City Bank Ltd has recently appointed Sohail R K Hussain and Ehsan Khasru as its new additional managing directors.

Prior to their new positions, Sohail R K Hussain was serving the bank as a deputy managing director(DMD) and Head of Business while Ehsan Khasru as Chief Risk Officer and another deputy managing director(DMD), said a press release.

Sohail Hussain joined City Bank in 2007 as DMD and head of business, overseeing the various business divisions of the bank including Corporate Banking, Retail Banking, Treasury and Capital markets and SME Banking. As additional managing director his functional designation will be chief business officer.

News: Daily Sun / Bangladesh/ Feb-03-2011

FHM Humayan Kabir

The World Bank would lend Bangladesh one billion dollar as budgetary support in the next three years provided it is satisfied with the progress of reforms pledged in the country's last two budgets, officials said Tuesday.

They said the development lender has asked the government to submit the status of the reforms by March this year and has assured Dhaka of disbursing the first tranche by June this year.

"We are preparing the progress report. It will be shared with the World Bank in March. We are confident it will satisfy the Bank," Arastoo Khan, additional secretary of Economic Relations Division (ERD), told the FE.

The government sought the budgetary support from the World Bank in October last year. The country needs the fund to finance its budget deficit, which is set to balloon this year due to spike in food and fuel import bills.

Unlike project aid, budgetary support can be used for any expenditure in the budget and normally a very few conditions are attached to such support.

"Usually, the World Bank attaches some terms and conditions on government reforms for availing its budgetary support," said ERD secretary M Musharraf Hossain Bhuiyan.

"But this time it has told us to show the progress of the reform programmes the finance minister pledged in his last two budget speeches," he told the FE.

In the last budget speech, the finance minister said that the budget deficit of the current fiscal year would be kept at five per cent of the country's Gross Domestic Product (GDP), up from 3.4 per cent in the last fiscal year.

But officials said the deficit could cross the projected limit as the government fuel bill is likely to rise by more than a billion dollars in order to fund costly electricity purchase from rental power plants.

In addition, the government was buying around 1.6 million tonnes of foodgrain at a very high price from the international market in an effort to build a buffer stock at home in view of a volatile domestic market.

In his last budget speech, the finance minister promised to raise the country's tax-GDP ratio to 11.9 per cent, boost development spending, frame a perspective plan for the next ten years, establish a budget and planning wing in all ministries.

He also pledged wide-ranging reforms in the financial sector, digitising land record system, strengthening local government and legal system and improving law and order situation.

The government has set a target to secure Tk35.00 billion ($500 million) million as budgetary support credit from foreign lenders this year to keep the budget deficit at Tk393.23 billion, which is five percent of the GDP.

Power Development Board (PDB) officials said the government would have to spend an extra Tk80 billion as subsidy to purchase power from the diesel and furnace oil fired rental power plants.

The government is setting up more than 1400mw capacity rental power plants under a first-track power generation programme to cut supply shortfall, which is hampering the country's GDP growth.

ERD officials said over the last few years the World Bank and the ADB provided Dhaka more than two billion dollars as budgetary support credit to bankroll national budget.

In the last fiscal year, the Asian Development Bank (ADB) lent a record $745 million as budgetary aid mainly to cushion the country from the impact of the global financial meltdown.

The country received $300 million as budgetary support from the multilateral donors-- the World Bank and the ADB, in FY2009.

News: The Financialexpress/ Bangladesh/ Feb-02-2011

The half-year Monetary Policy announced by Bangladesh Bank (BB) governor Dr Atiur Rahman
on Sunday last has shed light how the central bank helped recovery momentum in the economy.
The MPS, as the Monetary Policy Statement is called, said, recovery momentum in economic activities materialized in H1 FY11 as expected, aided by demand recovery in external markets, government’s fiscal stimulus package and BB’s supportive monetary policy measures. The agriculture sector output activities are buoyant in overall benign weather conditions, supported by timely access to inputs and financing.
Exports rebounded strongly with 41 per cent growth y-o-y during July-December 2010, with increase in shipments to both traditional and newer destinations.
Quantum index of medium and large scale manufacturing (available only up to July 2010) moved up 15.3 per cent y-o-y in July 2010, the first month of FY11.
Quantum index for small scale manufacturing weakened 9.2 per cent y-o-y in Q1 FY11 however, presumably because small manufacturers cannot afford captive power generators to cope with supply disruptions from the national grid.
Import payments increased 41.9 per cent y-o-y during July-October 2010 with 35.6 per cent increase in capital machinery imports and about 43 per cent increase in import of production inputs including fuel oil. Opening of new import LCs increased strongly by 43.8 per cent y-o-y in H1 FY11.
Growth in workers’ remittance inflows weakened to a mere 0.21 per cent y-o-y in H1 FY11.
Weak growth of inflows alongside high outflows for strongly rising imports and other commercial payments abroad generated depreciation pressure on Taka and rendered the local inter bank market net buyer from rather than net seller to BB by December 2010. Exports have grown as strongly as imports, but the import base being larger than export base, the trade deficit has widened in H1 FY11.
Taka depreciated against USD, with the weighted average inter bank rate at Taka 70.75 per USD as of 30 December 2010, against Taka 69.44 per USD as of 30 June, 2010. The inter bank market was net seller of USD funds to BB in Q1 FY11, but with rising import payment pressures turned into net buyers from BB in Q2.
Overall, the inter bank market bought USD 400.0 million from and sold USD 316.5 million to BB in H1 FY11.
Because of the emerging balance of payments pressures the government is looking for concessional assistance from official external donors including IMF and IDA; to finance higher public expenditure needed for the aspired leap forward to a high growth trajectory, and to widen foreign exchange availability for increased private sector investments.
BB’s monetary policies and programmes have sought to impact consumer price levels both by influencing key financial sector prices (policy interest rates, viz., repo and reverse repo rates) and by influencing broad money (M2) growth with changes in reserve money (RM, currency in issue plus balances of scheduled banks with BB) as instrument. Besides day to day changes in reserve money, cash reserve and statutory liquidity requirements (CRR, SLR) are also adjusted occasionally in influencing the M2 growth path. Money stock targeting retains relevance in economies with external capital account controls like Bangladesh. Effectiveness of monetary targeting diminishes with increasing openness in capital account, efforts to contract or expand money stock get counteracted by fund flows into or out of the domestic market; the reason why advanced open economies no longer use money stock targeting and resort solely to price based interventions.
Financial inclusion promotion measures in credit policies, alongside discouragement of financing for wasteful unproductive uses are the growth supportive features of BB’s monetary policy stance.
Domestic credit growth kept on gaining pace in H1 FY11, rising to 24.2 per cent y-o-y in November 2010 from 17.6 per cent of June 2010.
Growth in credit to public sector remained small at 9.6 per cent in November 2010, with credit to government and credit to other non financial public sector increasing 5.4 per cent and 29.9 per cent y-o-y (credit growth to SOEs that performed poorly in the past may again become cause for concern unless the new fund infusions yield the hoped for positive results).
Credit to the private sector has expanded even faster; growing 27.8 per cent y-o-y in November 2010 against 24.2 per cent of June 2010. Credit to private sector has thus been expanding much in excess of what may be reasonably needed for attaining the targeted real and nominal GDP growth.
The 38.3 per cent y-o-y rise in industrial term loan disbursements, 42.9 per cent rise in outstanding SME loans, and 18.8 per cent rise in outstanding agricultural loans apparently portray healthy composition of productive lending, but sample probes into actual loan utilization unearthed instances of diversion of industrial term loans into capital market (unavailability of new power and gas connections may have acted as inducement for diversion of loans drawn from banks negligent in end use tracking).
Credit growth faster than deposit growth (28.4 and 21.6 per cent y-o-y respectively as of December 2010) indicated lax attitude of banks in H1 FY11 in expanding lending commitments; time deposits growing slower than demand deposits (20.6 & 42.4 per cent y-o-y in November 2010 respectively) signified high liquidity preference amongst the public, presumably for engagements in capital market, evidenced by hectic trading in the stock exchanges.

News: The Independent / Bangladesh/ Feb-02-2011

In a major step, the Securities and Exchange Commission (SEC) yesterday decided to let lenders take decisions on share credit and perform other tasks related to margin loan disbursement and maintenance.

The merchant banks and stockbrokers, who provide margin loans for share purchase, will however have to report to the SEC on credit disbursement and maintenance on a monthly basis so that the regulator can monitor.

Previously, the SEC had fixed the loan ratio and the lenders provided credit in line with the limit, but the regulator was facing strong criticism from experts and market intermediaries for its role in share credit.

In another move, the SEC allowed stock exchanges to take decisions on some other issues such as transfer of securities from one trading market to another, and suspension of stock trading. Earlier, the bourses acted only on instructions from the SEC.

The decisions came from SEC's meeting with merchant banks and the twin bourses. The commission's Chairman Ziaul Haque Khondker presided over the meeting, attended by presidents and chief executive officers of Dhaka and Chittagong stock exchanges, president of Bangladesh Merchant Banker's Association (BMBA), and three executive directors of the SEC.

However, the SEC handed over a task to the BMBA to make a 'guideline' on margin loan and asked the association to submit it by February 10 to the commission for regulatory approval, said Saifur Rahman, an executive director of the SEC.

"While preparing the guideline, some issues will have to be considered such as valuation method of securities in a client's portfolio, highest limit or ratio of margin loan, certain procedures on margin call or forced sell and considering the existing securities rules and regulations," he said in a press briefing.

Once the margin loan ratio is fixed, the limit can be reset after six months. "The revised loan ratio will come into effect from the first trading day of every January or July," Rahman said.

He said after the new decisions takes effect, every merchant bank will have to submit reports on previous month's loan disbursement and maintenance, while the stockbrokers will have to submit similar reports through their exchanges.

On the bourses responsibilities, he said, the stock exchanges can shift trading of securities from public market to spot market by their own decision, and can also stop trading of stocks considering the price movement or the market situation.

"They only have to inform the commission after taking such a decision," the SEC executive director said, adding: "It will help the stock exchanges to play their role as statutory regulatory organisation."

News: The Daily Star/ Bangladesh/ Feb-02-2011

MA Sabur, sponsor director and former chairman of United Commercial Bank Limited (UCB) has been elected as the Chairman of Executive Committee of the Bank.

The decision on his appointment was made unanimously at the 312th meeting of the Board of Directors of the bank in the city yesterday, says a press release.

Sabur, born in January 2, 1948 is the founder managing director of Maxim Limited which includes three garment units, two towel and linen industries and two textile spinning industries.

Son of late Alhaj Rahan Ali of Kanchan of Narayangonj, Sabur is also the chairman of Masco Group and director of Janata Insurance Co Ltd.

Sabur is a reputed philanthropist and actively associated with many educational and socio-cultural organisations of Chittag- ong and Dhaka.

News: Daily Sun / Bangladesh/ Feb-02-2011