Lower trade deficit, restricted imports and higher foreign aid have underpinned an improvement in the country's balance of payments (BOP) situation at the end of April of the outgoing financial year.

Bangladesh Bank (BB) data shows the BoP shortfall came down to $106 million in April this year, from $ 419 million in March. In the July-April period of the previous fiscal, the deficit in BoP was as high as $502 million.

A BB high official said the BoP situation has been improved due to lower trade deficit as a result of tightening monetary policy, which also restricted imports and encouraged exports to new destinations and pursued for accelerating the remittance mobilisation.

“BB was serious in executing the monetary policy stance (MPS) and monitored banks regularly, especially on opening of letters of credit (LCs), since the MPS for January-June of the current FY came to force early 2012,” said the official, seeking anonymity.

The country also received around $1.5 billion as foreign loans including $ 300 million from the International Monetary Fund (IMF) that helps ease the pressures in balance of payments, he said.

The official said the merchandise imports in the first half of the current fiscal saw a significant growth that led the central bank to intervene into restricting import of non-productive items so that no abnormal burden could rise with regards to BoP.

Due to the high demand for petroleum products for the fuel-run quick-rental and rental power plants, the country’s import expenditure stood at $ 28.8 billion at the end of May since July 2011, up 11.82 percent compared to the same period of the previous fiscal, according to BB statistics.

Opening of LCs for import of food grains (rice and wheat), capital machinery, industrial raw materials and other products together declined by 6.97 percent this fiscal compared to the previous fiscal.

For food grains, the fall in imports was 70.10 percent while capital machinery 25.82 percent, industrial raw materials 8.05 percent and others imports saw a fall by 4.41 percent in July-April period of the 2011-12 fiscal.

On the other hand, earnings from merchandise exports rose to

$ 21.7 billion in the July-May period of the outgoing fiscal. The growth in exports over the corresponding period was recorded only 8.2 percent. The growth was almost half than the strategic target of 15 percent for FY 2011-12, according to data available from Export Promotion Bureau (EPB).

Meanwhile, the country received a total of $ 11.7 billion in remittance during the July-May period. The country received another $580 million as foreign direct investment during the same period.

The Daily Sun/Bangladesh/ 23th June 2012

The planning ministry has identified severe inefficieniesy in implementation of annual development programme (ADP) by the Banking Division of the Finance Ministry in 2011-12 fiscal and asked the authorities concerned to accelerate the execution process as much as possible by the end of the outgoing fiscal.

In a letter sent to Banking Division Secretary Safiqur Rahman Patwary on June 13, the Implementation, Monitoring and Evaluation Division (IMED) of the Planning Ministry also advised the concerned ministry’s head to cancel the holidays of all concerned officials and employees in order to achieve higher progress in ADP implementation.

The Planning Ministry letter reads that utilisation of ADP allocation for the Banking Division in the current FY is only 19 percent till May 2012. This is 51 percent less than the national ADP implementation rate of 70 percent. “If needed, please interfere in person and cancel weekly holidays of concerned officials in order to achieve 100 percent progress in the ADP spending,” IMED Secretary Md Mozammel Hoque Khan has asked the Banking Division secretary.

The ADP allocation for the Banking Division in FY 2011-12 was Tk. 1758 million for five projects including Central Bank Strengthening Project (CBSP) and Improvement of Capital Market Governance (ICMG) Project.

The CBSP project was funded by World Bank while the Asian Development Bank provided fund for the ICMG project.

The IMED letter mentioned that the achievement in ADP implementation by the Banking Division was 48 percent in FY 2010-11.

In the letter, the IMED secretary said the low progress in ADP spending might affect the government’s fiscal achievements.

The country’s ADP implementation in FY 2010-11, FY 2009-10 and FY 2008-09 were 92 percent, 91 percent and 86 percent respectively, the letter reads.

The Daily Sun/Bangladesh/ 23th June 2012

Commercial Bank of Ceylon PLC signed a Participation Agreement with Bangladesh Bank recently under 'JICA assisted Financial Sector Project for the Development of Small and Medium Enterprise Financing in Bangladesh'. Dilip Das Gupta, Senior General Manager of CBC seen exchanging the documents with Senior Officials of BB and JICA representative.

The Financial Express/Bangladesh/ 17th June 2012

The Bangladesh Bank will adopt a “people-centric” growth and empowerment model to provide economically deprived people with financial services to ensure overall economic development, Governor Atiur Rahman said yesterday.

The central bank will do the job under its Bangladesh Bank financial inclusion initiatives with the thematic outline “Including Excluded People”.

The initiatives were presented at the inaugural session of the national consultations in preparation for the international conference on people's empowerment model, organised by the foreign ministry, in the capital.

Rahman defined the financially excluded people as those who are dwelling in remote, sparsely populated locations and deprived of financial and social services and the financially excluded institutions are those micro and small scale farm and non-farm organisations which are excluded from financial services.

As an example of an initiative, for the first time, savings accounts of more than 9.6 million farmers have been opened -- each with a deposit of Tk 10 only -- and are being used for government transfers such as diesel subsidy.

Until June 10, Bangladesh Bank has provided Tk 490 crore to BRAC's refinancing scheme with which the development organisation provided loans to 4.15 lakh sharecroppers in 250 upazilas of 48 districts.

Asked how effectively the initiative is being implemented, the BB chief told The Daily Star: “I personally call farmers' mobiles randomly to find out whether they received the money.”

Under the BB's directive, student loans are also given out to poor students living on the outskirts of the city, which Rahman described as a “high-return investment”.

When the people living on the outskirts are brought under the initiative, every worker working in the capital will be able to send money with their mobile phones to their remote village in Kurigram also, he said.

The Daily Star/Bangladesh/ 14th June 2012

The central bank has defined merchant banks as non-banking financial institutions (NBFIs), creating confusion over the status of the merchant banks, which are involved in share market activities, not in the financial sector.

Bangladesh Bank in a letter to the Securities and Exchange Commission (SEC) on June 6 said the merchant banks are considered as NBFIs as per Section 2(b) of Financial Institution Act, 1993.

A clause of the act included merchant banks, among others, in the category of financial institution.

The SEC on June 10 forwarded the central bank's letter to Bangladesh Merchant Bankers Association (BMBA), a platform of the merchant banks.

Earlier, the stockmarket regulator on May 20 sought the banking regulator's opinion about the status of merchant banks.

The finance minister in his budget speech also treated the merchant banks as NBFIs, and proposed to reduce their income tax from 42.5 percent to 37.5 percent.

Later, the BMBA at a press briefing said the government's offer to reduce the income tax for merchant banks was met with a wave of confusion, as they were already paying the lower rate of 37.5 percent.

Merchant banks provide a myriad of financial services, ranging from underwriting shares to lending to stock investors amongst other activities. Due to their multi-faceted roles as financial institutions they are not classified in the same bracket as 'banks and non-bank financial institutions'.

The National Board of Revenue (NBR) wrote a letter to merchant banks putting them in the same classification as the rest, an idea which was met with vehement objections from merchant bankers. The plan did not come into effect.

“The merchant banks have always paid 37.5 percent tax while it is 42.5 percent for banks and non-bank financial institutions,” Mohammad A Hafiz, president of BMBA, told the press briefing.

“We are also not allowed to take deposits, disburse loans and perform other financial activities what NBFIs can,” Hafiz said.

Merchant banks, as opposed to 'banks and non-bank financial institutions', are not licensed by the central bank but by the SEC, he said.

There are 43 full-fledged merchant banks in the country now.

The Daily Star/Bangladesh/ 14th June 2012