage of this, the government will indeed need to generate more internal resources, mainly in the form of tax revenues, in order to remove social and physical impediments to growth."

Despite the global risks, the IMF expects Bangladesh's economy to expand by 5.8 percent in fiscal 2012-13, he said.

The risks associated to this growth outlook stem mainly from the uncertain external environment, he added.

The pace of expansion is expected to be slower than last year, mainly due to the more subdued growth in garment exports and private consumption.

Shinohara said the fund also expects headline inflation to stay in the 7-8 percent range this fiscal year, after coming down from double digits earlier in the year.

"Policy tightening is expected to further reduce the underlying pressures, but new ones could emerge if global food prices continue to rise. Greater exchange rate flexibility has helped absorb external pressures and reverse the decline in reserves we saw in 2011."

Shinohara said if the Eurozone crisis were to intensify Bangladesh's export growth could slow even further, seeing that nearly half of all exports receipts come from the European Union.

"At present, we expect a modest recession in the Euro area in 2012, followed by a weak recovery in 2013."

He said if the global slowdown becomes severe, remittances could also be affected, including those from the Gulf countries.

"Having said this, there could be offsetting effects on the balance of payments. They would arise mainly from a lower import bill due to more restrained imported garment inputs and oil import growth. The impact on the exchange rate would be driven by the supply and demand conditions in the market."

According to the conditions of the three-year ECF arrangement that IMF has approved for Bangladesh in April of this year, the government is committed to undertaking reforms to yield macroeconomic stability, reduce external vulnerability, and, ultimately, achieve higher growth.

In the face of external and fiscal pressures that emerged in 2011, macro-tightening measures have already been put in place.

"So far, the economy has responded well. Bangladesh Bank has been rebuilding its foreign reserves buffer since the early 2012. The government is also committed to moderate fiscal consolidation aimed at preserving stability."

"While we urge the policymakers to remain vigilant in the face of an uncertain external environment, the IMF is also prepared to step in when necessary to ensure programme targets are accommodating of the changing circumstances."

Shinohara said the budget for the current fiscal year provides good support to Bangladesh's macroeconomic stabilisation efforts.

"In our view, revenue targets are reasonably ambitious, factoring in ongoing improvements to tax policy and revenue administration. Expenditure levels are broadly appropriate, although we believe the annual development programme spending is higher than what the current capacity allows."

As a result, a lower-than-budgeted deficit target would be prudent, also factoring in the availability of external and domestic financing.

Shinohara said a major challenge for the government, as in the previous fiscal year, will be to keep subsidy-related costs under control and to ensure safety nets are in place to cushion the impact of administered price increases on the most vulnerable.

"Over the programme period, generating more tax revenues and better prioritising expenditure will also be crucial in reducing poverty and achieving the medium-term growth objectives."

The second instalment of the ECF loan is scheduled to be released in November. An IMF mission visited Dhaka In September to review implementation of the IMF conditions.

"The IMF mission has been generally satisfied with the progress made so far, particularly with respect to the quantitative targets set out under the ECF-supported programme.”

He added that most of the targets were met by the end of June 2012, which was the ECF arrangement's first test date and one of the main bases for going forward.

"However, discussions are still ongoing with the authorities on the forward-looking reform agenda, with further actions needed over the near-term to ensure structural reforms remain on track, notably those related to new VAT and banking legislation."

"Once satisfactory progress has been made in the programme, we would make a recommendation to the IMF's executive board to complete the review. Approval thereafter by our Board of this request would trigger the release of the second disbursement under the ECF arrangement."

The IMF official said the fund expects the government agenda to remain focused on reforms aimed at strengthening the tax policy, revenue administration, public financial management, monetary operations, financial sector and the trade and investment regime.

Under the ECF arrangement, the IMF is already working with the government to improve the taxation system, he added.

Shinohara urged the government to make efforts to woo in investors.

"Pre-election political uncertainty is not unique to Bangladesh. We, however, are confident that the government will remain committed to a reform path for a better future of the country,” he said.

"If this is the case, we believe investors -- both local and foreign -- will continue to pursue opportunities in Bangladesh."

News: The Daily Star/Bangladesh/11th-Oct-12