Contractionary monetary policy is one part of the destruction caused by Awami regime. Govt borrowing because of rental plants, no power and gas availability even upto 12 hours and increase of power and gas rate 3-4 times already; are all contributing factors. Not to mention political extortion. You are claiming "It is getting better" while reports and analysts are saying otherwise. Show your proof that things are getting better other than what your dad or uncle said.
Awami govt set to destroy backbone of Bangladesh economy
- Thread starter idune
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Contractionary monetary policy is one part of the destruction caused by Awami regime. Govt borrowing because of rental plants, no power and gas availability even upto 12 hours and increase of power and gas rate 3-4 times already; are all contributing factors. Not to mention political extortion. You are claiming "It is getting better" while reports and analysts are saying otherwise. Show your proof that things are getting better other than what your dad or uncle said.
scholseys
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Due to the global recession our garments orders dropped, not just ours but also China's. The spinning sector was also at the verge of collapse due to very low cotton price in the world and that has picked up. As the world economy is recovering our orders are coming back, so yes it is getting better. Textile is one of the major foreign currency earner of Bangladesh. If you need more proof just google "china's textile export". But here is an article for you China's textile exports languish as orders wane - China Fair Jordan 2011
Who are you kidding? All these awami destruction on Bangladesh economy touched every sector of industries and business not just garments and textile. Regardless of global recession Bangladesh could have been done much better if awami regime did not made excessive borrowing, did not increase price of power/ gas and now they even shut gas supply for 12 hours a day. Bangladesh has much better market access including duty free access in China, EU than any of these countries you are so desperately trying to compare. Besides, Bangladesh export concentrated in low to mid price segment of the market which was not impacted much as those are considered necessity.
Nice try to defend awami regime but facts does NOT allow you to hide awami regime economic destruction behind global recession.
Power tariffs go up, again
Frequent increases lead to 'high inflation'
FE Report
Energy regulator Thursday raised power tariffs by Tk 0.28 and Tk 0.30 per unit on an average for bulk and retail users respectively in line with the rising global prices of fuel-oil.
Chairman of Bangladesh Energy Regulatory Commission (BERC) Syed Yusuf Hossain announced the electricity price-hike at a press briefing at its Karwan Bazar headquarters.
The enhanced tariffs for both bulk and retail consumers come into force from the first day of the current month (March 1).
Business leaders and economists, however, expressed mixed reactions to the power tariff-hike, saying that it would raise the cost of industrial production and lead to higher inflation.
The government on November 24 last year increased electricity tariff for bulk consumers by 33.57 per cent, which was effective in two phases - from December 2011 and February 2012, fixing it at Tk 3.74 per unit when the production cost of per unit electricity was Tk 5.29.
The price has shot up by Tk 0.18 to Tk 3.05 for the 0-100 unit slab while the rate for the 101-400 unit slab gone up by 25 paisa to Tk 4.29.
The rate for 400-plus units, the tariff has been revised at Tk 7.89 from the previously charged Tk 7.43 --- an increase of 6.25 per cent.
The lowest power tariff rate has been fixed at Tk 2.26 for uses in agriculture sector during irrigation against previous rate of Tk 2.13 while the commercial tariff was readjusted to Tk 7.79, up by Tk 0.13.
The flat rate for small-scale industries has been revised at Tk 6.02, making an increase of 35 paisa while the price for large-scale industries has been fixed at Tk 5.90 per unit, up by Tk 0.35.
The rate for charitable institutions was raised to Tk 3.92, reflecting an increase of 0.23 paisa per unit.
According to the announcement, weighted average bulk tariff was fixed at Tk 4.02 instead of Tk 3.74 and the rate of increase is 7.49 per cent.
"The ongoing gas crisis caused the price-hike of power generation. The country has to depend on liquid fuel-run power plants to meet the increased demand for electricity in the summer," the BERC Chairman said.
Terming the latest price-hike as just and reasonable, he said Bangladesh Power Development Board (BPDB) should take effective steps to reduce the costs as price-hike could not be the only solution.
"It (increase in power price) should be treated as fuel-cost adjustment," he said.
"We're trying to provide an equitable solution for both bulk and retail users. I hope all the stakeholders will accept it," the BERC Chairman said.
The retail tariff rate is a bit higher than the bulk rate due to 11 per cent system loss incurred by the power distributing companies, he added.
The BPDB placed its proposal to the commission on March 12 last and sought immediate measures to raise bulk tariff by 41 paisa per unit as prices of petroleum products have gone up both locally and internationally, causing a heavy financial loss to the organisation.
The BPDB chairman ASM Alamgir Kabir in a public hearing on March 19 said that the latest price-hike of diesel and furnace oil by Tk 5.0 per litre, made on December 29 last year, came as another hurdle for the Board.
According to BPDB statistics, the recent fuel price-hike will cost the Board an additional amount of Tk 5.58 billion in the coming months of the ongoing fiscal year (FY) as it has already incurred a loss of Tk 1.34 billion in January and February of the FY (11-12) due to the price hike of liquid fuel.
The data showed that an additional 2500 mw of electricity would be added to the country's total power supply for summer, irrigation and new connections.
It also suggested that efforts for fuel-based power generation need to be intensified to bring down power outage to a tolerable level during the March-June period.
Bangladesh now generates nearly 5000 mw of electricity against its demand for 6500 mw.
In an instant reaction, economist and former adviser to the caretaker government Dr. Akbar Ali Khan told the FE that though the increased amount is not very large, it has an indirect impact on inflation.
"Frequent increases in utility prices creates inflationary pressure which leads to high inflation. The country is now experiencing an inflationary rate at over 10 per cent which is bad for the economy as the government should be on alert when inflation rate is six per cent," said Mr Khan.
He also said the hike in power tariff is a result of inefficiency of the power generating and distributing companies and the consumers should not be penalised for it.
The job of the energy regulatory commission is to take care of the inefficiency and system loss of the power-producing and- distribution companies, he added.
President of Exporters Association of Bangladesh Abdus Salam Murshedy said the price-hike has taken place within a very short time which will have an adverse impact on export.
"There was a 21 per cent power tariff hike just a few days back. Last year, fuel price was raised four times, increasing our production cost," he said, adding that the latest hike will only further intensify their miseries as exporters who have witnessed very high lending rate by the banks in recent months.
He said the European Union (EU) and the US have not recovered from economic recession rather they again have fallen into another economic downturn, resulting in declining export orders.
"The increased power tariff will hamper our competitiveness globally as we're yet to achieve our monthly export target for the last couple of months," he said.
He urged the government either to provide uninterrupted power supply to the export-oriented industries or fuel oil at a subsidised price to run the captive power plants to ensure smooth production.
Masadul Haque Masud, president of Bangladesh Automatic Steel and Re-rolling Mills Association told the FE that the decision to increase power tariff was totally whimsical as there was no visible development in the power supply situation.
"The government has installed many quick rental power plants by spending millions of takas without any visible improvements," he said.
He said the government's latest decision to stop power to the industries for 12 hours does only indicate how the situation has worsened.
The government can improve the power situation by adjusting price, controlling system loss and properly using fuel oil along with a proper energy policy, he suggested.
Power tariffs go up, again
Frequent increases lead to 'high inflation'
FE Report
Energy regulator Thursday raised power tariffs by Tk 0.28 and Tk 0.30 per unit on an average for bulk and retail users respectively in line with the rising global prices of fuel-oil.
Chairman of Bangladesh Energy Regulatory Commission (BERC) Syed Yusuf Hossain announced the electricity price-hike at a press briefing at its Karwan Bazar headquarters.
The enhanced tariffs for both bulk and retail consumers come into force from the first day of the current month (March 1).
Business leaders and economists, however, expressed mixed reactions to the power tariff-hike, saying that it would raise the cost of industrial production and lead to higher inflation.
The government on November 24 last year increased electricity tariff for bulk consumers by 33.57 per cent, which was effective in two phases - from December 2011 and February 2012, fixing it at Tk 3.74 per unit when the production cost of per unit electricity was Tk 5.29.
The price has shot up by Tk 0.18 to Tk 3.05 for the 0-100 unit slab while the rate for the 101-400 unit slab gone up by 25 paisa to Tk 4.29.
The rate for 400-plus units, the tariff has been revised at Tk 7.89 from the previously charged Tk 7.43 --- an increase of 6.25 per cent.
The lowest power tariff rate has been fixed at Tk 2.26 for uses in agriculture sector during irrigation against previous rate of Tk 2.13 while the commercial tariff was readjusted to Tk 7.79, up by Tk 0.13.
The flat rate for small-scale industries has been revised at Tk 6.02, making an increase of 35 paisa while the price for large-scale industries has been fixed at Tk 5.90 per unit, up by Tk 0.35.
The rate for charitable institutions was raised to Tk 3.92, reflecting an increase of 0.23 paisa per unit.
According to the announcement, weighted average bulk tariff was fixed at Tk 4.02 instead of Tk 3.74 and the rate of increase is 7.49 per cent.
"The ongoing gas crisis caused the price-hike of power generation. The country has to depend on liquid fuel-run power plants to meet the increased demand for electricity in the summer," the BERC Chairman said.
Terming the latest price-hike as just and reasonable, he said Bangladesh Power Development Board (BPDB) should take effective steps to reduce the costs as price-hike could not be the only solution.
"It (increase in power price) should be treated as fuel-cost adjustment," he said.
"We're trying to provide an equitable solution for both bulk and retail users. I hope all the stakeholders will accept it," the BERC Chairman said.
The retail tariff rate is a bit higher than the bulk rate due to 11 per cent system loss incurred by the power distributing companies, he added.
The BPDB placed its proposal to the commission on March 12 last and sought immediate measures to raise bulk tariff by 41 paisa per unit as prices of petroleum products have gone up both locally and internationally, causing a heavy financial loss to the organisation.
The BPDB chairman ASM Alamgir Kabir in a public hearing on March 19 said that the latest price-hike of diesel and furnace oil by Tk 5.0 per litre, made on December 29 last year, came as another hurdle for the Board.
According to BPDB statistics, the recent fuel price-hike will cost the Board an additional amount of Tk 5.58 billion in the coming months of the ongoing fiscal year (FY) as it has already incurred a loss of Tk 1.34 billion in January and February of the FY (11-12) due to the price hike of liquid fuel.
The data showed that an additional 2500 mw of electricity would be added to the country's total power supply for summer, irrigation and new connections.
It also suggested that efforts for fuel-based power generation need to be intensified to bring down power outage to a tolerable level during the March-June period.
Bangladesh now generates nearly 5000 mw of electricity against its demand for 6500 mw.
In an instant reaction, economist and former adviser to the caretaker government Dr. Akbar Ali Khan told the FE that though the increased amount is not very large, it has an indirect impact on inflation.
"Frequent increases in utility prices creates inflationary pressure which leads to high inflation. The country is now experiencing an inflationary rate at over 10 per cent which is bad for the economy as the government should be on alert when inflation rate is six per cent," said Mr Khan.
He also said the hike in power tariff is a result of inefficiency of the power generating and distributing companies and the consumers should not be penalised for it.
The job of the energy regulatory commission is to take care of the inefficiency and system loss of the power-producing and- distribution companies, he added.
President of Exporters Association of Bangladesh Abdus Salam Murshedy said the price-hike has taken place within a very short time which will have an adverse impact on export.
"There was a 21 per cent power tariff hike just a few days back. Last year, fuel price was raised four times, increasing our production cost," he said, adding that the latest hike will only further intensify their miseries as exporters who have witnessed very high lending rate by the banks in recent months.
He said the European Union (EU) and the US have not recovered from economic recession rather they again have fallen into another economic downturn, resulting in declining export orders.
"The increased power tariff will hamper our competitiveness globally as we're yet to achieve our monthly export target for the last couple of months," he said.
He urged the government either to provide uninterrupted power supply to the export-oriented industries or fuel oil at a subsidised price to run the captive power plants to ensure smooth production.
Masadul Haque Masud, president of Bangladesh Automatic Steel and Re-rolling Mills Association told the FE that the decision to increase power tariff was totally whimsical as there was no visible development in the power supply situation.
"The government has installed many quick rental power plants by spending millions of takas without any visible improvements," he said.
He said the government's latest decision to stop power to the industries for 12 hours does only indicate how the situation has worsened.
The government can improve the power situation by adjusting price, controlling system loss and properly using fuel oil along with a proper energy policy, he suggested.
Power tariffs go up, again
Non-food inflation hits record high
Thu, Apr 5th, 2012 3:52 pm BdST
Dhaka, Apr 5 (bdnews24.com) – Inflation in non-food sectors hit a record high of 13.96 percent in March, though overall point-to-point inflation came down a touch, according to Bangladesh Bureau of Statistics (BBS).
"The good news is that the overall inflation came down. Food inflation has lessened, too. But non-food inflation has increased," BBS director-general Shajahan Ali Molla said releasing latest inflation data on Thursday at a media briefing at the Parisangkhan Bhaban at Agargaon in the capital.
"According to the data we have until now, it seems that the non-food inflation of March is the highest."
The inflation in general last month was 10.1 percent, down 0.33 percentage points from 10.43 percent in February, Molla added.
Inflation in food sector was also slightly down – it was 8.28 percent in March from 8.92 percent in February, he said.
Non-food inflation in February was 13.57 percent, he added.
"Prices of lentil, spices and edible oil were lower in March than February," Shajahan said.
"On the other hand," he added, "Prices of non-food commodities, especially garments, medical services, transport, furniture and those of household and laundry increased causing the spike in inflation (in non-food sector)."
Molla reasoned hike in house rent and transport cost for non-food inflation.
Average inflation from April 2011 to March 2012 was 10.92 percent, which was 8.36 percent in the same period in the previous year, according to BBS data.
The government in this year's budget assumed that the average annual inflation would 7.5 percent.
According to the BBS, non-food inflation was higher in rural areas than urban areas.
Non-food inflation exceeded 14 percent in rural areas. It was 13.57 percent in February and 14.17 percent in March in rural areas.
In urban areas, non-food inflation was 13.42 percent in March.
Usually inflation goes up along with prices of foods. But recently, non-food inflation has risen significantly.
Asked about this, Shajahan said, "Bumper harvest of rice in past few seasons caused less import of rice. Those who have stored rice are now releasing the stock. The government is selling rice in open market at Tk 24 a kilogram. So the price of rice declined. It has impacted the food inflation."
He also said inflation will be counted considering the 2005-06 fiscal as base year from next month (April).
"We were counting inflation considering 1995-96 fiscal as base year. Sixteen to 17 years have gone by since then. Many new products have entered the market. From now on prices of 422 products will be considered while counting inflation. We were considering 315 products until now," he said.
He said the rate of inflation with 1995-96 as base year will also be counted and the data will be published.
In reply to a question whether the move to change the base year aims at showing the inflation rate lower, the BBS director-general said, "We will have to move forward. Many said the government is doing it with political intention. But it's not true. There is no reason to smell rat in this."
"Moreover," he added, "we'll publish inflation data in both the new and old systems."
Non-food inflation hits record high | Bangladesh | bdnews24.com
Thu, Apr 5th, 2012 3:52 pm BdST
Dhaka, Apr 5 (bdnews24.com) – Inflation in non-food sectors hit a record high of 13.96 percent in March, though overall point-to-point inflation came down a touch, according to Bangladesh Bureau of Statistics (BBS).
"The good news is that the overall inflation came down. Food inflation has lessened, too. But non-food inflation has increased," BBS director-general Shajahan Ali Molla said releasing latest inflation data on Thursday at a media briefing at the Parisangkhan Bhaban at Agargaon in the capital.
"According to the data we have until now, it seems that the non-food inflation of March is the highest."
The inflation in general last month was 10.1 percent, down 0.33 percentage points from 10.43 percent in February, Molla added.
Inflation in food sector was also slightly down – it was 8.28 percent in March from 8.92 percent in February, he said.
Non-food inflation in February was 13.57 percent, he added.
"Prices of lentil, spices and edible oil were lower in March than February," Shajahan said.
"On the other hand," he added, "Prices of non-food commodities, especially garments, medical services, transport, furniture and those of household and laundry increased causing the spike in inflation (in non-food sector)."
Molla reasoned hike in house rent and transport cost for non-food inflation.
Average inflation from April 2011 to March 2012 was 10.92 percent, which was 8.36 percent in the same period in the previous year, according to BBS data.
The government in this year's budget assumed that the average annual inflation would 7.5 percent.
According to the BBS, non-food inflation was higher in rural areas than urban areas.
Non-food inflation exceeded 14 percent in rural areas. It was 13.57 percent in February and 14.17 percent in March in rural areas.
In urban areas, non-food inflation was 13.42 percent in March.
Usually inflation goes up along with prices of foods. But recently, non-food inflation has risen significantly.
Asked about this, Shajahan said, "Bumper harvest of rice in past few seasons caused less import of rice. Those who have stored rice are now releasing the stock. The government is selling rice in open market at Tk 24 a kilogram. So the price of rice declined. It has impacted the food inflation."
He also said inflation will be counted considering the 2005-06 fiscal as base year from next month (April).
"We were counting inflation considering 1995-96 fiscal as base year. Sixteen to 17 years have gone by since then. Many new products have entered the market. From now on prices of 422 products will be considered while counting inflation. We were considering 315 products until now," he said.
He said the rate of inflation with 1995-96 as base year will also be counted and the data will be published.
In reply to a question whether the move to change the base year aims at showing the inflation rate lower, the BBS director-general said, "We will have to move forward. Many said the government is doing it with political intention. But it's not true. There is no reason to smell rat in this."
"Moreover," he added, "we'll publish inflation data in both the new and old systems."
Non-food inflation hits record high | Bangladesh | bdnews24.com
Next wave of Awami League economic destruction is coming.
----------------------------------------------------------------------
Govt to go for increased borrowings from banks
Siddique Islam
The government is going to increase bank borrowings substantially, to the extent of Tk 294 billion, to finance the budget deficit of the current fiscal year ending June affecting private investment.
"The figure of revised government borrowing from the banking system for FY'12 will be finalised at a meeting of the cash and debt management committee (CDMC) scheduled for Wednesday afternoon," a senior official told the FE.
The Ministry of Finance (MoF) had earlier set the target of borrowing around Tk 279 billion from the country's commercial banks and financial institutions against the original budgetary target of Tk 189.57 billion.
"The government could convince the last mission of International Monetary Fund (IMF) to raise the bank borrowing up to Tk 279 billion for FY'12 exceeding its original budgetary target," said the official who is close to the government's overall borrowing activities.
He also said the central bank has designed its revised monetary programme which was published in its latest monetary policy, considering the government's unofficially revised bank borrowing target for the FY'12.
Now the MoF is planning to borrow Tk 294 billion from the banking system instead of Tk 279 billion to meet the government expenditure.
A high-power committee on cash and debt management headed by the finance secretary is now working on mobilising fund at minimum cost with minimum risk.
The budgetary target for government borrowing from the banking system was originally set at an aggregate level of Tk 189.57 billion through issuing treasury bills (T-bills) and bonds.
Higher subsidy requirements particularly in energy, power and agriculture sectors and lower inflow of fund from the overseas sources have forced the government to borrow more from the country's banking system, said another official while explaining the main reason of higher government borrowing.
He also said higher import of fuel oil has pushed the pressures on subsidy in recent months.
The import of petroleum products increased by 48.61 per cent to $2.68 billion during the July-January period from $1.80 billion during the same period last year, according to the central bank statistics.
"The rising trend of fuel oil imports may continue until next month to meet the increasing demand of oil-based power plants and irrigation purposes," a senior official of the Bangladesh Bank (BB) said.
The government borrowing from banking system increased by nearly four times until March 22 this year compared to the corresponding period of the last year.
The government's net borrowing from banking system shot up to Tk 163.70 billion during the period under review as against Tk 46.49 billion in the same period of the previous year, the BB data showed.
During the period, the government borrowed Tk Tk 109.27 billion from the scheduled banks through issuing treasury bills (T-bills) and bonds during the period while Tk 54.42 billion from the central bank to finance the budget deficit.
Declining trend of net sale of national savings certificates has also forced the government to borrow more from the banking system to meet its budgetary expenditure.
The net investment in the saving certificates came down to Tk 1.14 billion during the July-January period from Tk 22.98 billion in the same period of the previous year.
The government earlier fixed the target to borrow Tk 60 billion through net selling of the savings certificates by the end of FY'12, officials said adding that the net sales witnessed a negative growth in January netting Tk 2.19 billion because of lower rates of return.
The government has raised the rates of return on all existing savings tools to the extent of 2.64 per cent, effective from March 1 to attract savers to the instruments and, thus reduce the government's borrowing from the banking system.
Net receipts of foreign aid during the July-January period of the FY'12 stood lower at $ 530.47 million against $647.10 million in the corresponding period last year.
Govt to go for increased borrowings from banks
----------------------------------------------------------------------
Govt to go for increased borrowings from banks
Siddique Islam
The government is going to increase bank borrowings substantially, to the extent of Tk 294 billion, to finance the budget deficit of the current fiscal year ending June affecting private investment.
"The figure of revised government borrowing from the banking system for FY'12 will be finalised at a meeting of the cash and debt management committee (CDMC) scheduled for Wednesday afternoon," a senior official told the FE.
The Ministry of Finance (MoF) had earlier set the target of borrowing around Tk 279 billion from the country's commercial banks and financial institutions against the original budgetary target of Tk 189.57 billion.
"The government could convince the last mission of International Monetary Fund (IMF) to raise the bank borrowing up to Tk 279 billion for FY'12 exceeding its original budgetary target," said the official who is close to the government's overall borrowing activities.
He also said the central bank has designed its revised monetary programme which was published in its latest monetary policy, considering the government's unofficially revised bank borrowing target for the FY'12.
Now the MoF is planning to borrow Tk 294 billion from the banking system instead of Tk 279 billion to meet the government expenditure.
A high-power committee on cash and debt management headed by the finance secretary is now working on mobilising fund at minimum cost with minimum risk.
The budgetary target for government borrowing from the banking system was originally set at an aggregate level of Tk 189.57 billion through issuing treasury bills (T-bills) and bonds.
Higher subsidy requirements particularly in energy, power and agriculture sectors and lower inflow of fund from the overseas sources have forced the government to borrow more from the country's banking system, said another official while explaining the main reason of higher government borrowing.
He also said higher import of fuel oil has pushed the pressures on subsidy in recent months.
The import of petroleum products increased by 48.61 per cent to $2.68 billion during the July-January period from $1.80 billion during the same period last year, according to the central bank statistics.
"The rising trend of fuel oil imports may continue until next month to meet the increasing demand of oil-based power plants and irrigation purposes," a senior official of the Bangladesh Bank (BB) said.
The government borrowing from banking system increased by nearly four times until March 22 this year compared to the corresponding period of the last year.
The government's net borrowing from banking system shot up to Tk 163.70 billion during the period under review as against Tk 46.49 billion in the same period of the previous year, the BB data showed.
During the period, the government borrowed Tk Tk 109.27 billion from the scheduled banks through issuing treasury bills (T-bills) and bonds during the period while Tk 54.42 billion from the central bank to finance the budget deficit.
Declining trend of net sale of national savings certificates has also forced the government to borrow more from the banking system to meet its budgetary expenditure.
The net investment in the saving certificates came down to Tk 1.14 billion during the July-January period from Tk 22.98 billion in the same period of the previous year.
The government earlier fixed the target to borrow Tk 60 billion through net selling of the savings certificates by the end of FY'12, officials said adding that the net sales witnessed a negative growth in January netting Tk 2.19 billion because of lower rates of return.
The government has raised the rates of return on all existing savings tools to the extent of 2.64 per cent, effective from March 1 to attract savers to the instruments and, thus reduce the government's borrowing from the banking system.
Net receipts of foreign aid during the July-January period of the FY'12 stood lower at $ 530.47 million against $647.10 million in the corresponding period last year.
Govt to go for increased borrowings from banks
Leading businesses worried over declining export growth rate
21 out of 34 sectors fail to attain target
Jasim Uddin Haroon and Badrul Ahsan
Country's leading businesses Friday expressed their grave concern over the continued decline in the rate of export growth, noting that the falling trend is most likely to continue further, intensifying pressure on its balance of payments (BoP).
In the wake of a marked fall in shipments, the national export promotion agency met with 84 chambers and associations on April 15 last to formulate a plan of action to help address the problem.
Government statistics show the growth of country's merchandise exports declined to 10 per cent so far in the current fiscal, compared to 40 per cent growth in the last fiscal.
Asian Development Bank (ADB) in its recent outlook said Bangladesh's export growth was headed for slowing down to 12 per cent in the current fiscal year, and further to 10 per cent in the next fiscal.
Some 21, out of 34 export earning sectors, have failed to attain targets during the period. Thirteen sectors grew marginally, the data of Export Promotion Bureau (EPB) said.
Amjad Khan Chowdhury, chief of Metropolitan Chamber of Commerce and Industry (MCCI) told the FE: "The situation has become disconcerting in view of declining growth trend about exports to Europe and the USA where sluggish economic performance has chipped away at demands for goods manufactured by us."
He hinted at the further weakening of export activities in the coming months following a declining demand in the 17-member eurozone and also in view of new global economic uncertainties.
During his recent visit to Bangladesh, the Director General (DG) of World Trade Organisation (WTO), Pascal Lamy also indicated that slowed-down economic activities in the crisis-hit eurozone countries in Europe might affect Bangladesh's exports to the European market that account for two-thirds of export receipts of Bangladesh.
Salim Osman, chief of the apex body in the country's knitwear export sector told the FE: "We're in an uncertain situation now as the orders from our key markets are declining gradually with a huge inventory piling up at their superstores."
He said: "We are surviving at the moment for orders from new markets like Japan, Russia, South Africa and some counties in South America.
Md Musa Meah, a leading frozen food exporter, told the FE that they now needed new hybrid generations of shrimps to boost exports, adding: "We trailed much behind the target this year until March."
Senior managers of apparel sectors, who handle most overseas buyers, told the FE that there was no immediate chance to see a turnaround of the export sectors.
Md Anowar Hossain, general manager of a leading knitwear manufacturer, Grameen Knitwear, told the FE: "Buyers are placing orders in much lower quantities than was expected as they already have a huge inventory lying unsold."
He also said mid-to-lower brands, which influence the country's exports less, are also affected as the overall sales have dropped in Europe and the USA.
Mr Anowar said the 'promotional buyers' who used to place orders on different occasions had also trimmed their orders on a substantial scale.
Analysts said performance of exports, a key growth driver, was weakening as the year progressed, largely because of weaknesses in Bangladesh's major markets.
They also said poor infrastructural facilities related to power, roads and ports had coincided with the slow growth in exports.
They said exports needed to be raised through broadening its base and deepening the access to the newer markets.
Mustafizur Rahman, executive director of the country' oldest private think tank -- Centre for Policy Dialogue -- said: "We now need both product and market diversification as our main markets are facing severe problems over the debt issues."
Mr Mustafiz added, "If this situation persists for three months more, it will widen the country's trade deficit further and, thus, increase pressure on its BoP."
Nazrul Islam Swapon, an apparel expert, told the FE that delay in recovery in the western economies would hurt exports further.
Mr Swapon, who is a former managing director of one of the largest RMG plants --- Nassa Group, said new orders even at the peak time are now in fewer in quantity and facing lower prices than before.
Ready-made garments (RMG), the sector which has been dominating the country's export earnings for years, has achieved 10.36 per cent growth in export receipts to $17.88 billion during July-March period this fiscal in comparison to over 42 per cent growth rate in the first quarter.
When contacted, EPB vice chairman Shubhashish Bose said they would now encourage product diversification and tapping of new markets to reduce high dependence on a limited number of destinations.
He said they would follow a course of actions, in accordance with the recommendations made by the 84 chambers and associations.
Leading businesses worried over declining export growth rate
21 out of 34 sectors fail to attain target
Jasim Uddin Haroon and Badrul Ahsan
Country's leading businesses Friday expressed their grave concern over the continued decline in the rate of export growth, noting that the falling trend is most likely to continue further, intensifying pressure on its balance of payments (BoP).
In the wake of a marked fall in shipments, the national export promotion agency met with 84 chambers and associations on April 15 last to formulate a plan of action to help address the problem.
Government statistics show the growth of country's merchandise exports declined to 10 per cent so far in the current fiscal, compared to 40 per cent growth in the last fiscal.
Asian Development Bank (ADB) in its recent outlook said Bangladesh's export growth was headed for slowing down to 12 per cent in the current fiscal year, and further to 10 per cent in the next fiscal.
Some 21, out of 34 export earning sectors, have failed to attain targets during the period. Thirteen sectors grew marginally, the data of Export Promotion Bureau (EPB) said.
Amjad Khan Chowdhury, chief of Metropolitan Chamber of Commerce and Industry (MCCI) told the FE: "The situation has become disconcerting in view of declining growth trend about exports to Europe and the USA where sluggish economic performance has chipped away at demands for goods manufactured by us."
He hinted at the further weakening of export activities in the coming months following a declining demand in the 17-member eurozone and also in view of new global economic uncertainties.
During his recent visit to Bangladesh, the Director General (DG) of World Trade Organisation (WTO), Pascal Lamy also indicated that slowed-down economic activities in the crisis-hit eurozone countries in Europe might affect Bangladesh's exports to the European market that account for two-thirds of export receipts of Bangladesh.
Salim Osman, chief of the apex body in the country's knitwear export sector told the FE: "We're in an uncertain situation now as the orders from our key markets are declining gradually with a huge inventory piling up at their superstores."
He said: "We are surviving at the moment for orders from new markets like Japan, Russia, South Africa and some counties in South America.
Md Musa Meah, a leading frozen food exporter, told the FE that they now needed new hybrid generations of shrimps to boost exports, adding: "We trailed much behind the target this year until March."
Senior managers of apparel sectors, who handle most overseas buyers, told the FE that there was no immediate chance to see a turnaround of the export sectors.
Md Anowar Hossain, general manager of a leading knitwear manufacturer, Grameen Knitwear, told the FE: "Buyers are placing orders in much lower quantities than was expected as they already have a huge inventory lying unsold."
He also said mid-to-lower brands, which influence the country's exports less, are also affected as the overall sales have dropped in Europe and the USA.
Mr Anowar said the 'promotional buyers' who used to place orders on different occasions had also trimmed their orders on a substantial scale.
Analysts said performance of exports, a key growth driver, was weakening as the year progressed, largely because of weaknesses in Bangladesh's major markets.
They also said poor infrastructural facilities related to power, roads and ports had coincided with the slow growth in exports.
They said exports needed to be raised through broadening its base and deepening the access to the newer markets.
Mustafizur Rahman, executive director of the country' oldest private think tank -- Centre for Policy Dialogue -- said: "We now need both product and market diversification as our main markets are facing severe problems over the debt issues."
Mr Mustafiz added, "If this situation persists for three months more, it will widen the country's trade deficit further and, thus, increase pressure on its BoP."
Nazrul Islam Swapon, an apparel expert, told the FE that delay in recovery in the western economies would hurt exports further.
Mr Swapon, who is a former managing director of one of the largest RMG plants --- Nassa Group, said new orders even at the peak time are now in fewer in quantity and facing lower prices than before.
Ready-made garments (RMG), the sector which has been dominating the country's export earnings for years, has achieved 10.36 per cent growth in export receipts to $17.88 billion during July-March period this fiscal in comparison to over 42 per cent growth rate in the first quarter.
When contacted, EPB vice chairman Shubhashish Bose said they would now encourage product diversification and tapping of new markets to reduce high dependence on a limited number of destinations.
He said they would follow a course of actions, in accordance with the recommendations made by the 84 chambers and associations.
Leading businesses worried over declining export growth rate
IMF projects 5.5pc GDP growth
Staff Correspondent
The International Monetary Fund on Wednesday said that Bangladesh’s gross domestic product would grow by only 5.5 per cent this fiscal year, the lowest growth in last nine years. The IMF projection was another blow to the government’s projection of 7 per cent GDP growth this fiscal year as two other international lenders, the World Bank and the Asian Development Bank, recently projected 6-6.2 per cent growth.
Bangladesh Bank governor Atiur Rahman, however, differed with IMF projection saying that no such incidents had happened that would push down the country’s GDP growth to 5.5 per cent. He said that he still believed the GDP would grow by 6.5 to 7 per cent.
David Cowen, the chief of a visiting IMF mission to Bangladesh, at a press conference at the central bank said that the country’s economy would grow by 5.5 per cent this fiscal year and Bangladesh might have to wait till 2015 to achieve a 7 per cent growth.
IMF’s projection of 5.5 per cent growth is the lowest since 2002-2003 fiscal year when the country’s GDP growth was 5.26 per cent.
The GDP growth increased to 6.7 per cent in 2010-11 fiscal year. The GDP growth in FY2002-03 was 5.26 per cent, in FY2003-04 was 6.27 per cent, in FY2004-05 was 5.96 per cent, in FY2005-06 was 6.63 per cent, in FY2006-07 was 6.43 percent, in FY2007-08 was 6.13 per cent, in FY2008-09 was 5.74 per centand in FY2009-10 was 6.07 per cent.
Cowen said that the country’s economy was now facing various strains like double-digit inflation, intensified trade deficit and falling export growth. He said that the macroeconomic pressure had been intensifying since late 2010, balance of
payment went into deficit in FY 2011 and reserves declined significantly, mainly for increased import of fuel oil. He said fiscal pressure had intensified as subsidy costs for fuel, electricity, food and fertiliser increased, expanding government domestic borrowing and putting liquidity pressures on banks.
The IMF mission chief said that rising global prices and accommodative policies fuelled double-digit inflation in the country.
He said the Bangladesh government should go for price adjustment in energy and electricity in accordance with global market to decrease the government subsidy in the sector.
The government should decrease borrowings from the banking source to ease loan facilities for the private sector, he said.
Moreover, the government should ensure its borrowed money is not spent on unproductive sectors, he said.
Regarding the GDP growth, BB governor Atiur Rahman, however, told New Age, ‘Many are projecting GDP growth in their own ways. But nothing has happened that the country’s GDP growth would decline.’
When asked about the IMF projection over the GDP growth, he said they might have got limited information on the Bangladesh economy and that was why they were making lower projection rate.
The country’s economic sector, including agriculture production, in the current year has significantly increased which would help to attain the desired GDP growth, he said.
The central bank in its current monetary policy statement projected that the GDP growth would reach 6.5 per cent to 7 per cent in this financial year. ‘I think our GDP growth will not be less than last fiscal year’s [6.7 per cent] growth.’
Finance minister AMA Muhith recently said that the policymakers had better knowledge about Bangladesh’s economy than the international lenders and asserted that the country’s GDP growth would be close to 7 per cent.
The IMF officials at the press conference also highlighted four major ‘suggestions’ that the government had to fulfil in exchange of getting around $1 billion in loan under extended credit facility.
The conditions for ECF facility, which many economists said would put the sovereignty of the country at stake, include enactment of a new VAT law and amendment to the banking companies act.Cowen said, ‘We want to see that the government ensures to limit the credit growth.’
‘Containing the subsidy cost, the government will have to raise its tax revenue… we also look forward to seeing that revenue collection is increased.’
The IMF official
said the extended credit facility was IMF’s main concessional lending facility available for low-income countries.
When asked whether the IMF supported the new commercial banks approved by Bangladesh Bank, he did not make any direct comment but said that the BB should proceed very cautiously so that the new banks could function properly.
The central bank should also ensure to provide the liquidity flow for the new banks, he said.
New Age | Newspaper
Staff Correspondent
The International Monetary Fund on Wednesday said that Bangladesh’s gross domestic product would grow by only 5.5 per cent this fiscal year, the lowest growth in last nine years. The IMF projection was another blow to the government’s projection of 7 per cent GDP growth this fiscal year as two other international lenders, the World Bank and the Asian Development Bank, recently projected 6-6.2 per cent growth.
Bangladesh Bank governor Atiur Rahman, however, differed with IMF projection saying that no such incidents had happened that would push down the country’s GDP growth to 5.5 per cent. He said that he still believed the GDP would grow by 6.5 to 7 per cent.
David Cowen, the chief of a visiting IMF mission to Bangladesh, at a press conference at the central bank said that the country’s economy would grow by 5.5 per cent this fiscal year and Bangladesh might have to wait till 2015 to achieve a 7 per cent growth.
IMF’s projection of 5.5 per cent growth is the lowest since 2002-2003 fiscal year when the country’s GDP growth was 5.26 per cent.
The GDP growth increased to 6.7 per cent in 2010-11 fiscal year. The GDP growth in FY2002-03 was 5.26 per cent, in FY2003-04 was 6.27 per cent, in FY2004-05 was 5.96 per cent, in FY2005-06 was 6.63 per cent, in FY2006-07 was 6.43 percent, in FY2007-08 was 6.13 per cent, in FY2008-09 was 5.74 per centand in FY2009-10 was 6.07 per cent.
Cowen said that the country’s economy was now facing various strains like double-digit inflation, intensified trade deficit and falling export growth. He said that the macroeconomic pressure had been intensifying since late 2010, balance of
payment went into deficit in FY 2011 and reserves declined significantly, mainly for increased import of fuel oil. He said fiscal pressure had intensified as subsidy costs for fuel, electricity, food and fertiliser increased, expanding government domestic borrowing and putting liquidity pressures on banks.
The IMF mission chief said that rising global prices and accommodative policies fuelled double-digit inflation in the country.
He said the Bangladesh government should go for price adjustment in energy and electricity in accordance with global market to decrease the government subsidy in the sector.
The government should decrease borrowings from the banking source to ease loan facilities for the private sector, he said.
Moreover, the government should ensure its borrowed money is not spent on unproductive sectors, he said.
Regarding the GDP growth, BB governor Atiur Rahman, however, told New Age, ‘Many are projecting GDP growth in their own ways. But nothing has happened that the country’s GDP growth would decline.’
When asked about the IMF projection over the GDP growth, he said they might have got limited information on the Bangladesh economy and that was why they were making lower projection rate.
The country’s economic sector, including agriculture production, in the current year has significantly increased which would help to attain the desired GDP growth, he said.
The central bank in its current monetary policy statement projected that the GDP growth would reach 6.5 per cent to 7 per cent in this financial year. ‘I think our GDP growth will not be less than last fiscal year’s [6.7 per cent] growth.’
Finance minister AMA Muhith recently said that the policymakers had better knowledge about Bangladesh’s economy than the international lenders and asserted that the country’s GDP growth would be close to 7 per cent.
The IMF officials at the press conference also highlighted four major ‘suggestions’ that the government had to fulfil in exchange of getting around $1 billion in loan under extended credit facility.
The conditions for ECF facility, which many economists said would put the sovereignty of the country at stake, include enactment of a new VAT law and amendment to the banking companies act.Cowen said, ‘We want to see that the government ensures to limit the credit growth.’
‘Containing the subsidy cost, the government will have to raise its tax revenue… we also look forward to seeing that revenue collection is increased.’
The IMF official
said the extended credit facility was IMF’s main concessional lending facility available for low-income countries.
When asked whether the IMF supported the new commercial banks approved by Bangladesh Bank, he did not make any direct comment but said that the BB should proceed very cautiously so that the new banks could function properly.
The central bank should also ensure to provide the liquidity flow for the new banks, he said.
New Age | Newspaper
Power crisis hinders RMG production in Ctg
Saturday, 28 April 2012
CHITTAGONG, APR 27: Ready Made Garment (RMG) sector in Chittagong is suffering from various crisis particularly severe power crisis recently. Severe power crisis hampered production of garment sector in the port city, the sources in Bangladesh Garments Manufacturers and Exporters Association (BGMEA) said. Following the prevailing power crisis, the leaders of BGMEA held a meeting with the top officials of Power Development Board (PDB) in Chittagong on Thursday at BGMEA building at Khulshi.
The First Vice-President of BGMEA Nasir Uddin Chowdhury urged the PDB for ensuring undisrupted power supply to the garment factories in Chittagong and giving additional load connection to the garment factories. He said power shortage is hampering the production. The authority is not allowing any new power connection to the factories. Besides, if any factories fail to pay the bill on time, the authority cut off the power line to the factory.”
He said, “Many of our industries are sick now. Many companies are not able to supply their orders as per schedule. Moreover power crisis and workers unrest is the prime problems in the sector.” He also said the investors are losing their interest in RMG sector for crisis of power.
The owners of the garment factories are egger to pay the power bill on time. But, because irregularities of the ground level PDB workers and officials, the garment owners can not pay the bill with in schedule, said Nasir Uddin Chowdhury.
He further said, “PDB should distribute the bill before at least 15 days of the payment date. The garment owners are paying power bill of crores of taka per month in Chittagong, but PDB has failed to supply power properly. As a result, the production is severely hampered now.”
He urged to the PDB authority to add additional load line to the garment factories as per demands. He also request to the PDB authority not to cut the power line of any factory without informing the BGMEA for any reason.
Engineer Md Rois Meah, Chief Engineer of PDB Chittagong region said, PDB is trying to ensure the undisrupted power supply to the RMG sector but, there is shortage of power to supply. PDB is trying to present a good load sheding management system here in Chittagong. So, the power situation will be better in future.”
He further said, “PDB will not cut the power line without discussion with BGMEA in future. If any allegation will arise against any company, PDB will discuss with BGMEA to solve the crisis.”
Engineer Md Rois Meah further said the mismanagements in distributing the bill will be removed very soon as PDB will introduce the e-bill soon. The meeting between PDB and BGMEA was presided over by First Vice-President of BGMEA Nasir Uddin Chowdhury. Among others, director of BGMEA A M Chowdhury Selim, Abdul Wahab, Sayed Najrul Islam, Kaji Mahabub Uddin Jwel, Sabbir Mostafa, Shahab Uddin Ahamed Chowdhury, Emdadul Haque Chowdhury, Md Hasanujjaman Chowdhury, Mohammed Musa, Swakat Osman, Rejjakul Hyder, Jashim Uddin Ahamed, Mridul Chakraborti and owners of garment factories in Chittagong were present at the meeting.
Power crisis hinders RMG production in Ctg
Saturday, 28 April 2012
CHITTAGONG, APR 27: Ready Made Garment (RMG) sector in Chittagong is suffering from various crisis particularly severe power crisis recently. Severe power crisis hampered production of garment sector in the port city, the sources in Bangladesh Garments Manufacturers and Exporters Association (BGMEA) said. Following the prevailing power crisis, the leaders of BGMEA held a meeting with the top officials of Power Development Board (PDB) in Chittagong on Thursday at BGMEA building at Khulshi.
The First Vice-President of BGMEA Nasir Uddin Chowdhury urged the PDB for ensuring undisrupted power supply to the garment factories in Chittagong and giving additional load connection to the garment factories. He said power shortage is hampering the production. The authority is not allowing any new power connection to the factories. Besides, if any factories fail to pay the bill on time, the authority cut off the power line to the factory.”
He said, “Many of our industries are sick now. Many companies are not able to supply their orders as per schedule. Moreover power crisis and workers unrest is the prime problems in the sector.” He also said the investors are losing their interest in RMG sector for crisis of power.
The owners of the garment factories are egger to pay the power bill on time. But, because irregularities of the ground level PDB workers and officials, the garment owners can not pay the bill with in schedule, said Nasir Uddin Chowdhury.
He further said, “PDB should distribute the bill before at least 15 days of the payment date. The garment owners are paying power bill of crores of taka per month in Chittagong, but PDB has failed to supply power properly. As a result, the production is severely hampered now.”
He urged to the PDB authority to add additional load line to the garment factories as per demands. He also request to the PDB authority not to cut the power line of any factory without informing the BGMEA for any reason.
Engineer Md Rois Meah, Chief Engineer of PDB Chittagong region said, PDB is trying to ensure the undisrupted power supply to the RMG sector but, there is shortage of power to supply. PDB is trying to present a good load sheding management system here in Chittagong. So, the power situation will be better in future.”
He further said, “PDB will not cut the power line without discussion with BGMEA in future. If any allegation will arise against any company, PDB will discuss with BGMEA to solve the crisis.”
Engineer Md Rois Meah further said the mismanagements in distributing the bill will be removed very soon as PDB will introduce the e-bill soon. The meeting between PDB and BGMEA was presided over by First Vice-President of BGMEA Nasir Uddin Chowdhury. Among others, director of BGMEA A M Chowdhury Selim, Abdul Wahab, Sayed Najrul Islam, Kaji Mahabub Uddin Jwel, Sabbir Mostafa, Shahab Uddin Ahamed Chowdhury, Emdadul Haque Chowdhury, Md Hasanujjaman Chowdhury, Mohammed Musa, Swakat Osman, Rejjakul Hyder, Jashim Uddin Ahamed, Mridul Chakraborti and owners of garment factories in Chittagong were present at the meeting.
Power crisis hinders RMG production in Ctg
Awami League finance minister had admitted the dire state of national economy to IMF while begging for $1 billion loan. All the while Awami propaganda mouthpieces including some in this very forum, kept running propaganda on state of economy.
-------------------------------------------------------
Economic Analysis
This is how to run the economy
M. A. Taslim
The Finance Minster (FM) often says things that surprise the economics profession. Perhaps that is only because they are paying attention to the wrong things. When the FM speaks to the local media or even to his parliamentary colleagues, he is essentially talking politics. And politics of our country has already degenerated sufficiently not to necessarily have substance.
However, when the FM writes memos to the International Monetary Fund (IMF) supplicating for funds, he has to talk economics, with facts and figures to boot. Hence, if one is interested in knowing what the FM really thinks about the state of the economy, he should read the memo that he has written to the IMF in a desperate bid to have the Extended Credit Facility (ECF) fund released. We must thank the IMF that it published the memo and the attachments on its website. Otherwise the nation would have been in the dark about the full contents of the FM's communication. The IMF does some good things too!
The FM states at the beginning of the Memorandum of Economic and Financial Policies:
"Macroeconomic pressures have intensified over the past 18 months resulting in heightened risks to Bangladesh's external position". He apparently now recognises the build-up of macroeconomic pressures and its balance of payments (BoP) consequences which the local economists repeatedly warned him about during the past year or so, and which he initially rejected. He also states "...fiscal pressures have also emerged, stemming mainly from rising fuel, electricity and fertilizer subsidies. In turn, domestic borrowing by the government rose sharply in the first half of fiscal year (FY) 12, straining available liquidity in the banking system and putting upward pressure on interest rates".
This confession of sorts is in sharp contrast to the government's obdurate reluctance to admit that the oil-driven rental power plants have thrown fiscal discipline out of the window and that government borrowing has crowded out the private sector. These gas-guzzling plants have increased petroleum imports by more than three billion dollars punching a big hole in the balance of payments. This was further aggravated by foreign relations' debacles that have dried up external funds. There has been very little net inflow of foreign resources during this fiscal year. A consequence of this has been the depreciation of the taka.
The onset of an economic downturn worldwide, especially in our main export markets, has considerably slowed down the growth of exports which has largely offset the effects of recessive policies of Bangladesh Bank (BB) to contain imports through aggregate demand management. Large scale government borrowing at a time of tight monetary policy has caused a liquidity crunch that has pushed the interest rate much higher than intended. Investment has taken a hit dimming the prospect of high growth and new employment.
To get out of the current predicament the government had to agree to the harsh conditionalties of the ECF. These will drag the economy further down before any improvement becomes visible, i.e. things will get worse before it becomes better. This is underscored by the IMF's forecast of a growth rate of only 5.5 per cent (later reportedly revised to 5.9 per cent) this fiscal year. This is a far cry from the FM's insistence that 7.0 per cent growth target will be achieved, but conforms to the apprehension of the local economists that it would be difficult to achieve even 6.0 per cent growth this year.
In the cleverly designed package agreed with the IMF ceilings or floors have been set on only a few variables. The government had to commit not to exceed the agreed ceilings on BB's net domestic assets, net credit to the government by the banking system, non-concessional external debt and suppliers' credit and reserve money. It also agreed to maintain net international reserves, tax revenues and social spending above the suggested floors.
These apparently innocuous conditionalities actually put restrictions on the flexibility of the government in deciding on the nature and magnitude of the current and the next budget. Taken together these essentially impose limits on the extent of government spending and borrowing, and ensure that the current tight monetary policy is continued. Hence, the government's policy space is circumscribed in an essential way. The elected government that boasts of nine-tenths majority in the parliament has effectively surrendered its flexibility to conduct national fiscal and monetary policies in a manner that will achieve the goals of its much-touted manifesto; some people from overseas will now oversee the economic policies of the sovereign government.
The impact of the conditionalities on the monetary sector is already evident from the rising interest rates and falling credit growth. Fiscal discipline will be imposed through the ceilings on net credit to the government and non-concessional foreign borrowing. Subsidies will be reduced by increasing electricity tariffs which have already increased by about 40 per cent.
An automatic adjustment mechanism will be put into effect by the year-end to ensure full pass-through of international fuel prices to domestic prices. Thus the subsidy costs will be shifted to the public.
[Note: inflation will go up further and export will loose competitiveness. All those celebration 40% Pakistani spinning mill (no proof of that stat) moved to BD will short live.]
Tax effort will be intensified to increase revenue. The Ministry has indicated a budget size of Tk189 billion for the next fiscal year. If the inflation rate remains at its current level, this will represents only a very small real increase over this year's budget. Fiscal policy will be, therefore, restrictive to match the restrained monetary policy.
While such imposed restrictions may seem abhorrent to some independent-minded people, the shrinking of the policy space of the government may not be an altogether bad thing. The manner in which the government has turned a fairly good economic situation (of FY 2009-2010) to its current depressing state calls its economic management credentials into question. On its own it might have pushed the economy into a crisis zone. The external intervention might help to put the economy on track. Since no one in the government or the party seems to be much concerned about being told how to run the economy, there should not be much internal resistance. The silver lining is that if these policies work, the government could claim credit in time for the next election.
(Prof M. A. Taslim is Chairman, Department of Economics, University of Dhaka.
This is how to run the economy
-------------------------------------------------------
Economic Analysis
This is how to run the economy
M. A. Taslim
The Finance Minster (FM) often says things that surprise the economics profession. Perhaps that is only because they are paying attention to the wrong things. When the FM speaks to the local media or even to his parliamentary colleagues, he is essentially talking politics. And politics of our country has already degenerated sufficiently not to necessarily have substance.
However, when the FM writes memos to the International Monetary Fund (IMF) supplicating for funds, he has to talk economics, with facts and figures to boot. Hence, if one is interested in knowing what the FM really thinks about the state of the economy, he should read the memo that he has written to the IMF in a desperate bid to have the Extended Credit Facility (ECF) fund released. We must thank the IMF that it published the memo and the attachments on its website. Otherwise the nation would have been in the dark about the full contents of the FM's communication. The IMF does some good things too!
The FM states at the beginning of the Memorandum of Economic and Financial Policies:
"Macroeconomic pressures have intensified over the past 18 months resulting in heightened risks to Bangladesh's external position". He apparently now recognises the build-up of macroeconomic pressures and its balance of payments (BoP) consequences which the local economists repeatedly warned him about during the past year or so, and which he initially rejected. He also states "...fiscal pressures have also emerged, stemming mainly from rising fuel, electricity and fertilizer subsidies. In turn, domestic borrowing by the government rose sharply in the first half of fiscal year (FY) 12, straining available liquidity in the banking system and putting upward pressure on interest rates".
This confession of sorts is in sharp contrast to the government's obdurate reluctance to admit that the oil-driven rental power plants have thrown fiscal discipline out of the window and that government borrowing has crowded out the private sector. These gas-guzzling plants have increased petroleum imports by more than three billion dollars punching a big hole in the balance of payments. This was further aggravated by foreign relations' debacles that have dried up external funds. There has been very little net inflow of foreign resources during this fiscal year. A consequence of this has been the depreciation of the taka.
The onset of an economic downturn worldwide, especially in our main export markets, has considerably slowed down the growth of exports which has largely offset the effects of recessive policies of Bangladesh Bank (BB) to contain imports through aggregate demand management. Large scale government borrowing at a time of tight monetary policy has caused a liquidity crunch that has pushed the interest rate much higher than intended. Investment has taken a hit dimming the prospect of high growth and new employment.
To get out of the current predicament the government had to agree to the harsh conditionalties of the ECF. These will drag the economy further down before any improvement becomes visible, i.e. things will get worse before it becomes better. This is underscored by the IMF's forecast of a growth rate of only 5.5 per cent (later reportedly revised to 5.9 per cent) this fiscal year. This is a far cry from the FM's insistence that 7.0 per cent growth target will be achieved, but conforms to the apprehension of the local economists that it would be difficult to achieve even 6.0 per cent growth this year.
In the cleverly designed package agreed with the IMF ceilings or floors have been set on only a few variables. The government had to commit not to exceed the agreed ceilings on BB's net domestic assets, net credit to the government by the banking system, non-concessional external debt and suppliers' credit and reserve money. It also agreed to maintain net international reserves, tax revenues and social spending above the suggested floors.
These apparently innocuous conditionalities actually put restrictions on the flexibility of the government in deciding on the nature and magnitude of the current and the next budget. Taken together these essentially impose limits on the extent of government spending and borrowing, and ensure that the current tight monetary policy is continued. Hence, the government's policy space is circumscribed in an essential way. The elected government that boasts of nine-tenths majority in the parliament has effectively surrendered its flexibility to conduct national fiscal and monetary policies in a manner that will achieve the goals of its much-touted manifesto; some people from overseas will now oversee the economic policies of the sovereign government.
The impact of the conditionalities on the monetary sector is already evident from the rising interest rates and falling credit growth. Fiscal discipline will be imposed through the ceilings on net credit to the government and non-concessional foreign borrowing. Subsidies will be reduced by increasing electricity tariffs which have already increased by about 40 per cent.
An automatic adjustment mechanism will be put into effect by the year-end to ensure full pass-through of international fuel prices to domestic prices. Thus the subsidy costs will be shifted to the public.
[Note: inflation will go up further and export will loose competitiveness. All those celebration 40% Pakistani spinning mill (no proof of that stat) moved to BD will short live.]
Tax effort will be intensified to increase revenue. The Ministry has indicated a budget size of Tk189 billion for the next fiscal year. If the inflation rate remains at its current level, this will represents only a very small real increase over this year's budget. Fiscal policy will be, therefore, restrictive to match the restrained monetary policy.
While such imposed restrictions may seem abhorrent to some independent-minded people, the shrinking of the policy space of the government may not be an altogether bad thing. The manner in which the government has turned a fairly good economic situation (of FY 2009-2010) to its current depressing state calls its economic management credentials into question. On its own it might have pushed the economy into a crisis zone. The external intervention might help to put the economy on track. Since no one in the government or the party seems to be much concerned about being told how to run the economy, there should not be much internal resistance. The silver lining is that if these policies work, the government could claim credit in time for the next election.
(Prof M. A. Taslim is Chairman, Department of Economics, University of Dhaka.
This is how to run the economy
Power crisis remains where it was 3 yrs ago, says Muhith
Loadshedding due to international fuel price hike
Finance Minister AMA Muhith said on Thursday that power crisis remains almost same as it was three years ago.
Explaining the cause of huge load shedding, he said, the fuel price in the international market has gone up by 75 percent for which the government could not meet the demand as there was no extra allocation to match with the inflated market.
Full article:
Power crisis remains where it was 3 yrs ago, says Muhith Loadshedding due to international fuel price hike | price,fuel | HAWKER.COM.BD
Loadshedding due to international fuel price hike
Finance Minister AMA Muhith said on Thursday that power crisis remains almost same as it was three years ago.
Explaining the cause of huge load shedding, he said, the fuel price in the international market has gone up by 75 percent for which the government could not meet the demand as there was no extra allocation to match with the inflated market.
Full article:
Power crisis remains where it was 3 yrs ago, says Muhith Loadshedding due to international fuel price hike | price,fuel | HAWKER.COM.BD
Govt borrows more
Thursday, 24 May 2012
Dhaka, May 23: The government's borrowing from the banks has increased by over Tk. 1,100 crore in the month of May compared to the previous month.
According to Bangladesh Bank (BB) statistics, the government's borrowing on May 20 stood at Tk. 17,743 crore which was around Tk. 16,600 crore in April.
Sources in the central bank said that the government has started borrowing further in accordance with its revised target of the current financial year (FY 2011-12) in order to meet the budgetary requirements.
The revised target of borrowing is around Tk. 27,900 crore.
In the budget for FY 12, the government had planned to borrow Tk. 18,957 crore from banking systems. But, later, they were pushed to revise the target in April with about 47 percent upward adjustment after failing to secure required disbursement under foreign funded projects.
Meanwhile, managing director of a private bank said high borrowing by the government obviously would result in crowding out bank financing to the private sector.
"There is also no denial to the fact that banks would primarily face shortage of deposits. Its implication is that the banks will not have adequate liquidity to carry out day-to-day operations," said the private bank top official, seeking anonymity. He said borrowing by the government has two implications. The first is that money will be back in banks if the borrowed money is spent in domestic development activities. "But, the second implication is that banks would face acute liquidity shortage in case of pay off import bills against petroleum or other large imports by the government, as those money will not be back to banks," he said.
Whatever, borrowing by the government from banking system in the current FY widely criticised by different quarters including the International Monetary Fund (IMF), civil society members, economists and the opposition parties.
IMF, in April, suggested lessening of borrowing from banks. It also urged the central bank not to mint excess money, which is the principal component to fuel inflation.
Govt borrows more
Thursday, 24 May 2012
Dhaka, May 23: The government's borrowing from the banks has increased by over Tk. 1,100 crore in the month of May compared to the previous month.
According to Bangladesh Bank (BB) statistics, the government's borrowing on May 20 stood at Tk. 17,743 crore which was around Tk. 16,600 crore in April.
Sources in the central bank said that the government has started borrowing further in accordance with its revised target of the current financial year (FY 2011-12) in order to meet the budgetary requirements.
The revised target of borrowing is around Tk. 27,900 crore.
In the budget for FY 12, the government had planned to borrow Tk. 18,957 crore from banking systems. But, later, they were pushed to revise the target in April with about 47 percent upward adjustment after failing to secure required disbursement under foreign funded projects.
Meanwhile, managing director of a private bank said high borrowing by the government obviously would result in crowding out bank financing to the private sector.
"There is also no denial to the fact that banks would primarily face shortage of deposits. Its implication is that the banks will not have adequate liquidity to carry out day-to-day operations," said the private bank top official, seeking anonymity. He said borrowing by the government has two implications. The first is that money will be back in banks if the borrowed money is spent in domestic development activities. "But, the second implication is that banks would face acute liquidity shortage in case of pay off import bills against petroleum or other large imports by the government, as those money will not be back to banks," he said.
Whatever, borrowing by the government from banking system in the current FY widely criticised by different quarters including the International Monetary Fund (IMF), civil society members, economists and the opposition parties.
IMF, in April, suggested lessening of borrowing from banks. It also urged the central bank not to mint excess money, which is the principal component to fuel inflation.
Govt borrows more
CPD terms current FY the weakest
Staff Correspondent
Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya speaks at a press briefing at its office in the capital on Monday. CPD executive director Mustafizur Rahman was also present. New Age photoCentre for Policy Dialogue distinguished fellow Debapriya Bhattacharya speaks at a press briefing at its office in the capital on Monday. CPD executive director Mustafizur Rahman was also present. New Age photo
The Centre for Policy Dialogue on Monday termed the current fiscal year as the weakest year of the incumbent government and warned that the coming fiscal could be more tough and disastrous in terms of economic performance.
The CPD made the observation in an analytical review of Bangladeshs macro-economic performance in FY 2011-12 and commented that some dark clouds still hovered over the economy which would continue in the coming year.
There are a lot of internal crises in the economy including lax macro-economic management, weak fiscal management, stagnation in investment, slow implementation of annual development programme and scanty foreign aid disbursement, the CPD distinguished fellow Debapriya Bhattacharya said at a press briefing held at its office on Monday.
Although the economy has grown by 6.3 per cent, the analysis indicated that from economic perspective, fiscal year 2012 had been the weakest of the three years of the present government, Debapriya said while sharing the analytical review of the countrys macro-economic performance in fiscal 2011-12.
CPD executive director Mustafizur Rahman, head of research Fahmida Khatun, senior research fellow Khandaker Golam Moazzem, among others, were present at the briefing.
In its review, the countrys leading independent think-tank, said that a stagnating investment held back the economy from achieving higher levels of economic growth in the current fiscal year.
The government failed to achieve its targeted growth at seven per cent in FY 2012 mainly due to negative growth in agriculture, services and import duty sectors.
At the end of the year, GDP growth might slip below the original estimate of 6.3 per cent by the Bangladesh Bureau of Statistics because of a drop in the growth in manufacturing and services sectors.
The CPD attributed the reasons behind the poor performance of the outgoing fiscal to lack of coordination in project implementation, slower investment, unplanned subsidy and the governments weakness in expenditure management in power sector planning and low utilisation of foreign aid.
The energy sector alone made the fiscal management weak in the outgoing fiscal year, the CPD report said.
Poor understanding about the implications of massive use of rental power plants not only created serious instability in fiscal, but also in tackling balance of payment (BoP) problems. It also defeated the purpose of the initiative of quick and steady power supply, the report stated.
If the rental power plants continue to operate in the coming fiscal, it will create additional problems like those of the outgoing fiscal year, Debapriya said.
According to CPDs analysis, investment situation remained stagnant in the country with decrease in private and foreign direct investments and insignificant public investment whichboth of which will also continue in the next fiscal year.
FDI remained stagnant over the last three years, Debapriya pointed out.
He said the investors became frustrated due to absence of infrastructure, shortage of power supply, lack of access to finance, inefficient government bureaucracy, policy instability, and complex foreign currency regulations and tax rates.
Invertors are also talking about corruption which ranked second in the CPD study among top problematic factors for investment, he added.
In the absence of fast investment from private sector and improved implementation of government investment plans, achieving the GDP growth in FY 2013 would remain a far cry.
Meanwhile, controlling the governments borrowing demand would be the central banks one of the important preoccupations. It would be very important for Bangladesh Bank to create adequate space for the private sectors access to credit to meet the investment demand, the report stated.
According to CPD the soaring revenue expenditures and mounting subsidy demand were the weakest side of the fiscal management in FY2012.
An increase of 32.5 per cent in expenditure against 18.1 per cent increase in revenue created a big problem in economy, Debepriya said.
Subsidy expenditure also increased by 69.8 per cent with failure in financing from non-bank sources and foreign aid which pushed the government to excessive borrowings from banking sectors, he said.
CPD blamed that the government kept the amount for subsidy lower for next fiscal year based on full fuel price adjustment expectation to fulfill the condition of international monetary fund.
Annual development programme implementation rate in July-April was only 55.4 per cent, the lowest in the tenure of the current government and aid utilization rate has been even lower at only 47.6 per cent.
An inflationary pressure continues as non-food inflation remains in the driving seat.
Indeed, adjustment of administered prices of petroleum products and electricity, depreciation of the Taka and increased cost of production made a mark on price level on non-food items, the report said.
If the government takes price adjustment in power and energy following IMF conditions, the inflation would increase further, Debapriya said. The CPD advised the government to adopt a monetary policy that would facilitate credit to the private sector to achieve the targeted growth. We dont think that tightened monetary policy will reduce inflation rather it will deter obtaining 7 per cent GDP growth, Debpriya said.
There are some stability in the balance of payment but we are not sure how long it will sustain amid slow growth in exports and lower disbursement of foreign aid, he said.
The CPD said that restoring fiscal discipline would be one of the major challenges in the coming fiscal 2012-13 because lax macro-economic management has been greatly responsible for many of the recent economic woes.
New Age | Newspaper
Staff Correspondent
Centre for Policy Dialogue distinguished fellow Debapriya Bhattacharya speaks at a press briefing at its office in the capital on Monday. CPD executive director Mustafizur Rahman was also present. New Age photoCentre for Policy Dialogue distinguished fellow Debapriya Bhattacharya speaks at a press briefing at its office in the capital on Monday. CPD executive director Mustafizur Rahman was also present. New Age photo
The Centre for Policy Dialogue on Monday termed the current fiscal year as the weakest year of the incumbent government and warned that the coming fiscal could be more tough and disastrous in terms of economic performance.
The CPD made the observation in an analytical review of Bangladeshs macro-economic performance in FY 2011-12 and commented that some dark clouds still hovered over the economy which would continue in the coming year.
There are a lot of internal crises in the economy including lax macro-economic management, weak fiscal management, stagnation in investment, slow implementation of annual development programme and scanty foreign aid disbursement, the CPD distinguished fellow Debapriya Bhattacharya said at a press briefing held at its office on Monday.
Although the economy has grown by 6.3 per cent, the analysis indicated that from economic perspective, fiscal year 2012 had been the weakest of the three years of the present government, Debapriya said while sharing the analytical review of the countrys macro-economic performance in fiscal 2011-12.
CPD executive director Mustafizur Rahman, head of research Fahmida Khatun, senior research fellow Khandaker Golam Moazzem, among others, were present at the briefing.
In its review, the countrys leading independent think-tank, said that a stagnating investment held back the economy from achieving higher levels of economic growth in the current fiscal year.
The government failed to achieve its targeted growth at seven per cent in FY 2012 mainly due to negative growth in agriculture, services and import duty sectors.
At the end of the year, GDP growth might slip below the original estimate of 6.3 per cent by the Bangladesh Bureau of Statistics because of a drop in the growth in manufacturing and services sectors.
The CPD attributed the reasons behind the poor performance of the outgoing fiscal to lack of coordination in project implementation, slower investment, unplanned subsidy and the governments weakness in expenditure management in power sector planning and low utilisation of foreign aid.
The energy sector alone made the fiscal management weak in the outgoing fiscal year, the CPD report said.
Poor understanding about the implications of massive use of rental power plants not only created serious instability in fiscal, but also in tackling balance of payment (BoP) problems. It also defeated the purpose of the initiative of quick and steady power supply, the report stated.
If the rental power plants continue to operate in the coming fiscal, it will create additional problems like those of the outgoing fiscal year, Debapriya said.
According to CPDs analysis, investment situation remained stagnant in the country with decrease in private and foreign direct investments and insignificant public investment whichboth of which will also continue in the next fiscal year.
FDI remained stagnant over the last three years, Debapriya pointed out.
He said the investors became frustrated due to absence of infrastructure, shortage of power supply, lack of access to finance, inefficient government bureaucracy, policy instability, and complex foreign currency regulations and tax rates.
Invertors are also talking about corruption which ranked second in the CPD study among top problematic factors for investment, he added.
In the absence of fast investment from private sector and improved implementation of government investment plans, achieving the GDP growth in FY 2013 would remain a far cry.
Meanwhile, controlling the governments borrowing demand would be the central banks one of the important preoccupations. It would be very important for Bangladesh Bank to create adequate space for the private sectors access to credit to meet the investment demand, the report stated.
According to CPD the soaring revenue expenditures and mounting subsidy demand were the weakest side of the fiscal management in FY2012.
An increase of 32.5 per cent in expenditure against 18.1 per cent increase in revenue created a big problem in economy, Debepriya said.
Subsidy expenditure also increased by 69.8 per cent with failure in financing from non-bank sources and foreign aid which pushed the government to excessive borrowings from banking sectors, he said.
CPD blamed that the government kept the amount for subsidy lower for next fiscal year based on full fuel price adjustment expectation to fulfill the condition of international monetary fund.
Annual development programme implementation rate in July-April was only 55.4 per cent, the lowest in the tenure of the current government and aid utilization rate has been even lower at only 47.6 per cent.
An inflationary pressure continues as non-food inflation remains in the driving seat.
Indeed, adjustment of administered prices of petroleum products and electricity, depreciation of the Taka and increased cost of production made a mark on price level on non-food items, the report said.
If the government takes price adjustment in power and energy following IMF conditions, the inflation would increase further, Debapriya said. The CPD advised the government to adopt a monetary policy that would facilitate credit to the private sector to achieve the targeted growth. We dont think that tightened monetary policy will reduce inflation rather it will deter obtaining 7 per cent GDP growth, Debpriya said.
There are some stability in the balance of payment but we are not sure how long it will sustain amid slow growth in exports and lower disbursement of foreign aid, he said.
The CPD said that restoring fiscal discipline would be one of the major challenges in the coming fiscal 2012-13 because lax macro-economic management has been greatly responsible for many of the recent economic woes.
New Age | Newspaper
Some wannabe Bangla stars are Bulldozing on phantom developments whilst conveniently ignoring actual economic slum-bogginess’s scenario in BD, IDUNE Bhai. Bank borrowing AKA Bank robbing has reached to a point that banks don't have any money to clear its client’s checks more than few lacs TK. And fantasy stars are flooding PDF with futuristic pile of BAL's lie. What world do they think that people live in?
Weren't those CPD dalals; especially Ruskie's made over pundit, Debobrata calling BNP/JI rulers underachievers and were crying foul for not having 10% growth whilst steady rise to 6.8% during BNP/JI'S rule seemed far-reaching by now at any of the fiscal yrs of RAWamy dalal's tenure.
The era of bank-borrowing ended a long ago by 2006, the last yr of BNP/JI'S ruling but that came back vehemently with the destruction of all governmental organs; which followed with the ultimate result of Macro Economic destability, looting of stock market, rising inflation, liquidity crisis, drying up of FDI and discouraging of local investment. What did it demonstrate folks? It was a freaking grand conspiracy to bring RAWamy dalals into power in order to erode BD's potential as 'Nation State'.
Moreover, continuous path of destruction led foreign; especially 'Bharati Corporation' to quickly step in to exploit BD's mass for profiteering/racketeering whilst leading them to immature death. This is what democracy, independence by enemy has provided to BDIANS along with the fake trial of patriotic leaders, thanks.
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