Left, ADB Country Director Teresa Kho speaks at a press conference in Dhaka yesterday.

Bangladesh's economic growth may come down to 6 percent in the current fiscal year due to sluggish exports and a decline in domestic demand, the Asian Development Bank has said.

The lender launched its Asian Development Outlook 2012 in Bangladesh and throughout Asia Pacific yesterday.

GDP (gross domestic product) rose by 6.3 percent and the government's target is 7.2 percent for the current fiscal year.

However, the ADB said inflation will fall by 2 percentage points and stand at 8.5 percent on average in the current fiscal year compared to that in the last fiscal year.

“Export growth is expected to remain low in the first half of fiscal 2013," said ADB Country Director Teresa Kho at a press conference at the organisation's office in Dhaka yesterday.

Growth in domestic demand is also likely to stay limited because of the central bank's continued credit tightening, Kho said.

Mohammad Zahid Hossain, principal economist of the ADB in Bangladesh, made a presentation on the latest situation of Bangladesh's economy at the press conference.

Hossain said a financial crisis in the European Union is affecting Bangladesh's exports.

Echoing the view of the ADB country director, he said credit tightening by the central bank will slow domestic demand.

“The expected rise in remittances will not be strong enough to fully offset it.”

Hossain said sectoral GDP growth in the services and industries sectors will be slow in the current fiscal year but growth in the agriculture sector will almost double compared to that in the last fiscal year.

About inflation, he said upward adjustments in the fuel and electricity prices at home will lift non-food inflation.

But inflationary pressures will be contained as central bank's credit tightening measures take hold.

He also said the international prices of commodities, including that of fuel, are expected to be broadly stable.

Hossain said food prices are expected to fall in the first half with comfortable domestic supply, but will go up in the second half as drought in a number of major agricultural suppliers cuts global supplies.

The ADB said remittance growth will be 12 percent in the whole year as more workers leave for the Middle East countries.

The prevailing oil prices support the construction projects in those countries that engage the bulk of unskilled Bangladeshi workers.

However, the ADB said several downside risks could upset the projections.

It said fiscal management could come under pressure if the revenue target is not realised and planned foreign financing does not materialise.

If political pressures quash the expected increases in fuel and electricity prices, it may also strain fiscal management, the ADB said.

The lender also said the monetary discipline could be undermined if the government increases bank borrowing to finance subsidy spending.

Finally unfavourable weather or political unrest could affect economic activities, it said.

The ADB country director said it is important to enhance macroeconomic stability in the short-term and strengthen internal and external balances.

Kho also said ensuring adequate credit for the private sector is a priority.

Policy actions at the same time should focus on keeping inflationary pressures in check, she added.

News: The Daily Star/Bangladesh/4th-Oct-12

Leaders of the Small and Medium Enterprise (SME) sector on Tuesday slammed the government for its decision to disburse the fund of a refinancing schemes for SMEs through private banks as they charge high interest on credit.

Though the government is giving the fund for refinancing at lower interest, they are charging higher interest in the name of operating charges, the entrepreneurs alleged.

“The government is handing over people’s money to the institutions of the riches,” the sector leaders said, pointing finger at the private banks.

The SME sector leaders were speaking at a discussion on the SME financing project, funded by the Japan International Cooperation Agency (JICA), at SME foundation’s office in the city. Under the Jica scheme, Bangladesh Bank (BB) earlier opened a Tk 4.5 billion fund to provide financing facilities to the country’s small and medium enterprises.

Under the two-step fund, provided by JICA, 39 banks and financial institutions (FIs) will be provided with re-finance or pre-finance for lending to SMEs. BB signed separate agreements with 39 participatory banks and FIs to this effect.

During the function, SME Foundation managing director Khurshid Alam repented that the central bank was not taking any effective measure to lower the interest rates.

“For disbursing the Jica’s loan, the government did not pick up state-owned banks. Because, state banks have been set aside for institutions like Hallmark,” remarked Raju Ahmed, president of Agro Processor Association.

Another SME sector leader Mosharraf Bhuiyan alleged that the private banks were charging 15 to 18 percent interest from small entrepreneurs after getting the fund from the central bank at an interest of five percent.

News: The Daily Sun/Bangladesh/3rd-Oct-12

Bangladesh Bank Governor Dr Atiur Rahman speaks at a seminar on ‘Green banking, mobile banking and corporate responsibility’ at BB head office in Dhaka Tuesday.

Bangladesh Bank (BB) Governor Dr Atiur Rahman warned that if the banks fail to introduce mobile banking service within the set time then their licences for the service will be cancelled.

Calling upon the mobile operators of the country to provide necessary help to the banks in this regard, he said, “You have to abide by the laws to do business in the country.”

The BB governor was speaking at a seminar as the chief guest organised on ‘green banking, mobile banking and corporate responsibility’ Tuesday in the capital.

The BB governor said, “Until now, some 23 banks have been given licences to introduce mobile banking. Of them, 14 banks have already started the service. If the other approved banks fail to start the service within the set time, then their approvals will be cancelled and given to other banks. No new approval will be issued in next three years, if needed.”

Chief executives of different scheduled banks, BB deputy governors SK Sur Chowdhury and Begum Naznin Sultana, BB executive directors and senior officials attended the seminar.

In the seminar, chief executives of scheduled banks alleged that the telecom companies are not helping the banks to introduce mobile banking. All the leading mobile operators are acting similarly. They are not coming forward.

Responding to their allegations the BB governor angrily said, “If you want to do business in the country you have to abide by the rules. They will have to come forward.”

Atiur said, “Our mobile banking has to expand more to ensure inclusive growth. There are 40 million people in the country who need to be brought under mobile banking. Economy of the country will advance immensely if new 40 million people are brought under banking service.

News: The Daily Sun/Bangladesh/3rd-Oct-12

The flow of remittance into the country marked a steady growth in September, though the month is considered to be the lean season, according to official statistics. From 1st to 28th September, expatriate Bangladeshis have remitted $ 1.05 billion (Tk 82 billion) in the country from different destinations across the world, the Bangladesh bank (BB) data shows.

Central bank sources said the flow of remittance remained slow in the month of September during last couple of years but it has showed a remarkable rise this year.

According to the BB data, the country’s receipts as remittance were $ 855.44 million and $ 837.71 million in the single-month of September in the calendar years 2010 and 2011 respectively.

In July and August 2012, the remittances that entered into the country were $ 1201.15 million and $ 1167.84 millions, the BB data shows.

News: The Daily Sun/Bangladesh/2nd-Oct-12

Bangladesh Bank (BB) will raise the flat-rate premium by 0.01 to 0.02 percent for deposit insurance to minimise the risk connected to the loss of depositors’ funds with the scheduled banks, officials of Banking Division under the finance ministry said.

“The Banking Division has already given its consent on the hike in premium rate under the deposit insurance trust fund” said a senior official of the finance ministry’s wing. He also said the central bank will announce the new premium rate soon.

As per a proposal, BB will raise premium rate on deposit insurance by the state-owned commercial banks, non-banking financial institution, and private commercial banks including those under the early warning system and problem banks category. The banks that are now under an early warning system will have to pay such premium at 9 paisa per Tk 100 deposited, which was earlier 7 paisa, according to the BB proposal.

The amount payable as premium for the problem banks will be 10 paisa instead of 9 paisa and 8 paisa for other banks, which was previously 7 paisa. Deposit insurance system was first introduced in Bangladesh in August 1984 aiming to minimise the risk of loss of money deposited with banks.

The Deposit Insurance Act 2000 says in case of an insured bank’s collapse or bankruptcy, BB shall pay an amount equal to the money of each depositor of that bank. However this amount will not exceed Tk 200,000, which was earlier Tk 100,000. As per provisions of the law, the premiums collected from the insured banks are deposited in an account called the Deposit Insurance Trust Fund, maintained by the central bank.

News: The Daily Sun/Bangladesh/2nd-Oct-12