The government will mobilise Tk 20,000 crore from commercial banks within the next six to nine months for implementing a series of power projects to generate 2,000 megawatts of electricity.

At a meeting on Wednesday, State Minister for Power and Energy Nasrul Hamid asked the banks to assist the local power sponsors by investing the funds.

SDG Chief Coordinator Abul Kalam Azad, Power Secretary Dr Ahmad Kaikaus, Banking Division Secretary Md Eunusur Rahman, Bangladesh Bank Deputy Governor SK Sur also attended the meeting along with the high officials from several banks, including Standard Chartered, HSBC, Dhaka Bank, Prime Bank, Agrani Bank.

The state minister also assured the banks that their investment will be more secured in Bangladesh’s power sector.

The Power Division is implementing 116 projects at an estimated cost of $24.73 billion. Of the total cost, around $13.78 billion will come from project aids.

Besides, the power division is also planning to implement another 56 projects that will require $32.79 billion, including $25.47 billion in project aids.

The government will need around $85 billion for implementing power transmission, generation and distribution projects.

The government is planning to implement the projects with funds from government-to-government deals, ECA financing and local banks.    

In response to the proposal from the state minister, top officials of the banks said they have already received proposals from different power sponsors.

The also said they are ready to support the power sector development. They suggested reforms in some rules and regulations and a review of the statutory liquidity ratio (SLR).

SDG Chief Coordinator Abul Kalam said the Finance Division will soon form a high-powered committee comprising representatives of NBR, finance division, power division and private banks to address the issue.

Banking Division Secretary Md Eunusur Rahman said the local banks are reluctant in investing in the power sector as those are long-term investments. He also assured that they are ready to address any issue the banks might have been facing in this regard.

BB Deputy Governor SK Sur said the government can mobilise funds for power sector development by issuing Islamic and corporate bonds.

The government is planning to utilise a chunk of idle money from the forex reserves and commercial banks’ funds to implement a series of priority power projects for meeting the power demand in the long term.

The power sector has already received $8 billion in investments during the last eight years of the current Awami League government.

“Power Division wants to make the local banking sector and financial institutions aware of the investment opportunities in power sector,” Power Cell Director General Mohammed Hossain, who presented the keynote at the meeting, told daily sun.

Bangladesh Bank has over Tk 1 lakh crore of idle money, officials said.

The total amount of loan from saving instruments will be almost 50% of the outgoing fiscal year’s deficit budget, which is now estimated at Tk98,674 crore

The government expects its borrowing from saving instruments will exceed Tk50,000 crore in the outgoing fiscal year against the target of Tk45,000 crore.

In June so far, an amount of Tk10,000 crore came from the sale of saving instruments.

“There has been a huge pressure of buying saving instruments in the month of June which marks the end of a fiscal year,” said Bablu Kumar Saha, Director General of the Department of National Savings.

He said the saving instruments are still preferred by the people to depositing in banks or investing in stocks as the profit rates of the instruments are relatively high.

“The people are increasingly choosing to buy saving instruments instead of depositing their money in banks or investing in stock markets,” Bablu Kumar said.

According to the Finance Division, the total government borrowing from saving instruments will be almost 50% of the outgoing fiscal year’s deficit budget which is now estimated at Tk98,674 crore.

An official said if the government loan from saving instruments crosses Tk50,000 crore, it will also create a fiscal indiscipline in the outgoing fiscal year.

According to the Department of National Savings, the government has so-far sold Tk60,519 crore saving instruments as of April 2017 while the principal payment paid was Tk18,419 crore. An amount of Tk12,914 crore was also paid as interest.

As a result, the net amount stands at now Tk42,099 crore from the sale of saving instruments as of April 2017, which is 93.55% of the government’s total credit target in the current fiscal year.

The government has a target to borrow a net amount of Tk45,000 crore in the revised budget during the fiscal year 2016-17.

In the revised budget, the principal amount is Tk22,000 crore and the profit is Tk15,630 crore.

In the FY2017-18, the target of total sale of saving instruments is Tk60,000 crore, the principal amount payment is Tk29,850 crore and the profit is Tk19,780 crore.

Now the government wants to encourage people to go to stock market and the banks reducing the profit rate of the saving instruments.

Earlier, Finance Minister AMA Muhith said: “We have already taken initiative to rationalise the profit rate (of saving instruments) so the people go to banks or stock markets.”

The profit rates of saving instruments currently range from 11.04% to 11.70%.

Although the present rates are after slashing down by 1%-2% in the FY2014-15, they are still high compared to the treasury bill, bonds and bank deposit interest.

Finance Division’s Credit Debt Management Committee (CDMC) described the nature of taking loan from the government window as an “open tap” source.

The CDMC has identified three causes behind the rise in demand of the saving instruments: the reduction of banks’ fixed deposit rate, the people’s reluctance to invest in stocks and reduction of tax of saving instruments.

CDMC has advised to reform the operation of the national saving instruments. As per the initial proposal of the Department of National Savings, several steps were taken to squeeze the size of amount of saving instruments.

According to the proposal, the people have to inform the authorities concerned about the source of income for depositing or investing in the state saving instruments.

Organisations investment should be stopped while the investment limit in the sectors other than pension scheme will be lowered to Tk25 lakh from the existing Tk45 lakh, the proposal said.

The under-aged group will not purchase the national saving certificates and the profit rate of saving certificates will be more lucrative for the older men and women, it said.

According to the proposal, the functions of the Department of National Savings will be digitalised.

The Bangladesh Bank has issued an operating licence to a new non-banking financial institution (NBFI) named Alliance Leasing and Finance Company Limited. The central bank issued the licence under Article 4(1) of the Financial Institution Act 1993, said a circular dated June 20, 2017.

Domestic demand buoyant, says BB quarterly report

The current negative growth in remittance inflows might have some adverse effects on domestic demand, the central bank said, thereby possibly affecting country's economic growth.

From the demand side, strong private-sector-credit growth and capital-machinery-import growth indicate buoyant domestic demand, according to the latest quarterly report of the Bangladesh Bank (BB).

"However, the negative growth in remittance inflows (-15.3 per cent) might have some moderating effects on the domestic demand," the central bank said in its latest Bangladesh Bank Quarterly (BBQ) for January-March 2017.

The BB's latest observations came against the backdrop of falling trend in the flow of inward remittances in recent months.

It happened due to a sluggish trend in economic activities in the Middle-Eastern countries along with a rising trend in sending hard-earned money by expatriate Bangladeshis using informal channels, according to the central bank officials.

They also said the overall economic growth may face an adverse impact in future if the existing downward trend of inward remittance continued.

"It may be visible in the next fiscal if the falling trend in inward remittance persists," a BB senior official told the FE Wednesday while explaining possible impacts of the negative growth in inward remittances.

He also said the government as well as the central bank of Bangladesh is now working to revamp the inflow of remittance shortly.

The BBQ also said the country's overall economic activity maintained its momentum during the third quarter (Q3) of the outgoing fiscal year (FY) 2016-17.

The industry sector benefited from domestic demand, with output in the large-and medium-scale industries growing by 10 per cent in the Q3 of FY 17.

The growth in bank credits to trade and commerce sectors (13.3 per cent) and the increase in the Chittagong port cargo volume (9.5 per cent) suggest a solid performance of the service sector.

The recent floods in the northern haor areas of the country had localised impact in the agriculture sector, the BBQ noted.

"Favourable inflation dynamics benefited from declining non-food inflation, while food inflation (12-month average) rose modestly since September 2016," the BB explained in its latest BBQ.

Besides, non-food inflation (point to point) has been on the rise since the beginning of the Q3.

Recent developments increase the probability of higher inflationary pressures over the coming months, the central bank hinted.

However, consumer price index (CPI) inflation on 12-month-average basis declined to 5.4 per cent in March 2017, well below the 5.8 per cent target in the FY17 budget.

Country's banking-sector indicators depict a mixed picture during the period under review.

The BBQ says capital-to-risk-weighted-asset ratio (CRAR) and asset quality (NPLs) in the banking system softened, while the provision-shortfall position of banks against classified loans improved.

The ratio of gross NPL to the total outstanding loans of the banking sector increased from 9.2 per cent at end-December 2016 to 10.5 per cent at end-March2017.

Moreover, the ratio of net NPL to the total outstanding loans of the banking sector rose to 2.9 per cent from 2.3 per cent during the same period.

The CRAR remained largely unchanged at around 10.7 per cent in March 2017.

Despite the deterioration in NPL, provision-shortfall position of the banking sector improved in March 2017 and stood at Tk (-) 52.3 billion from Tk (-) 54.7 billion at the end of December 2016.

The spread of monthly weighted average lending rates and deposit rates in the banking sector remained below 5.0 per cent and the inter-bank money-market rate was stable around 3.6 per cent, reflecting adequate market liquidity.

During the quarter under review, the Bangladesh Taka (BDT) exchange rate against the US dollar depreciated modestly (1.22 per cent), reflecting the market forces.

The BB bought $45 million in January 2017 and sold $ 22 million and $23 million on the foreign-exchange market in February and March 2017 respectively, according to the quarterly report.  

"Real effective exchange rate also depreciated modestly due to the depreciation of nominal exchange rate and falling domestic prices," it noted.

The Government and the Asian Development Bank (ADB) Wednesday signed agreements for US$300 million in loans to help build a dual-gauge railway connecting Chittagong and Cox's Bazar to promote trade and regional connectivity.
This assistance forms the first tranche of $1.5 billion ADB loans for the South Asia Subregional Economic Cooperation (SASEC) Chittagong-Cox's Bazar Railway Project, said a press release here.
The first tranche will finance 20 percent of the progress towards constructing 102 kilometers of new railway line between Chittagong and Cox's Bazar.
Economic Relations Division (ERD) Secretary Kazi Shofiqul Azam and ADB Principal country Specialist Jyotsana Varma signed the agreements on behalf of their respective sides.
"This project, which is closely aligned with Bangladesh's Seventh Five Year Plan, will provide efficient, safe and environmentally-friendly railway transport," said Jyotsana Varma.
"The project design will integrate features that are friendly to the elderly, women, children, and people with disabilities," he added.
The new rail link, which opens in 2022, aims to transport 2.9 million passengers annually between Chittagong and Cox's Bazar by 2025.
The construction of this railway section is one of several ADB railway projects to help Bangladesh meet its targets under its Seventh Five-Year Plan and Railway Master Plan.
It will help boost Bangladesh Railway's freight market share to 15 percent and passenger market share to 10 percent by 2020 - both are currently around 4 percent.
Chittagong-Cox's Bazar Railway forms part of the Trans-Asia Railway network, an initiative led by United Nations, aiming to provide seamless rail links between Asia and Europe to better connect people and markets.