Stocks rise despite contractionary monetary policy

Tallu Spinning Mills’ quarterly loss

The key indexes of the Dhaka and Chittagong stock exchanges rose yesterday despite the central bank unveiling a contractionary monetary policy a day earlier and scrapping the interest rate cap on loans.

The DSEX, the benchmark index of the Dhaka and Stock Exchange, rose 33 points, or 0.52 per cent, to 6,314.

The DS30, which represents blue-chip stocks, increased 0.24 per cent to 2,188 points while the DSES, an index comprised of shariah-compliant companies, edged up 0.47 per cent to 1,369 points.

Md Moniruzzaman, managing director of Prime Bank Securities, said the impact of the monetary policy would be little on the stock market as investors knew about the central bank move on the Six-months Moving Average Rate of Treasury bills (SMART), which will be used to fix the lending rate from the coming fiscal year.

The central bank rolled out the monetary statement policy for the first half of the next fiscal year, raising the rate at which cash-strapped banks take short-term loans by 50 basis points to 6.50 per cent.

The BB also increased the rate at which banks keep funds at the BB — known as the reverse repo—by 25 basis points to 4.50 per cent.

It also scrapped the 9 per cent interest rate ceiling on loans introduced in April of 2020.

The hike in the policy rate and the withdrawal of the cap is expected to elevate the borrowing costs for financial institutions, which will subsequently influence interest rates across the economy, said the central bank.

“This adjustment will make it more expensive for businesses and individuals to access funds for investments and consumption.”

The central bank will allow banks to add a maximum of 3 per cent. Currently, the interest rate of the six-month T-bill is 7.10 per cent. This means the interest rate on loans will be a maximum of 10.10 per cent.

“As the interest rate will go up by around 1 percentage point, it would not be a big deal,” said Moniruzzaman, adding that some listed companies that have kept funds with banks will benefit from the new interest rate setting.

Turnover, a key indicator of the DSE, surged 27 per cent to Tk 533 crore.

Of the securities traded, 146 advanced, 29 declined and 180 did not show any price movement.

Among the top gainers, the life insurance sector rose 4.9 per cent, the general insurance sector advanced 4.4 per cent and the cement sector increased 2.1 per cent. The jute sector shed 0.3 per cent.

Investors’ attention was mostly centred on the life insurance, pharmaceuticals and food sectors.

Meghna Insurance posted the highest gain with an increase of 9.97 per cent. Crystal Insurance, Progressive Life Insurance, Trust Islami Life Insurance, and Prime Islami Life Insurance were among the top gainers as well.

Khulna Printing & Packaging was the biggest loser, shedding 4.72 per cent.

Apex Tannery, Midland Bank, Khan Brothers PP Woven Bag Industries, and Metro Spinning were also on the list of significant losers.

Meghna Life Insurance was the most traded stock with issues worth Tk 28 crore transacted. Navana Pharmaceuticals, Sonali Life Insurance, Rupali Life Insurance, and City General Insurance also saw significant turnover.

The Caspi, the all-share price index of the Chittagong Stock Exchange, added 80 points, or 0.43 per cent, to close at 18,635 points.

Of the issues traded, 99 rose, 20 retreated and 99 did not see any price swing. Turnover of the port city bourse slipped 5 per cent to Tk 12.9 crore.

Source: The Daily Star

Inflationary pains for common people to persist

Achieving inflation target for FY24 may be challenging: BB

Like in the outgoing financial year, the common people in Bangladesh will continue to suffer from higher consumer prices in 2023-24 as the factors behind the elevated level of inflation are unlikely to change dramatically.

Inflation rates around the world have declined from their recent peaks in line with the fall in global commodity prices. But Bangladesh has not benefited from the development. Rather, inflation in the country shows no sign of slowing down.

Under such a bleak scenario, the central bank on Sunday unveiled its monetary policy for the first half of 2023-24 with a view to reining in inflation and giving a boost to the foreign currency reserve level.

The BB has set an inflation target of 6 per cent for FY24. But the point-to-point inflation rate surged to 9.94 per cent in May, compared to 7.42 per cent in the same month last year.

The average headline inflation stood at 8.84 per cent last month, surpassing the government’s revised target ceiling of 7.50 per cent set for June 2023.

And the central bank itself thinks that achieving the 6 per cent target in FY24 may prove to be challenging.

“The rigid nature of internal price adjustment, combined with a significant depreciation of the domestic currency, could impede the downward adjustment of domestic inflation, despite the recent decline in international market prices,” it said on Sunday.

“Consequently, uncertainties may persist in the inflation outlook during the first half of FY24. The inflationary pressure experienced in FY23 may also contribute to elevated inflation expectations throughout FY24.”

The central bank also acknowledged the lack of a competitive environment, along with market syndication for the current level of inflation.

Other factors pushing the inflation to at least a decade high include cheap funds made available through the 9 per cent interest rate cap for the past three years.

In an encouraging move, the central bank has removed the ceiling and raised the policy rates for the sixth time in the past one year. The ceiling has rendered the multiple hikes in policy rates ineffective so far.

The BB thinks the hike in the policy rate and the withdrawal of the cap is expected to elevate the borrowing costs for financial institutions, which will subsequently influence interest rates across the economy. This adjustment will make it more expensive for businesses and individuals to access funds for investments and consumption.

This shift intends to curtail excessive monetary expansion, thereby aiding inflation control.

In another major development, the central bank has decided to adopt a unified and market-driven single exchange rate regime, allowing the exchange rate to be determined by market forces. If a uniform exchange rate could be implemented, there might be some improvement in the reserve scenario.

A multiple exchange rate regime with separate rates for exporters, remitters and importers has been blamed for the erosion of the reserve.

A wide gap in formal and informal exchange rates has been one of the factors behind the sharp fall in the foreign exchange reserves as it shifts remittances from official channels to unofficial routes and impedes repatriation of export proceeds, said the World Bank recently.

In Bangladesh, a one-per cent deviation between the formal and informal exchange rate shifts 3.6 per cent of remittances from the formal to the informal financial sector, it said.

Because of the gap between the exchange rates for imports and remittances, importers have incentives to over-invoice imports to buy more US dollars from banks and send the profits back as remittances. This rate arbitrage leads to a further decline in US dollar liquidity in banks and parallel exchange rates discouraged the inflow of foreign currencies, said the WB.

The BB projects that the reserve would rise to $31.5 billion in 2023-24 from about $30 billion currently. It was much lower than the $41.44 billion seen in June last year.

Global ratings agency Moody’s has already said gross foreign exchange reserves to remain below $30 billion for the next two to three years.

A 29 per cent fall in the reserve level in the past one year, led by higher-than-usual imports and a spike in the global commodity prices, has forced the government to limit procurements from the external source, which contributed to the tightening of supplies and thus acceleration of the prices in the local market.

The government may need to maintain its import control measures until the reserve level goes up, meaning lingering struggles for businesses and industries looking to open letters of credit to import inputs, raw materials and equipment.

Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said: “Inflation will only come down to the targeted level if the central bank allows the interest rate to go up to the required level.”

“Nobody knows how much the interest rate should increase. The contractionary monetary policy has to be implemented effectively.”

He said the inflation rate has been allowed to go up. “So, a strong dose of medicine will have to be applied because the disease is serious. But the money supply will not be tightened if the interest rate is allowed to increase by a merely 1 to 2 percentage points from the current level.”

The former official of the IMF pointed out that the 43 per cent growth target in government borrowing in July-December of FY24 contradicts the goal on inflation.

“A higher borrowing from the central bank as seen in recent years will stoke inflationary pressures. Then it does not remain a contractionary monetary policy. The borrowing from the central bank by the government will have to be minimal.”

Under the new method, the central bank would initially set a monthly reference rate based on the weighted average rate to be calculated on the basis of the interest rates of the six-month short-term treasury bill.

The central bank controls the interest rates of T-bills and T-bonds. Since the central bank offers lower rates during the auctions of government securities, commercial banks do not get the opportunity to buy them.

“It seems that the interest rate will not be market-based,” said Selim Raihan, executive director of the South Asian Network on Economic Modeling.

“If that is the case, then it will not help narrow the money supply and rein in inflation.”

He urged the government to set up a coordination cell on inflation, if necessary, in order to step up monitoring and remove market imperfections.

Mansur called for ensuring a market-based exchange and interest rates as well as bringing the financial account of the balance of payments into positive territory by activating the line of credits from external financial institutions in a bid to reverse the downward trend of the forex reserve.


Cenbank declares 7.13% reference rate to fix lending rate

The lending rate will be 11.13% for personal and car loans and consumer loans.

The Bangladesh Bank has declared a reference lending rate of 7.13% for July, projecting an increase in interest rates for all types of bank loans.

Based on the reference rate, the lending rate for banks will rise to 10.13% with the addition of a 1% supervision fee, meaning the rate will be 11.13% for personal and car loans, both of which fall under CMSME (Credit to Micro, Small, and Medium Enterprises) and consumer loans.

Reference interest rates, sometimes called benchmark interest rates, are interest rates that are used as the basis for financial contracts,

The reference lending rate, known as “SMART” (six-month moving average rate of Treasury bills), applies a margin for both banks and non-bank financial institutions (NBFIs).

Banks can apply a margin of up to 3%, while NBFIs can apply a margin of up to 5% over the SMART rate.

The central bank determined the reference rate by calculating the average of treasury bills from December 2022 to May 2023.
Furthermore, the lending rate for agricultural and rural loans will increase to 9.13%, up from the existing 8% for farm loans and 9% for other types of rural loans.

However, the lending rate of 20% for credit cards will remain unchanged.

According to a Bangladesh Bank gazette, the interest rate cannot be changed within six months of its imposition.

This means that even if the interest rate increases, the bank cannot raise it for existing customers.

Similarly, if the interest rate decreases, the customer’s rate will not decrease.

In the case of early loan repayment, personal loans, car purchase loans under CMSME, and consumer loans will be subject to a proportionate supervision fee of 1%.

Therefore, if a borrower wants to repay the loan before its maturity, the bank can charge a supervision fee of 0.50% on their loan.

The islamic banks have also been instructed by the Bangladesh Bank to calculate profits according to the same rules.
Bank officials state that the central bank has moved away from fixing an interest rate cap and has slightly increased the interest rate.

However, it still remains within a regulated system and is not fully market-oriented.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, commented that although the Bangladesh Bank has removed the interest rate cap to combat inflation, the move is still not market-driven as the rate’s formula remains under the central bank’s control.

In April 2020, an initiative was taken by bank entrepreneurs and businessmen to set the interest rate at 9%. Following that, the Bangladesh Bank issued a notification fixing the interest rate at 9%.
During the monetary policy announcement ceremony on Sunday, Bangladesh Bank Governor Abdur Rauf Talukder stated, “When the interest rate was at 16% to 17%, the rate was fixed at 9% based on a political decision to reduce the cost of doing business. At that time, foreign loans were available at 2% interest. Now, considering the current situation, the interest rate needs to be increased. We have convinced the government, and therefore, the maximum interest rate ceiling is being lifted again based on a political decision.”

Source: The Business Standard


Pran Agro, Runner Automobiles allowed to issue bonds worth Tk530cr

The securities regulator, on Monday, has allowed Pran Agro Limited and Runner Automobiles PLC to issue bonds worth a total Tk530 crore through private placements.

The bonds’ issuance approval came in a commission meeting chaired by the Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat-ul-Islam.

In the meeting, the BSEC also approved a draft prospectus of open-end mutual funds of CWT-Community Bank Shariah Fund.

The target of the fund is Tk25 crore, while the sponsor will provide Tk2.5 crore, and the rest is open for general investors. The face value of the fund is Tk10 each.

Pran Agro’s bond

Pran Agro will issue a guaranteed, unsecured, transferable, redeemable and non-convertible bond worth Tk262.5 crore with a face value of Tk10 lakh per unit.

According to the BSEC press release, Pran Agro will issue the bond to institutional investors and high-net worth individuals for building office and factory, acquiring machinery, and repaying loans.

The coupon rate has been fixed 8.88% and the bond will enlist with the Alternative Trading Board (ATB) of the stock exchanges.

The bond’s trustee is Green Delta Capital and arranger Riverstone Capital.

Runner Automobiles’ bond 

Runner Automobiles will issue an unsecured, redeemable, non-convertible, guaranteed sustainability bond worth Tk267.5 crore with a tenure of seven years.

The bond will be issued to multinational and local insurance companies, banks, non-bank financial institutions, corporates and high-net worth individuals, according to the press release.

Issuing the bond, the Runner Automobiles will use the fund for credit sales, constructing solar plants, and bond related costs.

The face value per unit is Tk10 lakh, and the coupon rate 8.5-9%.

The bond’s trustee is DBH Finance PLC, and arranger Green Delta Capital.

Source: The Business Standard


মুদ্রানীতি ঘোষণা আজ – নীতি সুদহার বাড়তে পারে

বাংলাদেশ ব্যাংক
বাংলাদেশ ব্যাংকছবি: সংগৃহীত

নানা সংকটে দেশের অর্থনীতি। অর্থনীতিবিদেরা বলছেন, এর আগে এমন বহুমুখী সমস্যা দেখা যায়নি। এখনকার সংকটের মধ্যে অন্যতম হলো চাহিদার তুলনায় ডলারের জোগান কম। এতে অনেক ব্যবসায়ীই বিপাকে পড়েছেন। আবার ডলারের দাম বেড়ে যাওয়ার প্রভাব পড়ছে দ্রব্যমূল্যে। এতে মূল্যস্ফীতি বেড়ে ১০ শতাংশ ছুঁই ছুঁই করছে। শিল্পের কাঁচামাল ও যন্ত্রপাতিসহ সাধারণ আমদানিও কমে গেছে।

কেন্দ্রীয় ব্যাংক ডলার বিক্রি করতে থাকায় গত এক বছরে বৈদেশিক মুদ্রার রিজার্ভ বা মজুত প্রায় ১৩ বিলিয়ন, মানে ১ হাজার ৩০০ কোটি মার্কিন ডলার কমেছে।

ব্যাংকঋণের সুদহার ৯ শতাংশে আটকে রাখায় আমানতের প্রবৃদ্ধি কমে গেছে। ব্যাংকে যে আমানত আসছে, তার চেয়ে ঋণ বেশি যাচ্ছে। পাশাপাশি ইসলামি ধারার কয়েকটি ব্যাংক ভুগছে তীব্র তারল্যসংকটে। সার্বিকভাবে ব্যাংক খাতে খেলাপি ঋণও বাড়ছে দিন দিন। এসব সমস্যা মোকাবিলায় নানামুখী পদক্ষেপ নেওয়া প্রয়োজন বলে অর্থনীতিবিদেরা মনে করেন।

অর্থনীতির এমন অস্থির সময়ে আজ রোববার আগামী ২০২৩-২৪ অর্থবছরের প্রথম ছয় মাসের জন্য মুদ্রানীতি ঘোষণা করবেন বাংলাদেশ ব্যাংকের গভর্নর আব্দুর রউফ তালুকদার। এর মাধ্যমে ব্যাংকঋণের সুদের হার কতটা বাড়বে এবং ডলার-সংকট কাটাতেই বা কী পদক্ষেপ নেওয়া হবে, তা জানা যাবে। সেই সঙ্গে চলতি হিসাবের পাশাপাশি আর্থিক হিসাবেও যে ঘাটতি তৈরি হয়েছে, তার উন্নতিতে কেন্দ্রীয় ব্যাংক কী করবে, সেটিও জানা যাবে।

খাতসংশ্লিষ্টরা বলছেন, বাংলাদেশের আমদানি-রপ্তানির পরিমাণ দেশের জিডিপির ২৭ শতাংশ। প্রতিবেশী ভারতের আমদানি-রপ্তানি দেশটির জিডিপির ৪৫ শতাংশ। ভারত ইতিমধ্যে মূল্যস্ফীতি প্রায় ৪০ শতাংশ কমিয়ে ৪ দশমিক ২৫ শতাংশে নামিয়ে এনেছে। ২০২২ সালের জুন থেকে ২০২৩ সালের এপ্রিলের মধ্যে থাইল্যান্ডের মূল্যস্ফীতি ৭ দশমিক ৭ শতাংশ থেকে কমে ২ দশমিক ৭ শতাংশে নেমে এসেছে। অথচ বাংলাদেশে মূল্যস্ফীতি বেড়ে ৯ দশমিক ৯৪ শতাংশ উঠেছে।

২০২৩-২৪ অর্থবছরের জন্য প্রস্তাবিত বাজেটে মূল্যস্ফীতি ৬ শতাংশ ও ডলারের দাম ১০৪ টাকায় নামিয়ে আনার লক্ষ্য ঠিক করা হয়েছে। মূল্যস্ফীতি ও ডলারের সংকট, এই দুই সমস্যা সমাধানের দায়িত্ব বাংলাদেশ ব্যাংকের।

বাজারে মুদ্রা সরবরাহবিষয়ক নীতিই হলো মুদ্রানীতি। অর্থ মন্ত্রণালয়ের অর্থ বিভাগ যে মধ্যমেয়াদি সামষ্টিক অর্থনৈতিক নীতি বিবৃতি দিয়েছে, তাতে উল্লেখ করা হয়েছে যে ২০২৩ সালের জুলাই থেকে বাংলাদেশ ব্যাংক তার মুদ্রানীতিতে মুদ্রা নিয়ন্ত্রণভিত্তিক ব্যবস্থা থেকে সরে এসে মূল্যস্ফীতি নিয়ন্ত্রণভিত্তিক ব্যবস্থা প্রণয়ন করতে যাচ্ছে।

ভারত ইতিমধ্যে মূল্যস্ফীতি প্রায় ৪০ শতাংশ কমিয়ে ৪.২৫ শতাংশে নামিয়ে এনেছে। থাইল্যান্ডেও মূল্যস্ফীতি ৭.৭ শতাংশ থেকে কমে ২.৭ শতাংশে নেমে এসেছে। অথচ বাংলাদেশে তা বেড়ে ৯.৯৪ শতাংশে উঠেছে।

কেন্দ্রীয় ব্যাংকের এক কর্মকর্তা নাম প্রকাশ না করার শর্তে গতকাল শনিবার প্রথম আলোকে বলেন, যে ধরনের মুদ্রানীতি নেওয়া দরকার, তা এখন নেওয়া যাচ্ছে না। অন্য দেশগুলো যেভাবে মূল্যস্ফীতি কমাচ্ছে, তা বাংলাদেশ পারছে না। কারণ, এখানকার ব্যাংকসহ অন্য প্রতিষ্ঠানগুলো খুবই দুর্বল। আর্থিক খাতের সব তথ্য-উপাত্তও বিশ্বাসযোগ্য নয়।

মুদ্রানীতিতে যা থাকছে

কেন্দ্রীয় ব্যাংকের সংশ্লিষ্ট কর্মকর্তাদের সঙ্গে কথা বলে জানা যায়, নতুন মুদ্রানীতিটি হবে সংকোচনমূলক। এর অংশ হিসেবে টাকাকে আরও দামি করে তুলতে নীতি সুদহার বাড়ানো হবে। পাশাপাশি আন্তর্জাতিক মুদ্রা তহবিলের (আইএমএফ) শর্ত মেনে নীতি সুদহার ও বাণিজ্যিক ব্যাংকের সুদহারের করিডর প্রথা চালু করবে। এ জন্য স্পেশাল রেপো ও রিভার্স রেপোর সুদহারের মধ্যে করিডর হবে। মাঝে থাকবে রেপো সুদহার। স্পেশাল রেপোকে বলা হবে স্ট্যান্ডার্ড লেন্ডিং ফ্যাসিলিটি (এসএলএফ), রেপোকে বলা হবে নীতি সুদ ও রিভার্স রোপোকে বলা হবে স্ট্যান্ডার্ড ডিপোজিট ফ্যাসিলিটি (এসডিএফ)। মুদ্রানীতিতে এসব সুদহার বাড়ানোর ঘোষণা থাকবে, যা বাংলাদেশ ব্যাংক প্রজ্ঞাপন আকারে জারি করবে। এখন রেপো সুদহার ৬ শতাংশ, স্পেশাল রেপোর সুদহার ৯ শতাংশ ও রিভার্স রেপো ৪ দশমিক ২৫ শতাংশ।

এ ব্যবস্থায় রেপোর সুদহার কলমানির সুদের সঙ্গে ওঠানামা করবে। উল্লেখ্য, এক ব্যাংক আরেক ব্যাংকের কাছ থেকে যে সুদে টাকা ধার নেয়, সেটাই কলমানির সুদ। দেশে কলমানির সুদের হার বাজারভিত্তিক হলেও সেটাকে ৭ শতাংশের ওপরে উঠতে দেয় না কেন্দ্রীয় ব্যাংক।

বাণিজ্যিক ব্যাংকের সুদহারের নামকরণ করা হবে স্মার্ট লেন্ডিং রিফর্ম রেট। বর্তমানে এই সুদের হার সর্বোচ্চ ৯ শতাংশ। নতুন সুদহার নির্ধারণ করা হবে ৬ মাস মেয়াদি ট্রেজারি বিলের সুদহারের সঙ্গে মার্জিন যুক্ত করে। সর্বশেষ ৬ মাস মেয়াদি ট্রেজারি বিলের সুদহার ছিল ৬ দশমিক ৮০ শতাংশ। এর সঙ্গে আড়াই থেকে সাড়ে ৩ শতাংশ মার্জিন যুক্ত হতে পারে।

পাশাপাশি আইএমএফের শর্ত মেনে মুদ্রানীতিতে বিনিয়োগ ও দায়কে বাদ দিয়ে প্রকৃত রিজার্ভের গণনা শুরু ও মুদ্রা সরবরাহের প্রধান সূচকের কর্মসূচির পরিবর্তে প্রক্ষেপণের ঘোষণা থাকবে বলে জানা গেছে।

জানতে চাইলে বেসরকারি গবেষণা প্রতিষ্ঠান সিপিডির বিশেষ ফেলো মোস্তাফিজুর রহমান সম্প্রতি প্রথম আলোকে বলেন, ব্যাংকগুলোকে সুদহার নির্ধারণের স্বাধীনতা দিতে হবে। ডলারের দামও করে দিতে হবে বাজারভিত্তিক। রাজস্ব নীতির সঙ্গে সমন্বয় রেখে ও বাজারে তদারকি জোরদার করে মূল্যস্ফীতি কমানোর উদ্যোগ নিতে হবে। এ ছাড়া আর্থিক খাতে খেলাপি ঋণ ও ইচ্ছাকৃত খেলাপি কমাতে মুদ্রানীতিতে লক্ষ্য বেঁধে দেওয়ার সময় এসেছে।

সূত্রঃ প্রথম আলো।


Remittance from KSA on unrelenting fall Huge job losses, consequent returns blamed

Source: The Financial Express


Rooppur Loan Repayment: US sanctions complicate payment in yuan

Rooppur Nuke Power Plant

Photo: Collected

The government’s bid to pay off Russia’s dues — of about $330 million — for the Rooppur power plant using the Chinese yuan has run into fresh complications after the last round of sanctions by the US on Russia.

Earlier on April 12, the US imposed sanctions on over 120 targets, including JSC Nauchno-Issledovatelsky i Konstruktorsky Institut Montazhnoy Tekhnologii Atomstroy (NIKIMT), the engineering, procurement and construction (EPC) contractor of the Rooppur power plant.

The current dues for the Rooppur power plant — which is for a $500 million loan agreed upon in 2013 for the project’s primary work — are to NIKIMT.

Last week, in an internal meeting, Bangladesh Bank officials weighed on the risks of sending payment instructions via SWIFT to China for the sanctioned entity, The Daily Star has learnt from officials familiar with the discussions.

The BB officials deemed the transaction to be dicey as it might land the country afoul of the US and conveyed as much to the Economic Relations Division, the government wing that deals with foreign loans.

“No final decision has been taken, but we won’t do anything that is prohibited or underhand,” Md Abul Bashar, acting BB spokesman, told The Daily Star on June 14.

At present, the dues for the Rooppur power plant are kept in an escrow account, a kind of trust fund managed by a third party.

Bangladesh has a correspondent account in the Bank of China.

“If there is any threat, they will let us know. If they agree to take payment, we will pay,” Bashar added.

“No final decision has been taken, but we won’t do anything that is prohibited or underhand.”

— Md Abul Bashar, Acting BB spokesman

The US sanctions on NIKIMT were announced during the four-day meeting with the Russian delegation led by Georgii Chizhenkhob, deputy director of Russia’s finance ministry’s department of public debt and sovereign financial assets, where the preliminary agreement to pay in yuan was struck.

The meetings were held in Dhaka from April 10 to April 13, The Daily Star has learnt from finance ministry officials involved with the proceedings.

At the meeting, the Bangladesh side led by ERD Secretary Sharifa Khan let the Russian delegation know that it would not be possible to make payments in roubles, the Soviet nation’s currency.

As per the loan agreements signed with Russia for the power plant, Bangladesh is to repay the loan in dollars.

That became unfeasible after Russia invaded Ukraine in February last year as some of the largest banks of the Soviet nation were expelled from the SWIFT financial system, which handles the vast majority of cross-border payments.

The Bank for Development and Foreign Economic Affairs (VEB), a Russian state-owned institution handling transactions for the Rooppur project, was among those expelled.

After that, Russia has been pushing for payment in roubles from Bangladesh.

Under the current monetary policy, Bangladesh can only deal with the SDR currency of the International Monetary Fund, Khan told the Russian delegation at the meetings.

“Bangladesh is not in a position to repay the Russian credits for the Rooppur project in rouble,” she said, while pushing for yuan as the preferred option for payments.

In 2016, the IMF added the yuan to the basket of currencies that make up the Special Drawing Right (SDR).

Russia agreed to the proposition.

The exchange rate applied for the payments would be the USD/CNY Central Parity Rate quoted by the China Foreign Exchange Trade System 10 business days before the actual date of payment.

Bangladesh will send advice to the Bank of China for transferring the yuan equivalent of dollars due calculated at the applicable exchange rate to the correspondent Russian bank account.

Also at the meeting, the dispute regarding the commitment fee for the $11.38 billion Russian loan for the project was settled.

Before the start of a year, the two sides agree on an amount that Russia would disburse in the forthcoming year for use on the project. If Bangladesh cannot use the amount during the course of the year, a commitment fee amounting to 0.5 percent of the unutilised amount must be paid.

At the meeting, the Bangladesh side furnished evidence that the EPC contractor’s estimates of fund that would be needed in the forthcoming years was “highly inflated”, so the annual credit amounts could not be used in full.

For instance, in 2019, 48.91 percent of the funds could be used, and in 2022, just 39.15 percent.

“As a result, Bangladesh has been paying huge amounts of commitment fees for the past years and which will potentially grow further from year to year. This is the most pertinent issue for Bangladesh,” Khan said at the meeting.

It was then decided that the commitment fee would be capped at $0.25 million and will be applicable for outstanding and future dues.

Also at the meeting, the interest rate that would be applied was settled.

When the loan agreement was signed, the six-month LIBOR rate was used as the interest rate. LIBOR has been replaced by SOFR in June 2023.

The new interest rate would be the six-month term SOFR, fixed spread adjustment equal to 0.42826 percent and a margin of 1.75 percent.

The six-month term SOFR rate at present is about 5.3 percent, so Bangladesh would have to pay a hefty interest.

But, it was decided that the interest rate would be capped at 4 percent.

Source: The Daily Star

Berger Paints allowed to secure $60m loan from parent company

J&N Investments (Asia) Limited holds 95% of the shares of the multinational paint manufacturer

Berger Paints Bangladesh Limited has received approval from the Bangladesh Investment Development Authority (Bida) to obtain a $60 million loan from its parent company, J&N Investments (Asia) Limited.

According to a disclosure made on Thursday by Berger Paints, the country’s leading multinational paint manufacturer, the loan will facilitate the opening of letters of credit for the import of raw materials.

The loan will also be disbursed in phases based on business requirements, it added.

J&N Investments holds 95% of the shares of Berger Paints.

Sazzad Rahim Chowdhury, director and chief financial officer at Berger Paints Bangladesh, had earlier told The Business Standard, “The move comes as a part of our commitment to lend a hand to the country’s foreign currency reserves.”

“We will build a foreign currency reserve out of the loan to pay our import bills,” he said, adding that the shareholder’s loan would help smooth the company’s imports as well.

Berger Paints got listed on the capital market in 2006 by issuing shares representing only 5% of its paid-up capital.

Its shares closed at Tk1,778.20 each on Thursday, which was 0.30% higher than the previous session at the Dhaka Stock Exchange.

Earlier in May, the painting giant recommended a 400% cash dividend for the financial year that ended on 31 March 2023.

The company had paid a 400% cash dividend in the previous financial year as well.

During the year, Berger’s consolidated profit increased by 4% year-on-year and stood at Tk301 crore at the end of March 2023.

The company official said the sector is facing challenges because of pricey raw materials and the devaluation of the local currency against the dollar.

Berger Paints achieved higher revenue during the year, but high production costs and dollar appreciation ate up a big portion of the profit, he added.


Source: The Business Standard


Why dollar crisis persists despite declining imports. Here are answers

Infographic: TBS

Infographic: TBS

The country’s banking sector has been experiencing higher outflow than inflow in foreign currency due to repayment pressure of private sector short-term foreign loans when external borrowings of banks declined substantially after Moody’s downgraded the banking system. 

This will be a major barrier to rebuilding foreign exchange reserves.

Not only external borrowing, other major indicators of foreign currency inflow including medium-and-long-term foreign loans, net foreign direct investment, foreign aid, and portfolio investment declined significantly intensifying pressure on reserves.

According to Bangladesh Bank data, the repayment amount of the private sector’s external short-term debt stood at $11.40 billion in four months from January to April of 2023, which was nearly $3 billion higher than external borrowings of $8.5 billion.

The total private sector external debt declined by $2.5 billion to $13.87 billion in a span of four months from $16.41 billion in December last year due to higher payments than drawings, central bank data shows.

Private sector businesses and banks borrow from external sources for the highest one year is considered short-term loans. Importers borrow from foreign lenders mostly for purchasing capital machinery which is known as buyer’s credit — when banks take short-term trade loans from foreign sources to settle their external payments.

Short-term loan components include buyer’s credit, deferred payment, back-to-back foreign letters of credit (LCs) and short-term trade loans.

The higher outflow than inflow created a dollar crisis in banks, forcing them to come up with a ruse to delay foreign payments.

Deferred payment, which refers to a temporary postponement of the payment of an outstanding bill, rose to $847 million in April from $689 million at the end of 2022, according to Bangladesh Bank data.

When contacted, a senior executive who heads the foreign trade department of a private commercial bank, told The Business Standard, “Local banks borrow from foreign lenders for short term to settle their foreign payment. However, such external borrowing declined after Moody’s downgrading of the banking system. Foreign lenders are shy to provide loans now.”

On the other hand, foreign borrowing became expensive due to the rise in interest rates. Currently, the Secured Overnight Financing Rate (SOFR) is over 5% and up to 3.5% additional interest adds to this for international loans, which means that borrowers are now subject to pay the highest 8.5% interest on their short-term foreign loans, he said.

The rise in interest rates also increased repayment costs for borrowers. The dollar crisis forced some banks to defer payments which come with higher costs as lenders agree to defer on additional interest charges, he said.

Moreover, import restrictions reduced buyers’ credit which also contributed to a reduction in short-term foreign loan inflow, he said.

Buyer’s credit is a funding mechanism where the buyer of goods borrows from an overseas bank to finance the purchase due to its apparent advantages.

Central bank data shows that the buyer’s credit declined by $1.5 billion to $8 billion in April this year from $9.5 billion in December last year.

Moody’s Investors Service in March downgraded the outlook on Bangladesh’s banking system to negative from stable and in May it downgraded the country’s rating.

Explaining the impact of declining short-term foreign loans, seasoned banker Mohammed Nurul Amin, who served different private banks as managing director, said the decline in buyer’s credit reflects a slowdown in business expansion as 70-80% of imports are raw materials and capital machinery.

Though the reduction of external short-term debt will ease payment pressure in the next two or three quarters, the country’s economy will feel the impact as a fall in capital machinery imports will force many factories to shut causing a rise in unemployment, he said.

Moreover, if businesses go shut, it will hurt export and other foreign currency inflow, eventually putting pressure on reserves, Nurul Amin added.

Other major indicators of foreign currency inflow turn negative

Not only short-term loans, but the inflow of foreign currency from other sources has also been declining, causing continuous erosion in foreign exchange reserves.

For instance, the inflow of medium-and-long-term foreign loans declined by 26.34% to $5.5 billion in the July-April period of the current fiscal year from $7.5 billion in the same period of the last fiscal year, according to Bangladesh Bank data.

Though inflow declined, payment for medium-and-long-term foreign loans increased by 7.40% to $1.3 billion during the same period.

Net foreign investment declined by 12.30% to $1.49 billion in July-April of the current fiscal year from $1.6 billion in the corresponding period of the last fiscal year.

Portfolio investment remained in negative territory for the last year when net foreign aid flows declined by 33% to $4.14 billion in July-April of FY23 from $6.2 billion in the same period of FY22.

Net reserve continues to decline

The Bangladesh Bank could not rebuild its net reserve since February when the International Monetary Fund (IMF) set the condition to improve the net reserve to $24.46 billion by June as part of the condition of getting the second tranche of the $4.7 billion loan package.

The net reserve of the Bangladesh Bank came down to $19.70 billion on 7 June, which was nearly $21 billion in February.

The net reserve will have to be calculated according to the new formula prescribed by the IMF based on the Balance of Payments and International Investment Position Manual (BPM6).

This net reserve amount is readily available for intervention in the foreign exchange market.

As per the IMF formula, the Bangladesh Bank calculated net reserve for its internal consumption and the figure will be disclosed in the next monetary announcement.

At present, the gross reserve is $29.77 billion. According to the central bank’s new calculation, components that will be deducted from the gross reserve are the FC Clearing Account’s $940 million, Asian Clearing Union’s $670 million (May-June period), $2.03 billion allocation of Special Drawing Rights (SDR) at IMF and $350 million Extended Credit Facility at IMF.

Besides, Export Development Fund’s (EDF) $4.50 billion, Green Transformation Fund’s (GTF) $450 million, Long Term Financing Facility’s (LTFF) $750 million, Sonali Bank Financing Facility’s (SBFF) $750 million, Payra Bandar Facility’s $260 million, ITFC’s $230 million deposits and $200 million in advance loan assistance to Sri Lanka also have to be deducted.

A central bank official, wishing not to be named, said it will be difficult to maintain net reserves as per the IMF conditions because the banks are facing a dollar crunch, owing to decreased inflow of remittances and export earnings.

“Besides, the central bank has to sell dollars to pay all kinds of government payments, due to which the reserve is constantly depleting. Besides, there is pressure on private debt repayment which is reducing the foreign currency of the banks,” he said.

The central bank has never had to sell such a huge amount of dollars in the market as it did in the current fiscal year. From July to June of FY 23, it sold about $13 billion to banks.

To compare, it sold only $7.6 billion to the banking system in the previous fiscal year, and the year before the central bank rather bought $6.2 billion from banks.


মহেশখালীতে হবে সামিটের আরেক এলএনজি টার্মিনাল

কক্সবাজারের মহেশখালীতে সামিট গ্রুপের আরেকটি তরলীকৃত প্রাকৃতিক গ্যাস (এলএনজি) টার্মিনাল নির্মাণের প্রস্তাবে নীতিগত অনুমোদন দিয়েছে অর্থনৈতিক বিষয়সংক্রান্ত মন্ত্রিসভা কমিটি। ভাসমান এই এলএনজি টার্মিনাল স্থাপনের মূল প্রস্তাব দিয়েছে সামিট অয়েল অ্যান্ড শিপিং কোম্পানি লিমিটেড।

আজ বুধবার অর্থমন্ত্রী আ হ ম মুস্তফা কামালের সভাপতিত্বে অনুষ্ঠিত অর্থনৈতিক বিষয়সংক্রান্ত মন্ত্রিসভা কমিটির বৈঠকে এ অনুমোদন দেওয়া হয়। বৈঠক শেষে সাংবাদিকদের এ তথ্য জানান মন্ত্রিপরিষদ বিভাগের অতিরিক্ত সচিব সাঈদ মাহবুব খান।

সাঈদ মাহবুব খান সাংবাদিকদের বলেন, জ্বালানি ও খনিজ সম্পদ বিভাগের অধীন পেট্রোবাংলার মাধ্যমে কক্সবাজারের মহেশখালীতে এবার তৃতীয় ভাসমান এলএনজি টার্মিনাল স্থাপন করা হবে।

দেশে বর্তমানে দুটি এলএনজি টার্মিনাল আছে। মহেশখালীতে প্রতিদিন ৫০০ মিলিয়ন ঘনফুট সক্ষমতার এ দুটি টার্মিনাল নির্মাণ করে যুক্তরাষ্ট্রের এক্সিলারেট এনার্জি ও সামিট গ্রুপ।

জানা গেছে, মহেশখালীতে ভাসমান এলএনজি টার্মিনাল নির্মাণে এক্সিলারেট এনার্জির সঙ্গে ২০১৬ সালের ১৮ জুলাই চুক্তি করে পেট্রোবাংলা। নির্মাণ শেষে ২০১৮ সালের ১৯ আগস্ট গ্যাস সরবরাহ শুরু করে কোম্পানিটি। ১৫ বছর মেয়াদি এ টার্মিনাল দিয়ে গ্যাস সরবরাহের চুক্তি রয়েছে ২০৩২ সাল পর্যন্ত; যদিও এর মধ্যে চুক্তির মেয়াদ ২০৩৮ সাল পর্যন্ত বাড়ানো হয়।

সূত্রঃ প্রথম আলো