The International Finance Corporation (IFC) yesterday announced an investment of $10 million in the Small Enterprise Assistance Fund Bangladesh Ventures Fund (SEAF BV) to boost the financing available for climate-resilient small and medium enterprises.

The investment, with support from the Climate Investment Funds-Pilot Programme for Climate Resilience (CIF-PPCR), would strengthen their capacity to address operating difficulties arising from climate change, according to a statement.

CIF-PPCR helps developing countries scale up efforts to combat climate change, the IFC said. This equity investment is a $10 million blended finance solution from the IFC and CIF-PPCR.

SEAF BV, launched by the IFC and the Small Enterprise Assistance Funds (SEAF) in 2010, is mandated to invest in SMEs in Bangladesh.

“IFC's extended support over the years has been invaluable in the successful initiatives of the fund. Its engagement will also help the fund begin investing in climate resilience activities for small businesses, helping SMEs to cope better with the adverse impacts of climate change,” said Hubertus Jan (Bert) van der Vaart, CEO of SEAF. 

Mengistu Alemayehu, IFC's director for South Asia, said: “This project is IFC's first climate resilience fund investment, and will help demonstrate the business case for increased climate resilience financing in Bangladesh and other countries which are vulnerable to climate change.”

IFC, a member of the World Bank Group, has previously invested $12 million of equity into the fund to catalyse investment in high-growth SMEs.

The investment complements the IFC's wider investment programme in Bangladesh, where it promotes sustainable growth and private-sector development by investing in critical infrastructure, boosting financial inclusion, enhancing competitive manufacturing, and supporting reforms, according to the statement.

Remittance slid 16 percent year-on-year in the first ten months of the fiscal year in continuation of the sluggish trend that is threatening the country's foreign currency reserves, growth and poverty reduction efforts. 

 Between the months of July last year and April this year, Bangladesh received $10.28 billion in remittance, according to data from the Bangladesh Bank.

The decline in remittance flow from the six Gulf Cooperation countries, the largest labour market for Bangladesh, mainly accounts for the slump.

Remittance inflow from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates shrunk 17 percent to $5.26 billion in the July-March period of the fiscal year.

This stands in stark contrast to the huge numbers of Bangladeshi nationals taking up jobs in the six GCC countries in recent years.

If the slow remittance growth trend continues into the new fiscal year, the local currency will devalue, said AB Mirza Azizul Islam, a former adviser to the caretaker government, adding that the current account deficit will also increase.

The exchange rate of the dollar crossed Tk 80.5 in May, up from the average of Tk 78 in the last several years.

The current account balance was $1.38 billion in the deficit in the first nine months of the fiscal year in contrast to being $3.35 billion in the surplus a year earlier. “Though it is said that remittance inflow has declined, it is not true,” said Abul Barkat, former president of the Bangladesh Economic Association.

The figure shown by the BB is only the amount that came through the banking channel, he said, while urging the government to find out the actual remittance figure by tallying the amounts coming through both the formal and informal channels.

Islam, however, disagrees with Barkat. “Though it is often claimed that the unofficial remittance figures are way higher, I believe that remittance growth has really dropped.”

The Middle Eastern countries are going through an economic downturn due to a fall in oil price. Even Saudi Arabia, a large labour market for Bangladesh, is facing budget deficit. As a result, migrant workers are losing jobs or seeing wage cuts, both of which account for the slump in remittance inflow.

The World Bank recently said the low oil prices, weak economic growth and fiscal tightening in GCC countries and the Russian Federation were taking a toll on remittance flows to South Asia and Central Asia. “If the current trend continues, consumption of those who are remittance recipients will shrink,” Islam added.

The slower remittance growth will put pressure on the exchange rate by depreciating the local currency, said Biru Paksha Paul, former chief economist of the central bank.

But the depreciation will not have a negative impact on the economy immediately as the devaluation of the local currency will encourage remitters to send money through the proper banking channel.

He also suggested the BB take measures to spread remittance services in remote areas to encourage expatriates to send money home through the formal channel. Remittance is the largest source of foreign exchange in Bangladesh after exports.

Money sent by Bangladeshi workers, which accounted for about 6 percent of the gross domestic product in fiscal 2015-16, supports growth through their impact on household income and consumption.

Remittances accounted for about 30 percent of the current account receipts in 2014-15, more than offsetting the trade deficit.

The government is considering doubling the excise duty on bank accounts with large debit or credit balance in fiscal 2017-18 to boost revenue collection.

Accounts with balance between Tk 1 lakh and Tk 10 lakh at any time of a year may be slapped with Tk 1,000 excise tax, up from existing Tk 500, as per the proposal of the Internal Resources Division.

For accounts with balance between Tk 10 lakh and Tk 1 crore, the excise duty would be Tk 3,000. 

The excise duty would double to Tk 15,000 for balance between Tk 1 crore and Tk 5 crore and to Tk 30,000 for accounts that record over Tk 5 crore balance.

Accounts that record up to Tk 1 lakh in balance, debit or credit, may be exempt from excise duty. At present, no excise duty is charged on balance of up to Tk 20,000.

Finance Minister AMA Muhith is considering the proposal, said a senior official of the finance ministry.

In 2016, the number of accounts increased 7 percent to 8.14 crore in 2016 and the average deposit per account 6 percent to Tk 110,457, according to data from the Bangladesh Bank.

In the first eight months of the fiscal year, Tk 1,480 crore was collected as excise duty, up 16 percent from a year earlier, according to data from the National Board of Revenue.

Bank accounts are the largest contributor to excise duty. The last time the revenue authority raised the excise duty rates was in fiscal 2015-16: by 40-50 percent. 

The government is also planning to increase the excise duty on overseas travel.