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The Bangladesh Bank (BB) has suggested the government take into consideration a number of factors, including the ratio of private sector investment in the country, before allowing investments abroad, officials said. In a recent letter sent to the ministry of finance (MoF), it made the plea after receiving loads of applications from businessmen who are interested in making overseas investments. The central bank needs MoF's consent first before permitting anyone to make investment abroad, officials added. In its letter, the BB mentioned the applications of three separate business groups who want to send US$ 20 million to Malaysia for acquiring two companies there, set up a garment factory in Haiti for which it needs to send $10.44 million, and establish a bank in Gambia by sending $7.0 million respectively. Making equity investment abroad for resident Bangladeshis is not open under the existing foreign exchange regulation act. But under sub-section 6 of section-4 of the act, the central bank can give permission for capital account transactions to interested businessmen in consultation with the government. The central bank in its letter said the foreign exchange reserve situation has to be taken into consideration first before making capital account convertible. It said the convertibility can only be considered if adequate foreign currency remains in hand after meeting necessary import cost, if export earnings show continuous rise, remittance inflow and foreign investment continue to increase for a long period. "Though the foreign exchange reserve crossed $32 million in Bangladesh quickly, its current growth rate is very slow," the central bank said, adding that import of fuel oil, capital machinery and consumer goods increased significantly in recent months. Side by side, the global economic crisis has lowered export earnings and remittance inflow, it noted. The BB said Bangladesh's foreign currency earning is mainly dependent on export earnings and remittance. Though export earnings are showing a positive trend this fiscal year, remittance earnings are showing a negative trend. But because of growing imports and low remittance inflow, the current account has gone to negative territory by $0.79 billon in December last. With the current foreign currency reserve, import needs for 7/8 months can be met. The central bank also said until November last year some Tk 2.77 trillion remained idle in the banking system. It further said minimum domestic investment needs to be 32 per cent of gross domestic product (GDP) to attain the optimum growth target of GDP. "Whether allowing investments abroad instead of encouraging local investment will be appropriate, at this stage, requires careful thought," the letter mentioned. The BB also mentioned that the government has already decided to form a $10 billion sovereign wealth fund in next five years by taking $2.0 billion each year from reserve. Besides, a $2.5 billion export development fund (EDF) has been formed taking money from the central bank. At the end of February, the balance of private sector external debt stood at $9.4 billion.   The central bank reminded that the government has recently decided to set up 100 economic zones across the country to promote domestic and foreign investment. Bangladeshis who are interested in making investments abroad have the opportunity to invest in these economic zones which may contribute to employment creation and socioeconomic development of the country.      It also suggested taking into consideration whether the equity fund, to be sent abroad, will be invested in the same what was mentioned in the application, ensuring return of earnings from the investment and the capital itself, sectors which may produce good returns, and ensuring employment generation for Bangladeshis in investments abroad. The BB also said equity investment on a limited scale for opening bank branches or exchange houses, facilitating remittance inflow, is being allowed. Besides, utilising fund for opening offices from export retention quota account has also been allowed for some companies so far. But it said until now no local companies is given permission to send such a big amount ($20 million by a business group) abroad for making equity investment. The central bank also said it has been receiving a good number of applications seeking permission for making equity investment abroad. If the applications are considered, the pressure on central bank foreign exchange reserve may heighten, it said. A senior finance ministry official told the FE that sending money abroad through unofficial channel has been increasing as capital account is kept non-convertible. Referring some reports he said in recent years billions of dollars have been siphoned off from the country. He said permission for investments abroad on a limited scale can be given. When contacted over telephone Friday, executive director of Policy Research Institute of Bangladesh Dr Ahsan H Mansur said the capital account should have been made convertible when the reserve situation was good. "Though the foreign exchange reserve growth has slowed down, it has not declined until now," he said suggesting allowing equity investment abroad on a limited scale. Mr Mansur, however, suggested that the government should tag conditions like employment generations for Bangladeshi nationals in investments abroad. He also advocated that reporting mechanising of equity investments should be very well to keep track on the capital went abroad.      syful-islam@outlook.com ....

Published at: 2017-03-18 00:00:07

The volume of buyers' credit in the country's banking sector increased 14.05 per cent in January last as importers got higher amount of the same taking the advantage of lower interest rates. The size of the credit, channelised through Usance Payable At Sight, generally known as 'UPAS', was US$1.06 billion in January. It was $934.37 million in the previous month, according to latest statistics of  Bangladesh's central bank. The amount was US$ 970.45 million in November last. The UPAS is a Usance L/C (letter of credit) which is payable at sight to the seller (beneficiary) while  payment settlement from the applicant (buyer) to the lender is made at the end of usance term. The repayment of loans by importers also increased by 16.71 per cent to $1.02 billion in January last from $934.37 million a month ago, the official data showed. Such loans are received in foreign currency from overseas sources on the basis of local bank guarantees mostly at an interest rate ranging between 3.50 per cent and 6.00 per cent. The foreign currency loans have become popular gradually mainly due to lower interest rates offered by local banks or overseas sources, according to the central bank officials. The net outstanding buyers' credit rose to $5.41 billion in January 2017 from $5.35 billion a month ago, according to the Bangladesh Bank (BB) data. The central bankers, however, said the effective interest rate of the buyers' credit will increase if the local currency, Bangladesh Taka (BDT), depreciates against the US dollar (US$). The volume of local currency depreciated 1.47 per cent against the US dollar in last five months due to higher demand for the greenback in the market. Earlier on October 27 last, the BDT witnessed a depreciating trend against the US dollar after maintaining stability for more than seven months in the inter-bank forex market. The US dollar was quoted at Tk 79.56-Tk 79.57 in the inter-bank forex market on Thursday against Tk 78.40-Tk 78.42 on October 27 last, according to market operators. Earlier on March 13 of last calendar year, the US dollar was quoted at Tk 78.40. "The trend of BDT losing value against the US dollar may continue in the coming days due to higher demand for the greenback in the market for settlement of import payment obligations," a senior treasury official of a leading commercial bank hinted. Lower inflow of remittances along with export earnings in February has pushed up the demand for the US dollar, the treasury official explained. Talking to the FE, Abdul Matlub Ahmad, president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) said, buyers' credit should be discouraged for avoiding exchange rate risk and to utilise excess liquidity in the country's banking sector. "We've enough excess liquidity with the local banks. So local currency loan should be encouraged," the FBCCI chief explained. The overall excess liquidity in commercial banks stood at around Tk 1.15 trillion as of January 31 last. But major portion of the funds has been invested in risk-free government securities, according to a senior BB official. He also said excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 44 billion. "The amount of excess liquidity fell slightly during the period under review as credit growth, particularly in the private sector, increased," the central banker noted. The growth in private sector credit flow rose to 15.61 per cent in January 2017 on a year-on-year basis from 15.55 per cent in December 2016. It was 15.01 per cent in November. The overall excess liquidity with the commercial banks was around Tk 1.16 trillion in December last. When contacted, M A Halim Chowdhury, Managing Director and Chief Executive Officer of Pubali Bank Limited, said the repayment burden for foreign currency loan will rise if the value of BDT against the US$ goes down. "Such loan is suitable only for export-oriented business entities," the senior banker said without elaborating.  On the other hand, the central bank is allowing such low-cost credit to achieve maximum economic growth through industrialisation in Bangladesh, another BB official said while explaining the main objective of the buyers' credit. He also said businessmen are now allowed to avail buyers' credit to import capital machinery and industrial raw materials. "Such credit also helped reduce interest rates on lending in local banking system in the recent months," he said, adding that it also helps neutralise inflationary pressures on the economy stable. The weighted average interest rates on lending came down to 9.85 per cent in January 2017 from 9.93 per cent a month before. It was 11.05 per cent in January 2016. The central bank of Bangladesh had opened up the opportunity for taking foreign currency loans in February 2012, with importers making its best use.     siddique.islam@gmail.com....

Published at: 2017-03-18 00:00:06

A mobile court has sentenced 20 gamblers to 29 days' imprisonment each in Dakhshin Surma upazila of Sylhet district in Friday. Sylhet Metropolitan Police (SMP) press release said, a team of police conducted a raid in the upazila on Friday afternoon and arrested them from Technical Intersection while they were gambling there. The team of the elite force, led by officer-in-charge of Dakhshin Surma Police Station Md Harun-or-Rashid, arrested the gamblers and produced before the mobile court. The mobile court, led by executive magistrate Shahed Mostafa, jailed them for 29 days, according to UNB report.....

Published at: 2017-03-18 00:00:06

An unknown criminal has died after he was gunned down by the RAB whom he attacked with explosives at a checkpost in capital Dhaka’s Khilgaon area early Saturday.  He died after being taken to hospital.  Two members of the elite force were also injured and admitted to hospital.  The attack comes within 24 hours of a ‘suicide attack’ inside a makeshift RAB camp at Ashokona in the city on Friday.  Mufti Mahmud Khan, director of legal and media wing at RAB headquarters, said the miscreant riding a motorcycle attacked the RAB-3 checkpost at around 4:35am.  RAB-3 Captain Tuhin Mohammad Masud said the elite force gunned down the attacker, leaving him with critical injuries. He died after being taken to hospital.  RAB-3 Operations Officer ASM Sakhawat Hossain said, “He (attacker) was challenged only when he tried to hurl something at us. Later he was found with huge explosives strapped to his body.”  After deadly raids at militant hideouts at Chittagong’s Mirsarai, a makeshift RAB camp came under a suicide attack at Ashokona in the capital on Friday noon. The ‘suicide bomber’, believed to be a suspected militant, died on the spot.  The RAB has been launching anti-militant raids across the country since a deadly cafe attack took place in Dhaka city last year.  The raids had triggered a lull in the militant activities, but it came to an end with militants trying to snatch their leader from a prison van at Tongi in Gazipur on March 6.  The next day, two suspected militants were also arrested as they threw bombs at police during a routine check of a bus in Comilla.  On the duo’s tip-off, the deadly raids were launched at the Mirsarai militant hideouts, when at least four suicide bombers died, according to police.  Meanwhile, the Islamic State claimed responsibility for the attack at Ashkona, but Bangladesh law enforcement agencies, as always, have denied it.     ....

Published at: 2017-03-18 00:00:06

The reverse repo operation in the money market, a process where central bank borrows money from banks through bidding as a means of monetary tool, remains almost halted for quite sometime. It has happened, as the Bangladesh Bank (BB) did not accept bids, signifying that the monetary instrument is 'losing its effectiveness.' On the other hand, the volume of money borrowed through repo operations, a process where banks borrow from the central bank, also declined significantly in the recent period. Such pictures were presented in a report of the central bank on the money market. The money market experts told the FE that through such reluctance to borrow from the commercial banks BB wants to give a signal that the market is in equilibrium and it requires no intervention. But in real sense there is adequate liquidity in the banking system. BB latest statistics shows that the volume of idle money, which remains unused for long in the banking system, amounts to Tk 2.77 trillion or equivalent to nearly 16 per cent of the country's GDP, as of November 2016. They also told the FE that both the commercial banks and the central bank have adequate cash to meet their demands that has made both the tools almost 'inactive'. However, this 'non-functionality' of the tools is hurting the commercial banks, as they are losing a better opportunity to invest, through which they might gain more than other available options. The experts argued that the volume of borrowed money through repo shrank, as the banks could collect deposit from their clients by giving interest at much lower rates than BB. Currently, the repo rate is 4.75 per cent, and the reverse repo is 6.75 per cent. Dr Zahid Hussain, lead economist at World Bank Dhaka office, told the FE that the monetary instrument is losing its effectiveness through such state of the reverse repo operation. "The process is open market-based, and its absence causes shrinking of domain of the money market." Dr Hussain said it should have been operationalised for the interest of the money market. He said BB does not feel the need to borrow, as the money that remains idle in the market is not pushing up the inflation rate as per the estimation of Bangladesh Bureau of Statistics. However, Finance Minister A M A Muhith in a recent meeting with the economists and professionals said Bangladesh's statistics is 'not reliable as well as conflicting' with other statistics. "If the central bank sees that the core inflation is going down, it will not borrow money from the commercial banks, as such type of operation shrinks its profitability significantly," he commented. On the other hand, Dr Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh, told the FE that the central bank is not borrowing money, as it wants to indicate that the money market remains in an equilibrium position. A number of senior bankers told the FE that adequate money remains unused in the banking system, leading to less borrowing through repos. They also said they can manage emergency funds now through call money or inter-bank transactions. Anis A Khan, managing director and CEO of Mutual Trust Bank Limited, told the FE that the money market remains stable and does not need borrowing from the central bank. Md Golam Hafiz, managing director and CEO of National Credit and Commerce Bank Limited, told the FE that reverse repo may be an attractive tool for the banking system, as it gives higher dividend than other available options. "If I give my excess money to the calls (call money), I get 2.0 per cent, and if the central bank borrows the money we may accrue interest at much higher rates," he commented. Nurul Amin, managing director and CEO of Meghna Bank, told the FE: "We've ample idle money for long, so we need not borrow much from the central bank." He said he has never seen such a large amount of unused money in the banking system. However, many economists said the situation may change dramatically, if the volume of investment and import rises fast. They opined that Bangladesh is lagging much behind to prop up required investment to meet its GDP goal. According to central bank statistics, there were 46 reverse repo auctions in October-December 2016 quarter involving more than Tk 36 billion. But the central bank did not accept any of the short-term reverse repos. During July-September period of this fiscal year (FY), 2016-17, some 40 auctions of reverse repo were held, amounting to nearly Tk 47 billion, but BB declined to accept those also. Similarly, during Mach-June period of the previous FY there were reverse repo auctions, which were not accepted by the central bank. Four repo auctions, worth Tk 0.67 billion, were held during October-December period of this FY, and were accepted. During July-September last, only two repo auctions, worth Tk 0.48 billion, were held and accepted by the central bank. During March-June period of the previous FY, one repo auction, amounting to Tk 8.48 billion, was accepted.     jasimharoon@yahoo.com....

Published at: 2017-03-18 00:00:06