An economist yesterday warned the government of “uneasiness” in the banking sector.

“It seems the banking sector is facing some uneasiness, particularly nationalised commercial banks,” said Binayak Sen, research director of Bangladesh Institute of Development Studies (BIDS).

“For them, problems are piling up,” Sen said. “We have to be cautious right now. The cash recovery of NCBs is low. In most cases, the recovery is being shown through rescheduling. The operating profit exists only in books.”

Sen urged the government to be stringent about issuing permission for new banks.

He spoke at a seminar that focused on socio-economic development in the first three years of the grand alliance in power, organised by the ruling Awami League at the auditorium of the Bangladesh Medical Association in Dhaka.

Sen said it was not wise to allow banks to get involved in the capital market. It was a wrong decision, he added. "A limit has been enforced now, but it should have been done earlier."

He said tax exemption for large investors was not proper in respect of social justice and growth.

"I still think that proper steps should have been taken against people who were found guilty in the report submitted by the Ibrahim Khaled-led panel after an investigation,” Sen said. “There should not have been any compromise on the issue.”

Sen said the country's tax-GDP ratio should be increased by mobilising resources from domestic sources to take the investment-GDP ratio to 32 percent from 24 percent now.

"Otherwise, we will not be able achieve 8-8.5 percent economic growth to take Bangladesh to a middle-income country," he said.

"Steps have been taken, but they are not sufficient. Bangladesh has still the lowest tax-GDP ratio in South Asia," Sen said.

Keynote presenter Mashiur Rahman, economic affairs adviser to the prime minister, said it would not be possible to run the economy without long-term accountability.

"In the past, our economic policies addressed only immediate and short-term challenges. We have now made mid-term and long-term policies. We should not deviate from this."

He said it is a matter of pride that the country's reliance on foreign aid is on the wane. "But the government has to borrow from the banking sector to finance the budget deficit, which can squeeze credit flow to the private sector."

"We have to look at whether we are failing to spend foreign aid due to our limitation in implementation,” Rahman said. “We cannot borrow from the banking sector or the central bank excessively.”

"The government should enhance its capacity to use foreign aid," Rahman said.

Finance Minister AMA Muhith said the economy of Bangladesh reached a level different from 2008.

The government was unable to spend much of the $14 billion foreign aid in the pipeline, he said.

"We could spend only $2.5 billion. If we can spend more, our investment will go up. However, the capacity of spending of our ministries has increased 30 percent."

Bangladesh's exports might grow by 14 percent in the current fiscal year, Muhith said. "If it is 14 percent then I would say it is still commendable, given it is based on the high growth of 40 percent we achieved in the last fiscal year."

Moazzem Hossain, editor of The Financial Express, said Bangladesh would not be totally immune to the persisting global economic crisis, as 40 percent of the country GDP is linked with international business and trade.

The Daily Star/Bangladesh/ 1st April 2012

The 29th annual general meeting (AGM) of Pubali Bank has been postponed because of an injunction by the High Court.

The Bank said its board decided to postpone the AGM after the court issued the order on March 21. The AGM was scheduled to be held yesterday.

The HC issued the rule after Safi Ahmed Chowdhury, who wanted to contest the election to the Bank's Board of Directors, filed a petition seeking a stay on the AGM. Pubali violated the mandatory provisions of retirement of directors and to elect them at the AGM, according to the petition.

Senior lawyer Rokanuddin Mahmud appeared on behalf of the petitioner.

It appears that the petitioner has reason for seeking the stay on the meeting, the HC said. "Therefore, this court is inclined to pass an interim order."

After the injunction was issued, the Bank postponed its sixth extraordinary general meeting citing unavoidable circumstances. The EGM was set for yesterday.

"The new date, time and venue for holding the 29th AGM and the sixth EGM will be notified later on," said Pubali Bank in a posting on the Dhaka Stock Exchange website on March 28.

The Daily Star/Bangladesh/ 1st April 2012

A Rouf Chowdhury, chairman of Bank Asia, attends the Bank's 13th annual general meeting at Officers' Club in Dhaka yesterday. The Bank declared 20 percent stock dividends for 2011. Mohd Safwan Choudhury and Mohammed Lakiotullah, vice chairmen; Rumee A Hossain, chairman of the audit committee; AM Nurul Islam, M Irfan Syed, Mashiur Rahman, Romo Rouf Chowdhury, Shah Md Nurul Alam, directors, and Md Mehmood Husain, managing director, were also present.

The Daily Star/Bangladesh/ 1st April 2012

World Bank (WB) Country Director Ellen Goldstein Wednesday said the bank would not take any decision on the Padma Bridge project before getting the investigation reports on it.

She said the WB is continuing dialogue on the Padma bridge project with Bangladesh.

"We are waiting for the preliminary outcome of some ongoing investigations into Padma Bridge project and at the same time the Bank is maintaining dialogue with the goverment," Ellen Goldstein told reporters after a meeting of the local consultative group (LCG) at the Economic Relations Division office in Dhaka.

Goldstein gave the assurance that the commitment made by the development partners worth about US$ 13 billion was available for use by Bangladesh though a global economic recession was going on.

"The fund is yours and you will get the committed fund. What you will have to do is spend it. From our part we will see whether it is spent on the purpose it is intended for," she said.

"Though the country maintained a steady growth and achieved many of the indicators in millennium development goal (MDG), Bangladesh aid disbursement could have been speedier if several structural reforms including financial management and public procurement were implemented," she added.

The country director said donors want to see that the money spent on projects is monitored in more transparent and accountable ways.

Goldstein identified the cumbersome project approval process, discontinuity of project directors and non-implementation of financial reforms as the major barriers to speeding up aid disbursement.

Senior Secretary of the Economic Relations Division (ERD) Iqbal Mahmood speaking on the occasion admitted that slow pace of implementation and discontinuity of project directors also worried the government. He said the meeting decided to hold the meeting of the LCG regularly to improve the situation.

The LCG meeting examined the trends in implementation of the Annual Development Programme (ADP).

The meeting agreed to hold quarterly meetings to closely monitor the implementation of the agreed measures.

Presently, the WB is implementing about 30 development programmes involving a sum of $4.6 billion in commitment.

The government signed agreements with WB for $1.2 billion loan, ADB (Asian Development Bank) for $615 million, JICA (Japan International Cooperation Agency) for $400 million and IDB (Islamic Development Bank) for $140 million to construct the 6.15 kilometre-long Padma bridge.

But the project became stalled in October last year following WB's allegation of corruption in the bidding process.

Iqbal Mahmood said the Padma bridge project, the biggest ever infrastructure project in the country, is on and the process would continue.

"We also discussed speedy appointment of consultants by the development partners," he said. "Delay in project approval is an obstacle and we will request the Planning Commission to look into the issue."

The ERD secretary claimed that aid disbursement and commitment this fiscal were better than that of previous years and it would continue to grow in future.

"Last year we received $1.7 billion foreign aid and this year until January we received $1.01 billion and we expect to get $2.0 billion in disbursed loan by the year-end," Mahmood said.

The World Bank country chief said until March the Bank disbursed $300 million and the amount is expected to cross $ 0.5 billion by the end of this fiscal.

Financial Express/Bangladesh/ 29th March 2012

The government has borrowed Tk 164-billion loan from banks in the first nine months of the current fiscal starting in July last year. The figure is three times higher than that in the same period of last fiscal, when it stood at Tk 40.23 billion.

Finance minister Abul Maal Abdul Muhith admitted that the government’s dependence on bank loan was increasing but hoped it would not exceed the budget estimates at the close of the current financial year (2011-2012).

Budget of the current fiscal year has estimated a loan of Tk 189.57 billion from banking system.

“The government has to take loan from banks to meet its increasing expenditure and provide money as subsidies since loan sources other than banks have shrunk along with a relative reduction in the flow of foreign loan and donations,” said Muhith.

He, however, said steps have been taken to practise restraint in borrowing from banks.
Government loan from banks exceeded Tk 220 billion on December 5 last year.

On December 1 last year, opposition leader Khaleda Zia said it is unprecedented that the government has borrowed “so much in such a short time, creating famine for the time being in the private sector”.

But the loan figure came down to Tk 160 billion after the government received Tk 40 billion from mobile phone operators and used the money for paying back the money borrowed from banks.

Since then the government loan from banking system has been ranging from Tk 150 billion to Tk 160 billion.
According to Bangladesh Bank, Tk 54.82 billion was borrowed from the central bank and Tk 109.15 billion from other commercial banks until March 21 this year.

In the last financial year, the government had taken Tk 204 billion loan, which was Tk 20 billion higher than the budget estimates.

Analysts hold rental power plants mainly responsible for the increasing bank loan.

“The government expenditure has increased due to rental power plants. It is one of the major reasons behind the increasing bank loan,” said former finance adviser to the caretaker government AB Mirza Azizul Islam.

“Increasing oil price is causing a rise in import expenditure and creating trade deficit. As a result, pressure is increasing on foreign exchange, making the government dependent on bank loan,” he added.

The Independent/Bangladesh/ 29th March 2012