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DISCLAIMERThe Quarterly Review is published for private circulation by Metropolitan Chamber of Commerce and Industry, Dhaka. The Chamber assumes no responsibility for the correctness of items quoted in the publication although every effort is made to give information from sources believed to be reliable.

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CHAMBER COMMITTEE FOR 2017

PRESIDENT

VICE-PRESIDENT

SECRETARY-GENERAL

MEMBERS

MS. NIHAD KABIR

MR. GOLAM MAINUDDIN

MR. M. ANIS UD DOWLA

MR. TABITH M. AWAL

MR. TAPAN CHOWDHURY

MS. SIMEEN HOSSAIN

MR. A.K.M. RAFIQUL ISLAM, FCA

MR. RUBAIYAT JAMIL

MR. HABIBULLAH N. KARIM

MR. HASAN MAHMOOD, FCA

MR. SYED NASIM MANZUR

MR. FRANCOIS DE MARICOURT

MR. FAROOQ AHMED

MR. SYED TAREQUE MD. ALI

Content

QUARTERLY REVIEWIssue 4 : Q4 of FY17 (April-June 2017)

Executive Summary 3

Remittances 16

Capital Market 12

Exchange Rate 20

Industry 7

Service Sectors 8

Foreign Direct Investment (FDI) 18

Exports 14

Overseas Employment Situation 21

Chamber’s Projection on Some Selected Economic Indicators 23

Agriculture 5

Foreign Aid 17

Public Finance 13

Foreign Exchange Reserves 20

Monetary and Credit Developments 8

Balance of Payment 19

Imports 16

Price Situation 22

Concluding Observations 24

Quarterly Review | 3

April-June 2017 (Q4 of FY17)

EXECUTIVE SUMMARYGeneral

BBS has estimated the GDP growth at 7.24 per cent in FY17, which is slightly above (0.04 percentage point) the target of 7.20 per cent. However, the economy is progressing well, but below its true potential. Inadequate infrastructure, lack of investor confidence in the economy that discourages making fresh investments and shortage of power and energy are now major impediments to the country’s development. These impediments must be removed to restore the confidence of the country’s business and investor community.

Based on the World Economic Outlook of IMF, released in April 2017, the PPP GDP of Bangladesh will cross US$1,000 billion and ranked 30th largest economy of the world in 2022 which is US$686.59 billion and ranked 32nd in 2017. On the nominal GDP basis, Bangladesh will be the 38th largest economy in 2022 which is now 45th.

Agriculture

The agriculture sector employed about 47.5 per cent of Bangladesh’s total labour force and accounted for about 14.79 per cent of GDP in the just concluded fiscal year (FY17). Due to strong government support in terms of timely availability of inputs and finance, the sector recorded a higher growth of 3.40 per cent in

FY17 compared to 2.79 per cent in FY16.

Industry

The industry sector grew by 10.50 per cent in FY17, 0.59 percentage point lower than the previous year’s 11.09 per cent. However, the share of the industry sector in GDP increased by 0.94 percentage point to 32.48 per cent in FY17 from 31.54 per cent in FY16.

Manufacturing sub-sector grew by 10.96 per cent in FY17, 0.73 percentage point lower than the previous fiscal year’s 11.69 per cent. The large and medium scale industries sub-sector grew by 11.32 per cent in FY17, compared to 12.26 per cent in FY16. The small scale manufacturing industries performed better than the previous fiscal, grew by 9.21 per cent in FY17 from 9.06 per cent.

Construction

The construction sub-sector performed better in FY17, growing at 9.32 per cent during the fiscal, compared to 8.56 per cent in FY16. The real estate, renting and business activities also performed better in the period when it marked a 4.78 per cent growth

compared to 4.47 per cent in FY16.

Power

The power supply situation improved in the quarter under review but the demand for power, too, shot up. Unofficial estimates put

the current demand for electricity at around 10,000 mw, while the maximum generation in 2017 was 9,479 mw (as of 7 June). In July 2017, total installed capacity rose to 13,179 mw, but production remained low because of gas shortage and also because of

shutting of some power stations for maintenance.

Services

The services sector performed better in FY17 compared to the previous fiscal. Despite the sluggish investment situation prevailing in the quarter under review, the services sector growth increased by 0.25 percentage point to 6.50 per cent in FY17 from 6.25 per cent in FY16. Notable among the well-performing sub-sectors in FY17 were wholesale & retail trade; hotel & restaurants; transport, storage & communication; real estate, renting & business activities; construction; and community, social

& personal services.

Money and Capital Market

Broad money (M2) grew by 11.69 per cent at the end of May 2017 compared with the 14.02 per cent growth achieved at the end of May 2016. Domestic credit, on the other hand, recorded 11.07 per cent growth at the end of May 2017, while a higher rate of growth of 12.97 per cent was recorded at the end of May 2016.

Among components of domestic credit, private sector credit registered a lower growth of 16.03 per cent during the period between May 2016 and May 2017, compared with a relatively higher growth rate of 16.40 per cent during the corresponding period of the previous year. Private sector credit growth remained within the targeted end-June 2017 ceiling of 16.5 per cent. Public sector credit, on the other hand, recorded a negative growth of 16.11 per cent at the end of May 2017, compared with the decrease of 2.76 per cent at the end of May 2016 as the government paid off maturing T-bills/T-bonds with proceeds of larger-than-planned sales of NSCs.

Total liquid assets of scheduled banks increased by 0.96 per

cent and stood higher at Tk.264,744 crore as of end May 2017.

The minimum required liquid asset of the scheduled banks was

Tk.161,541 crore as of end May 2017.

Interest rates on bank lending increased to 9.66 per cent in

May 2017 from 9.62 per cent in April 2017. Banks increased

their lending rates after a long pause due to an increased credit

demand from the businesspeople in the last few months. However,

the weighted average interest rate on deposits decreased to 4.93

per cent in May 2017 from 4.97 per cent in April this year. The

overall interest rate spread stood at 4.73 per cent in May 2017

compared to 4.65 per cent in the previous month.

The disbursement of industrial term loans during January-March

of FY17 stood 19.4 per cent lower at Tk.15,783 crore, compared to



Tk.19,575 crore during the immediate previous quarter (October-December) of FY17. The recovery of industrial term loans increased by 6.3 per cent during this period.

The disbursement of agricultural credit and non-farm rural credit by banks increased by 19.03 per cent to Tk.20,999 crore in FY17 from Tk.17,641 crore in FY16. The improvement in disbursement was partly the result of strong monitoring by the BB. The recovery of these loans increased by 10.46 per cent to Tk.18,841 crore in FY17 from Tk.17,056 crore in the previous fiscal year.

The country’s capital market marked a significant increase in the participation by investors in the quarter under review when both Dhaka and Chittagong Stock Exchanges witnessed a sharp rise both in the key index and turnover.

Public Finance

Total tax revenue collection (NBR and non-NBR) during July-April of FY17 stood 19.23 per cent higher at Tk.147,709 crore against the collection of Tk.123,889 crore during the corresponding period of FY16. NBR tax revenue collection during July-April of FY17 stood at Tk.142,759 crore, which was 19.62 per cent higher than the collection of Tk.119,344 crore during the corresponding period of the previous fiscal year

In FY17, 54 ministries and divisions spent Tk.1.066 trillion, the highest in history, out of the total Tk.1.193 trillion outlays in the ADP. ADP spending was 92.7 per cent in the previous fiscal year (FY16).

Export and Import

Export earnings in FY17 grew by only 1.69 per cent to US$34.835 billion from US$34.257 billion in the previous fiscal year. Export earnings were also 5.85 per cent short of the strategic target (US$37 billion). The slow growth in apparel exports was mainly responsible for the failure to meet the target.

Import payments (C&F) in the first eleven months (July-May) of FY17 rose by 10.69 per cent to US$43.508 billion from US$39.307 billion in the corresponding period of the previous fiscal. Import payments increased mainly due to higher imports of capital machinery.

Remittances

Remittance inflow in FY17 was the lowest in six years, dropping by 14.48 per cent to US$12.769 billion from US$14.931 billion in the previous fiscal year. The decline in remittance was indirectly linked with the decline in the price of petroleum products in the

global market.

Foreign Aid

The disbursement of foreign aid in FY17 fell by 12.32 per cent to US$3.56 billion from US$4.06 billion in the previous fiscal year.

The disbursement declined mainly due to slower project execution and lower fund disbursement by a few development partners, including Japan. On the other hand, the commitments of foreign aid increased to a record high of US$17.86 billion in FY17, 153.33 per cent higher than that of the corresponding period of the previous fiscal year (US$7.05 billion). The increase was mainly due to the single-largest US$11.36 billion state credit commitment by

the Russian government for Rooppur Nuclear Power Plant project.

Foreign Direct Investment (FDI)

In July-May of FY17, the net FDI inflow was US$1.625 billion, which was 27.75 per cent higher than the FDI inflow in the corresponding period of FY16.

Balance of Payments (BoP)

The trade deficit increased by 42.58 per cent to US$9.198 billion in July-May of FY17. The deficit in trade in services, too, widened to US$3.1 billion in July-May of FY17 from US$2.433 billion in the same period of FY16. Inward remittance fell by 14.15 per cent during the 11-month period. Because of higher trade deficit and the fall in inward remittances, the comfortable surplus in the current account prevailing in the previous fiscal turned into a deficit in FY17. The financial account, however, posted a sizeable surplus during July-May of FY17. Higher inflow of foreign investment and comparatively low pressure on the foreign debt repayment contributed to the improvement in the financial account. The net inflow of FDI increased by 27.75 per cent in July-May of FY17 while portfolio investment jumped by around six times to US$324 million during the period. However, because of the large increase in the current account deficit balance relative to the surplus in the financial account, the surplus in the overall balance shrank to US$2.682 billion in July-May of FY17 from US$4.143 billion in the

same period of FY16.

Exchange Rate and Foreign Exchange Reserve

Between end-June of 2016 and 2017, the Taka depreciated by 2.80 per cent in terms of US dollar. Gross foreign exchange reserves rose to US$33.407 billion in the last working day of FY17 (29 June 2017). The amount was sufficient to cover the country’s import bills for more than nine months.



Domestic Production The DAE set the target of domestic food grains (rice and wheat) production at 36.591 million metric tons (mmt) in FY17, which is 0.46 per cent higher than the target set for FY16 (36.424 mmt). Also, the target for FY17 is 1.48 per cent higher than the actual production of 36.057 mmt in the past year. Production targets for aman, aus, boro and wheat are 13.53 mmt, 2.48 mmt, 19.15 mmt, and 1.43 mmt, respectively, in FY17. Bangladesh Bureau of Statistics (BBS) has finalized aman and aus production in FY17 at 13.656 mmt and 2.260 mmt, respectively. The production of aman is 1.28 per cent higher but that of aus is 1.27 per cent lower than the previous year’s production of 13.483 mmt and 2.289 mmt, respectively. According to unofficial estimates of DAE, wheat

1.1 Food Situation

Inflation

In June 2017, the general point to point inflation increased by 0.18 percentage point to 5.94 per cent from 5.76 per cent in the previous month due to an increase in the price of some food and essential items.

The food inflation increased by 0.14 percentage point, to 7.51 per cent in June 2017 from 7.37 per cent in the immediate past month (May). At the same time, non-food inflation, too, increased by 0.23

1.0 AGRICULTURE

The agriculture sector employed about 47.5 per cent of Bangladesh’s total labour force and accounted for about 14.79 per cent of GDP in the just concluded fiscal year (FY17). Due to strong government support in terms of timely availability of inputs and finance, the sector recorded a higher growth of 3.40 per cent in FY17 compared to 2.79 per cent in FY16. However, production of crops fell due to crop losses in the back-to-back disasters – flashfloods in haor areas and Chalan Beel in Natore, intense rainfall in almost all parts of the country and fungal disease blast attacks.

production in FY17 is 1.428 mmt, which is almost the same as the production target. The target of boro production for the year, however, may not be achieved as cultivation declined due to a huge loss of boro crops. Back-to-back disasters – flashfloods in haor areas and Chalan Beel in Natore, intense rainfall in almost all parts of the country and fungal disease blast attacks - came as a blow to boro seasons. Following the first strike of flashflood in Sunamganj and few other adjoining haor-rich districts, the DAE estimated a crop loss of 6 lakh tons with boro on 2 lakh hectares gone under water. The DAE, however, is reassessing the boro losses as reports on new areas being submerged after haor embankments gave way to flashfloods continue to come. After an unusually early flashflood struck the back swamp of the northeastern regions in late March 2017, the DAE estimated that boro output would be some 4.5 lakh tons less than the 19.15 mmt production target. But with flashfloods inundating fresh haor areas and incessant and early rainfalls submerging many other parts of the country, the probable gap now needs to be rechecked. In view of the circumstances, total food grains production in FY17 is expected to be lower than the target.

Food Grains Import In the period up to 6 July 2017, about 61.6 thousand metric tons (tmt) of rice was imported by the private sector alone. No rice was imported by the public sector. Over the same period of last year, too, there was no rice import by the public sector, while the private sector import of rice was 6.2 tmt. Regarding other food grains, however, up to the fortnight ending 6 July 2017, about 328.8 tmt of wheat was imported by the private sector, while no wheat was imported by the public sector. Over the same period of the previous year, a total of 230.30 tmt of wheat was imported by the private sector alone.

Domestic Procurement

In order to provide price incentive to farmers, government procured about 444 tmt of aman rice during the aman procurement season that ended on 30 March 2017. Boro procurement started from 2 May 2017 and will continue till 31 August 2017. The procurement target was set at 0.70 mmt of paddy at Tk.24.00 per kg, 0.70 mmt

percentage point to 3.67 per cent in June 2017 from 3.44 per cent in the previous month.

A comparison of inflation data for urban and rural areas shows that the inflation rate in June of FY17 was higher in urban areas than in rural areas.



of parboiled rice at Tk.34.00 per kg and 0.10 mmt of white rice at Tk.33.00 per kg. As of 6 July 2017, about 83.13 tmt of boro rice was procured and about 222.55 tmt was contracted from the domestic market. The government has decided to procure 0.1 mmt of wheat at Tk.28.00 per kg from the domestic market. The procurement drive began on 18 April 2017 and closed on 30 June 2017. The target was almost fully achieved (about 99.99 tmt).

Public Distribution

The government has enhanced its efforts to ease the hardship of poor households by distributing subsidized grains through public food distribution system (PFDS), mainly open market sale (OMS) and fair price card (FPC) channels. In FY18, the revised target of food grains distribution was 2.74 mmt as against the actual distribution of 2.24 mmt in FY17. During FY18, up to 6 July 2017, a total of 2.0 tmt of food grains was distributed mainly through essential priorities, EP (1.6 tmt), and gratuitous relief, GR (0.2 tmt). The OMS drive, which was resumed in small scale – for only rice in Dhaka and Chittagong Metropolitan areas, and atta all over the country - continues.

Public Stock

According to the Directorate General of Food, the public food grains stock as of 6 July 2017 stood at 394.10 tmt – 139.70 tmt in rice and 254.40 tmt in wheat. At the end of FY17, the closing stock was about 378.4 tmt.

Domestic Market Price

In the fortnight ending 6 July 2017, the wholesale and retail prices of rice (Swarna) in Dhaka city markets fell by 4.0 per cent and 5.3 per cent, respectively, to Tk.42.50 per kg and Tk.47.50 per kg. The wholesale and retail prices were, respectively, 58.0 per cent and 65.4 per cent higher than they had been a year ago. Over the same period, the wholesale prices of atta in Dhaka city markets increased by 1.3 per cent, up to Tk.19.75 per kg but the retail prices remained unchanged at Tk.24.0 per kg. The wholesale and retail prices are, respectively, 3.9 per cent and 1.5 per cent higher now than the prices that prevailed last year.

International Market PriceIn the fortnight ending 7 July 2017, the prices of India 5% parboiled, Vietnam 15% white, and Thai 5% parboiled rice fell by 1.2 per cent, 3.0 per cent, and 10.7 per cent, respectively, to US$410 per mt, US$393 per mt, and US$402 per mt. But the price of Pakistan 5% parboiled rice rose by 1.8 per cent to US$453 per mt. And, the price of West Bengal coarse rice dropped by only 0.2 per cent to US$371 per mt. However, the wholesale price of rice in Dhaka city fell by 4.6 per cent and stood at US$530 per mt. In the fortnight ending 7 July 2017, the prices of US Soft Red Winter (SRW), Russian and Ukraine wheat increased by 15.7 per cent, 2.1 per cent and 0.3 per cent to US$219, US$129 and US$186 per mt, respectively. On the same day, Dhaka city wholesale wheat price stood at US$273 per mt.

1.2 Fisheries and Animal Farming . (Livestock and Poultry)

According to provisional estimates of BBS, fisheries and animal farming (livestock and poultry) sub-sectors accounted for about 5.21 per cent of the GDP in FY17, of which the fish sector contributed around 3.61 per cent and the animal farming sector contributed 1.60 per cent. Nearly 18.2 million people are involved in the fish sector, while the animal farming sector has created job opportunities for around 6.5 million people.

Bangladesh is the fourth largest inland freshwater fish producer in the world. Fish production in the country has been increasing for around a decade now, to keep up with the growing demand at home and abroad. According to the Department of Fisheries (DoF), Bangladesh has become almost self-sufficient in fish production, which will help overcome the malnutrition problem of the younger generation. The country would achieve the milestone in ensuring 60 grams of fish a day per person by 2021 with an annual production of 4.52 million tons of both fresh and salt water fish. Currently, the country produces around 4.05 million tons of fish compared to 3.88 million tons in FY16, which has ensured the annual availability of 56 grams of the protein a day. Increased consumption of fish, however, is very important for the country to eradicate the curse of malnutrition to better achieve the Sustainable Development Goals (SDGs). Proper utilization of the existing water bodies using the latest technologies could boost fish production in the country.



In addition, the government has released 558.35 tons of fish fries throughout the country in FY17; moreover, a total of 1,251 beel-hatcheries have been set up for raising the production of open water fishes. Even the government introduced registration and database of some 1.620 million fishermen, and 1.420 million fishermen have already been provided with identity cards under a development project. Apart from this, the government has enacted a law and formulated strategies for conserving jatka and mother hilsha which helped increasing the production of hilsha, the national fish, significantly. Hilsha accounts for one-tenth of the total fish production.The poultry industry now meets almost the entire local demand for meat and eggs, according to Bangladesh Poultry Industries Coordination Committee (BPICC). The industry produces 1,500 mt of poultry meat per day against the target of 1,400 mt. It also produces 16 million eggs per day against the demand for 15 million, and almost 10 million pieces of chicken every week against the weekly demand for nearly 9 million pieces. As a result, the industry has now an exportable surplus. However, Bangladesh could not yet export poultry due to the inability to maintain international standard.

2.0 INDUSTRY

2.1 Manufacturing Industries

2.2 Construction

2.3 Power Data on the country’s industry sector are not available for the quarter under review. The sector grew by 10.50 per cent in FY17, compared to 11.09 per cent in FY16. However, the share of the industry sector in GDP increased by 0.94 percentage point to 32.48 per cent in FY17 from 31.54 per cent in the past year.

According to provisional estimates of BBS, the manufacturing sub-sector grew by 10.96 per cent in FY17, 0.73 percentage point lower than the previous fiscal year’s 11.69 per cent. The large and medium scale industries sub-sector grew by 11.32 per cent in FY17, compared to 12.26 per cent in FY16. The small scale manufacturing industries performed better than the previous fiscal, grew by 9.21 per cent in FY17 from 9.06 per cent.

The construction sub-sector performed better in FY17, growing at 9.32 per cent during the fiscal, compared to 8.56 per cent in FY16. The real estate, renting and business activities have also performed better in the period when it marked a 4.78 per cent growth compared to 4.47 per cent in FY16. In spite of the tremendous potential of the construction and real estate sector, various factors adversely affected its development. The inhibiting factors are: land value distortion, absence of secondary property market, asset securitization and sale of mortgages, and backward linkage industries such as cement, ceramic, brick manufacturing industries, etc.

However, real estate business saw an improvement in recent times, thanks to property price corrections, falling interest on home loans and return of political stability. The sector appears to have been recovering in the last few months. An increasing number of customers were placing new bookings. Most of the realtors were selling flats and plots at a low profit margin to maintain their cash flows. The realtors hope that the recent cut in lending rates by banks and financial institutions would help raise the apartment sales further.

The power supply situation improved in the quarter under review but the demand for power, too, shot up as anticipated. Unofficial estimates put the current demand for electricity at around 10,000 mw, while the maximum generation in 2017 was 9,479 mw (as of 7 June). As of 29 June 2017, total actual generation was 5,990 megawatt (mw) during day peak hours and 7,634 mw during evening peak hours. In July 2017, total installed capacity rose to 13,179 mw, and derated/present capacity rose to 12,578 mw, but production remained low because of gas shortage and also because some power stations were shut for maintenance.

According to the BPDB website, the 13,179 mw installed capacity of power plants comprised of coal 250 mw (1.90%), gas 8,267 mw



3.0 SERVICES SECTOR

4.0 MONETARY AND CREDIT DEVELOPMENTS

According to provisional estimates of BBS, the services sector performed better in FY17 compared to the previous fiscal. Despite the sluggish investment situation prevailing in the quarter under review, the services sector growth increased by 0.25 percentage

point to 6.50 per cent in FY17 from 6.25 per cent in FY16. Notable among the well-performing sub-sectors in FY17 are wholesale & retail trade; hotel & restaurants; transport, storage & communication; real estate, renting & business activities; construction; and community, social & personal services.

It is worth noting that the share of the services sector in GDP, which was at its peak at 55.59 per cent in FY06, has been continuously declining thereafter, dropping to 52.73 per cent in FY17. Among the different services sub-sectors, the wholesale & retail trade held the highest share in GDP (13.94%) in FY17 compared to 13.99 per cent in FY16. The GDP shares of certain other sub-sectors in FY17 were: transport, storage & communication (11.25%); community, social & personal services (8.86%); construction (7.39%); real estate, renting & business activities (6.48%); public administration & defence (3.72%); financial intermediations (3.41%); and education (2.48%).

(62.73%), HFO 2,800 mw (21.25%), HSD 1,032 mw (7.83%), Hydro 230 mw (1.75%), and imported 600 mw (4.54%).

According to BB data, broad money (M2) grew by 11.69 per cent at the end of May 2017 compared with the 14.02 per cent growth achieved at the end of May 2016. Domestic credit, on the other hand, recorded 11.07 per cent growth at the end of May 2017, while a higher rate of growth of 12.97 per cent was recorded at the end of May 2016. These two important anchors of the current monetary program, aiming at containment of CPI inflation, were well below the program ceilings which helped achieve the favorable inflation performance in FY17.

Among components of domestic credit, private sector credit registered a growth of 16.03 per cent during the period between May 2016 and May 2017, compared with a relatively higher growth of 16.40 per cent during the period between May 2015 and May 2016. Private sector credit growth remained within the targeted

In line with the Power System Master Plan 2016, the government has targeted meeting at least 30.0 per cent of the country’s power demand from coal-based plants by 2030. Producing electricity from coal would also help keep power tariff at an affordable level because coal is cheaper than other available sources of power generation. The target of producing more power from coal would be met in phases, with setting up of 22 coal-fired power plants in the next four years. Construction work on the 22 power plants would begin in 2019; out of 22 plants, 7 would be built by the government, 7 by the private sector, and the other eight under joint ventures. A memorandum of understanding (MoU) has already been signed for setting up a 1,320 mw capacity coal-fired power plant under a joint initiative of China Energy Engineering Corporation Limited (Energy China) and Ashuganj Power Station Company Ltd (APSCL). State-run Coal Power Generation Company Bangladesh Ltd (CPGCBL) has also planned for setting up a 1,200 mw plant in Cox’s Bazar with funding from JICA.

According to the Ministry of Power, Energy and Mineral Resources (MoPEMR), 80 per cent of the country’s population has now come under electricity coverage and the government has set the goal of providing electricity to all citizens by 2021. To that end, government has undertaken a massive capacity expansion plan to have 24,000 mw capacity of power generation in 2021, which will be raised to 40,000 mw in 2030, and 60,000 mw in 2041. Countrywide electricity generation capacity has now reached 15,379 mw while it was 3,268 mw at the beginning of 2009. The power system has expanded to keep pace with the fast growing demand.



Total liquid assets of scheduled banks increased by 0.96 per cent and stood higher at Tk.264,744 crore as of end May 2017 compared with Tk.262,227 crore as of end June 2016. The minimum required liquid asset of the scheduled banks was Tk.161,541 crore as of end May 2017 (Table 2).

Table 1: Monetary and Credit Indicators

ParticularsOutstanding Stock (Taka in crore) % Changes in Outstanding Stock

May 2015R May 2016R May 2017P May 2017 over May 2016

February 2016 over February 2015

Total Domestic Credit 684438 773210 858836 (+) 11.07 (+) 12.97

Credit to Public Sector 122575 119192 99986 (-) 16.11 (-) 2.76

Net Credit to Government Sector 106003 102109 82598 (-) 19.11 (-) 3.67

Credit to Other Public Sector 16572 17083 17388 (+) 1.79 (+) 3.08

Credit to Private Sector 561863 654017 758850 (+) 16.03 (+) 16.40

Reserve Money (RM) 142984 172903 195969 (+) 13.34 (+) 20.92

Broad Money (M2) 768350 876094 978480 (+) 11.69 (+) 14.02

Note: P=Provisional; R=Revised Source: Bangladesh Bank

Table 2: Liquidity Position of Scheduled Banks

Notes: P=Provisional; R=Revised; *= SLR does not apply to Specialized banks (except BASIC Bank) as exempted by the government

Source: Bangladesh Bank

(Taka in crore)

Bank GroupAs of end June,

2016R As of end May, 2017P

Total Liquid Total Liquid Assets Minimum Required Liquid Assets Excess Liquidity

1 2 3 4 5 (3-4)

State owned banks 108039 107824 48735 59089

Private banks (other than Islamic) 103585 105511 82074 23437

Private banks (Islamic) 29091 27952 21426 6526

Foreign banks 19972 21750 7629 14121

Specialized banks* 1540 1707 1677 30

Total 262227 264744 161541 103203

Bangladesh Bank data show that, of the total liquid assets of scheduled banks as of end May 2017, some 4.80 per cent was held in the form of Cash in tills and Balances with Sonali Bank, 22.58 per cent in the form of CRR, 2.57 per cent in the form of Excess Reserves, 3.01 per cent in the form of Balances with Bangladesh Bank in Foreign Currency and the remaining 67.04 per cent in the form of Unencumbered approved securities.

end-June 2017 ceiling of 16.5 per cent. Public sector credit, on the other hand, recorded a negative growth of 16.11 per cent at the end of May 2017, compared with the decrease of 2.76 per cent at the end of May 2016 as the government paid off maturing T-bills/T-bonds with proceeds of larger-than-planned sales of NSCs. Within public sector credit, however, credit to government (net) recorded a negative growth of 19.11 per cent, and credit to other public sector recorded a growth of 1.79 per cent, during the period (Table 1).



4.2 Industrial Term Loans

Data on industrial term loans are available only up to the third quarter (January-March) of FY17. According to BB data, the disbursement of industrial term loans during January-March of FY17 stood 19.4 per cent lower at Tk.15,783 crore, compared to Tk.19,575 crore during the immediate previous quarter (October-December) of FY17 (Table 4). On the other hand, the recovery of industrial term loans increased by 6.3 per cent to Tk.14,547 crore during January-March of FY17, compared to Tk.13,679 crore in the previous quarter.

Interest rates on bank lending increased in May 2017 after 29 months of fall as the private sector credit increased. The weighted average interest rate on lending rose to 9.66 per cent in May from 9.62 per cent in April 2017. Banks increased their lending rates after a long pause due to an increased credit demand from the businesspeople in the last few

Table 3: Interest Rate (weighted average) movements in . FY16 and July-May of FY17

Notes: P=Provisional, R=Revised, NA=Not Available Source: Bangladesh Bank

Bangladesh Bank (BB) employs repo, reverse repo, and BB bill rates as policy instruments for influencing financial and real sector prices. Between 1 February 2013 and 13 January 2016, the repo and reverse repo rates remained unchanged at 7.25 per cent and 5.25 per cent, respectively. The rates were lowered down to 6.75 per cent and 4.75 per cent, respectively, with effect from 14 January 2016 (Table 3).

Month/Quarter Repo Reverse

RepoLending

RateDeposit

RateInterest

Rate Spread

FY16R

July 7.25 5.25 11.57 6.78 4.79

August 7.25 5.25 11.51 6.74 4.77

September 7.25 5.25 11.48 6.66 4.82

October 7.25 5.25 11.35 6.58 4.77

November 7.25 5.25 11.27 6.46 4.81

December 7.25 5.25 11.18 6.34 4.84

January 6.75 4.75 11.05 6.21 4.84

February 6.75 4.75 10.91 6.10 4.81

March 6.75 4.75 10.78 5.92 4.86

April 6.75 4.75 10.64 5.77 4.87

May 6.75 4.75 10.57 5.67 4.90

June 6.75 4.75 10.39 5.54 4.85FY17P

July 6.75 4.75 10.32 5.48 4.84

August 6.75 4.75 10.24 5.44 4.80

September 6.75 4.75 10.11 5.39 4.72

October 6.75 4.75 10.03 5.33 4.70

November 6.75 4.75 9.94 5.29 4.65

December 6.75 4.75 9.93 5.22 4.71

January 6.75 4.75 9.85 5.13 4.72

February 6.75 4.75 9.77 5.08 4.69

March 6.75 4.75 9.70 5.01 4.69

April 6.75 4.75 9.62 4.97 4.65

May 6.75 4.75 9.66 4.93 4.73

June 6.75 4.75 NA NA NA

( in per cent )

4.1 Interest Rate Developments months. However, the weighted average interest rate on deposit decreased to 4.93 per cent in May 2017 from 4.97 per cent in April this year (Table 3). The overall interest rate spread stood at 4.73 per cent in May 2017 from 4.65 per cent in the previous month.



Table 4: Disbursement and Recovery of Industrial Term Loans

Notes: LSI=Large Scale Industries, MSI=Medium Scale Industries and SSCI=Small Scale & Cottage Industries P=Provisional; R=Revised; Figures in parentheses indicate the percentage change over the previous quarter


4.3 SME Loans

Data on SME loans are available only up to the October-December quarter (Q3) of FY17. According to BB data, total SME loans by all banks and non-bank financial institutions (NBFIs) increased by 16.03 per cent to Tk.172,639 crore at the end of December 2016 from Tk.148,793 crore at the end of December 2015. The disbursement of SME loans was 23.9 per cent of total loans disbursed by all banks and NBFIs at the end of December 2016 (Table 5).

Table 5: Outstanding Position of SME Loans

QuarterDisbursement (Tk. in crore) Recovery (Tk. in crore)

LSI MSI SSCI Total LSI MSI SSCI Total

January-March of FY16R 14264 2506 1495 18265 (+2.5) 9021 2029 1386 12436 (+4.1)

April-June of FY16R 11921 2493 2341 16755 (-8.3) 9088 2718 965 12771 (+2.7)

July-September of FY17R 9929 1977 1139 13045 (-22.1) 8757 2393 1273 12423 (-2.7)

October-December of FY17P 14175 3068 2332 19575 (+50.1) 9846 2137 1696 13679 (+10.1)

January-March of FY17P 11875 2297 1611 15783 (-19.4) 11069 2186 1292 14547 (+6.3)

Notes: P=Provisional, R=Revised; SOBs= State Owned Banks, PBs= Private Banks, FBs= Foreign Banks, SBs= Specialized Banks,

(Taka in crore)

Quarter Type of Loans SOBs PBs FBs SBs NBFIs Total

October-December of FY16PTotal LoansSME LoansPercentage

11052929049(+26.3

428210111429(+26.0)

243991887(+7.7)

21377975

(+4.6)

448485453

(+12.2)

629463148793(+23.6)

January-March of FY16P

Total LoansSME LoansPercentage

11245728831(+25.6)

440555114851(+26.1)

242591863(+7.7)

21377970

(+4.5)

468075680

(+12.1)

645455152195(+23.6)

April-June of FY16PTotal LoansSME LoansPercentage

11683729541(+25.3)

465050120891(+26.0)

258811971(+7.6)

222511700(+7.6)

493096391

(+13.0)

679328160494(+23.6)

July-September of FY17PTotal LoansSME LoansPercentage

11906129685(+24.9)

469025121393(+25.9)

256502027(+7.9)

22251958

(+4.3)

469146595

(+14.1)

682901160658(+23.5)

October-December of FY17PTotal LoansSME LoansPercentage

12383629774(+24.0)

503053132954(+26.4)

251492413(+9.6)

21842594

(+2.7)

488536904

(+14.1)

722733172639(+23.9)

% change of SME loans at the end of December 2016 over end of December 2015 +2.50 +19.32 +27.86 -39.04 +26.61 +16.03

NBFIs= Non-bank Financial Institutions; Figures in parentheses indicate SME loans as percentage of total loans Source: Bangladesh Bank



4.4 Agricultural Credit and Non-farm . . Rural Credit

The disbursement of agricultural credit and non-farm rural credit by banks increased by 19.03 per cent to Tk.20,999 crore in FY17 from Tk.17,641 crore in FY16. The improvement in disbursement was partly the result of strong monitoring by the BB. The disbursement exceeded the annual target by 19.65 per cent (Table 6). In the quarter under review, the disbursement

5.0 CAPITAL MARKET

increased, year on year, by 7.35 per cent to Tk.5,188 crore from Tk.4,833 crore. In this backdrop, the central bank has recently asked banks to increase disbursement of agricultural credit and non-farm rural credit to boost the private sector credit growth. The recovery increased by 10.46 per cent to Tk.18,841 crore in FY17 from Tk.17,056 crore in the previous fiscal year. In the quarter under review, the recovery, year on year, increased by 10.50 per cent to Tk.4,876 crore.

Investor participation significantly increased in the country’s capital market in the quarter under review. On 29 June 2017, the last trading day of FY17, the key index of Dhaka Stock Exchange, DSEX, rose by 0.17 per cent and the shariah-based index, DSES, rose by 0.44 per cent, whereas the blue chip index, DS30, lost 0.16 points. Also, the Chittagong Stock Exchange (CSE) ended higher with its Selective Categories Index (CSCX), advancing 13.29 points.

Net foreign investment in the DSE marked an increase, encouraged by positive macroeconomic indicators coupled with declining interest rate, stable exchange rate and a peaceful political situation. Month-wise, net foreign investment at DSE in April 2017 was Tk.700 million, Tk.1.54 billion in May 2017, and Tk.3.90 billion in June 2017. Banks are the foreign investors’ preferred sector, but non-bank financial institutions, power and energy, pharmaceuticals, multinationals, telecoms and IT also drew their attention. Investors include Morgan Stanley, JPMorgan, Goldman Sachs and BlackRock, among others. Known as portfolio investment, total foreign investment accounted for nearly 2.0 per cent of DSE’s total market capitalisation that stood at Tk.3,801 billion at the close of trade on 29 June 2017, the last trading day of FY17.

Disbursement and Recovery of Agricultural Credit and Non-farm Rural Credit

Month FY17P FY16R

Disbursement Recovery Disbursement Recovery

July 1056.00 945.65 856.91 790.33

August 1006.63 1189.85 952.42 999.44

September 1381.22 1406.89 1389.90 1327.90

Total of Q1 3443.85(+7.65)

3542.39(+13.62)

3199.23(+16.32)

3117.67(-4.33)

October 1828.86 1584.44 1427.05 1379.96

November 2298.36 1842.59 903.69 999.03

December 2361.98 2021.89 3221.01 2924.69

Total of Q2 6489.20(+16.89)

5448.92(+2.74)

5551.75(+28.50)

5303.68(+15.18)

January 2225.66 1823.74 1323.46 1172.89

February 1770.74 1501.14 1296.97 1161.21

March 1880.97 1648.77 1436.89 1887.98

Total of Q3 5877.37(+44.86)

4973.65(+17.80)

4057.32(-0.97)

4222.08(+8.32)

April 1434.27 1378.34 1315.72 1266.20

May 1690.88 1305.79 1312.38 1397.76

June 2063.13 2192.07 2204.98 1749.04

Total of Q4 5188.28(+7.35)

4876.20(+10.50)

4833.08(+0.47)

4413.00(+12.56)

Total of July-June

20998.70(+19.03)

18841.16(+10.46)

17641.38(+10.41)

17056.43(+10.71)

Notes: P=Provisional, R=Revised; Figures in parentheses indicate the percentage change over the same period of the previous fiscal year


(in crore Taka)

Table 6:

In FY17, the eight state-owned commercial banks (SCBs) and specialised banks (SBs) disbursed Tk.9,698 crore agricultural credit and non-farm rural credit, which is 4.39 per cent higher than the disbursement target of Tk.9,290 crore. The disbursement by private commercial banks (PCBs) and foreign commercial banks (FCBs) together was Tk.11,300 crore during the period. The amount actually disbursed was 36.80 per cent higher than the disbursement target of Tk.8,260 crore for the period.



Table 7: Government Tax Revenue Collection

Notes: P=Provisional; R=Revised; NA=Not Available; *=include supplementary duties and travel tax;

Figures in brackets indicate percentage changes over the corresponding period of the preceding year.

Sources: BB, NBR and Office of the Controller General of Accounts

6.0 PUBLIC FINANCE

Data on tax revenue collection (NBR and non-NBR) are available only up to April of the just concluded fiscal year (FY17). According to provisional data of the National Board of Revenue (NBR), total tax revenue collection (NBR and non-NBR) during July-April of FY17 stood 19.23 per cent higher at Tk.147,709 crore against the collection of Tk.123,889 crore during the corresponding period of FY16. NBR tax revenue collection during July-April of FY17 stood at Tk.142,759 crore, which is 19.62 per cent higher than the collection of Tk.119,344 crore during the corresponding period of the previous fiscal year (Table 7).

The NBR had set a revenue collection target of Tk.203,152 crore for FY17, which is about 15.19 per cent higher than that of the previous fiscal year’s original target (Tk.176,370 crore) and also about 35.43 per cent higher than the revised target of Tk.150,000 crore.

Month

Tax Revenue Collections ( in crore Taka)NBR

Non-NBR GrandTotal Customs

Duties VAT IncomeTax Others* Total

FY16R

July 1122 3529 2460 1617 8728 376 9104August 1261 3780 2634 1953 9628 611 10239

September 1382 4835 5146 1396 12760 408 13168

October 1309 4394 3308 2224 11235 406 11641

November 1570 4986 3139 2820 12514 463 12977

December 1594 4488 4611 2531 13224 487 13711

January 1491 4329 3447 2618 11885 425 12309

February 1484 4175 3247 2486 11391 425 11817

March 1661 4681 5217 2515 14073 466 14539

April 1447 4516 5349 2594 13906 478 14384

July-April 14321(+20.2)

43713(+8.1)

37844(+12.4)

23467(+25.2)

119344(+15.72)

4545(+19.62)

123889(+15.86)

FY17P

July 1242 3862 2683 1807 9594 417 10011

August 1737 5074 2861 2755 12427 524 12951

September 1444 4999 5146 2825 14414 373 14787

October 1567 5265 3652 2897 13381 482 13863

November 1779 5510 3930 2827 14046 472 14518

December 1922 5629 5939 2845 16335 465 16799

January 2085 5914 4276 3317 15592 526 16118

February 1711 5251 3745 2770 13477 436 13913

March 1870 5947 6259 3253 17328 623 17950

April 1901 5901 5153 3208 16164 634 16798

July-April 17259(+20.5)

53352(+22.1)

43644(+15.3)

28503(+21.5)

142759(+19.6)

4950(+8.9)

147709(+19.2)



In the just-concluded fiscal year (FY17), government was able

to implement 89.4 per cent of the total annual development

programme (ADP) which was the lowest in eight years. Eight

years ago, in FY09, the spending rate was the lowest 86 per

cent of the then total ADP. The implementation rate was low

mainly because some mega projects could not mobilise foreign

funds, particularly those financed by Japan due to the militant

attack at the Holey Artisan Bakery in July 2016. The government

agencies and ministries spent 78 per cent of their Tk.357.97

billion foreign fund allocations, whereas they performed better

in spending the government’s internal funds as they managed

to spend 93 per cent of the government’s Tk.777 billion own

fund in the fiscal. Among other reasons, the implementation

capacity of the ministries and divisions has not kept pace with

the increase in the size of the development budget. According to

the Implementation, Monitoring and Evaluation Division (IMED),

54 ministries and divisions spent Tk.1.066 trillion, the highest in

history, out of the total Tk.1.193 trillion outlays in the ADP of FY17.

ADP spending was 92.7 per cent in the previous fiscal year (FY16).

Twelve ministries or divisions, or implementing agencies, which

together received 85 per cent of the total development budget,

performed very well. These ministries and divisions are those

of Science and Technology, the Road Transport and Highways

Division, the Secondary and Higher Secondary Education Division,

the Ministry of Primary and Mass Education, the Local Government

Division, the Ministry of Housing and Public Works, the Ministry of

Water Resources, the Energy Division, and the Ministry of Disaster

Management and Relief. Some of the implementing agencies

even overshot their allocation: the Power Division spent 101 per

cent, the Ministry of Post and Telecommunications 119 per cent,

and the Ministry of Shipping spent 106 per cent. But the Ministry

of Health, the Ministry of Railways, and the Bridges Division fell

short of spending their total allocation, according to IMED data.

Notes: P=Provisional; R=Revised Sources: Export Promotion Bureau and Bangladesh Bank

7.0 EXPORTS 6.1 Public Expenditure

Table 8: Monthly Trends in Exports

Month Exports (million US$) Change(%)

FY17P FY16R

July 2534 2626 (-) 3.50

August 3304 2758 19.80

September 2241 2375 (-) 5.64

Total of Q1 8079 7759 4.12

October 2713 2372 14.38

November 2899 2749 5.46

December 3107 3204 (-) 3.03

Total of Q2 8719 8325 4.73

January 3312 3186 3.95

February 2726 2854 (-) 4.48

March 3110 2831 9.86

Total of Q3 9148 8871 3.12

April 2776 2682 3.50

May 3069 3027 1.39June 3044 3593 (-) 15.28

Total of Q4 8889 9302 (-) 4.44

Total of July-June 34835 34257 1.69

The country’s export earnings in the just-concluded financial

year (FY17) grew by only 1.69 per cent to US$34.835 billion

from US$34.257 billion in the previous fiscal year. This export

growth hit a 15-year low since FY02, when it was (-) 7.43 per

cent. Export earnings decreased due to low growth of readymade

garments (RMG) exports in the major export markets, including

the European Union and the United States (Table 8). Export

earnings were also 5.85 per cent short of the strategic target

(US$37 billion). Though the RMG played a major role in the

overall increase in exports, the slow growth in apparel exports

was mainly responsible for the failure to meet the target. The

RMG exports accounted for 80.81 per cent of total exports in

FY17, compared to 82.01 per cent in the corresponding period

of the previous fiscal year. In fact, export earnings in the quarter

under review (Q4 of FY17) grew by a negative rate of 4.44 per

cent, compared to the entire 12-month period (1.69%), 3.12

per cent in Q3, 4.73 per cent in Q2 and 4.12 per cent in Q1 of

the fiscal. And in June 2017, year-on-year, exports witnessed a

drastic fall by 15.28 per cent to US$3.044 billion. The exports

in June were also below the strategic target (US$3.647 billion).



An analysis of EPB’s export data for July-June of FY17 shows that

the country’s major export products, i.e., knitwear, jute & jute

goods, leather & leather products, chemical products, plastic

products, paper & paper products, cotton & cotton products, home

textile, other footwear, engineering products, other manufactured

products, ceramic products, and computer services showed

positive growth while woven garments, agricultural products,

frozen & live fish, petroleum by products, man-made filaments

& staple fibres, carpet, and specialized textiles showed negative

growth.

The overall export growth was largely dependent on the RMG

sector. The sector alone earned US$28.150 billion or 80.81 per

cent of total exports in FY17 but registering only 0.20 per cent

growth from US$28.094 billion in FY16. This growth is too low

to achieve the US$50.0 billion export target by 2021. In order

to achieve that goal, the industry will need to attain more than

12.0 per cent export growth every year. RMG earnings in FY17

were also 7.34 per cent short of the strategic target (US$30.379

billion). Within the sector, knitwear products earned US$13.757

billion, a 3.01 per cent increase over the corresponding period of

the previous year, and woven products earned US$14.393 billion,

showing a negative growth of 2.35 per cent during the period.

Apparel shipment went down due to both external and internal

factors - the global consumption for apparel declined by 5.0 per

cent while Brexit had a negative impact on local garment exports.

The value of Taka against US dollar remained unchanged while

the currencies in competitor countries depreciated. Moreover, due

to the ongoing safety activities carried out by the western retailers’

platforms - Accord and Alliance - many factories were shut while

a good number of units are in the process of relocation. Apart

from those, the prevailing gas and other infrastructural problems

also affected the sector. According to businesspeople, the demand

for apparel products decreased on the global market and all the

exporting countries were losing their earnings but Bangladesh

was losing more than others. Bangladesh needs productivity-

driven growth and the diversification of markets and products. To

remain competitive in the global market, Bangladesh should cut

the cost of doing business.

Like the RMG, the other major sectors did not perform any better

either. The frozen foods including fish, agricultural products,

petroleum bi-products, specialized textiles and leather sector,

especially processed leather, witnessed negative growth. In

July-June of FY17, export earnings from frozen & live fish and

agricultural products declined by 1.74 per cent and 7.20 per

cent to US$526.45 million and US$553.17 million, respectively.

Specialized textiles, another potential sector, experienced

negative growth of 2.37 per cent in the period. Export of finished

leather fell by 16.30 per cent to US$232.61 million but export of

leather products and footwear increased as international retailers

come to Bangladesh to buy leather goods, not finished leather,

because of environmental pollution.

The country’s exports to major destinations, including the USA,

Canada and some other EU countries, marked a downward trend

in FY17. Factors like currency fluctuation and sluggish demand

and ongoing safety issues in the RMG sector were mainly

responsible for this poor performance. The country fetched

US$5.84 billion from the US market, the single largest export

destination, by exporting merchandise products, including

garment, which recorded a 6.01 per cent negative growth in FY17.

The downward trend was also seen in Canada that witnessed a

3.03 per cent negative growth in FY17. About 60 per cent of the

country’s total exports are destined for the countries of Western

Europe, where Germany, the United Kingdom (UK), Spain, France,

Italy, the Netherlands, Belgium, Poland and Denmark are the big

markets. Of them, export earnings fell in the UK and Belgium by

6.31 per cent and 9.50 per cent, respectively, while exports rose in

Germany, Spain, France, Italy and Denmark at varying rates.



According to BB data, the settlement of import Letters of Credit

(LCs) increased by 11.83 per cent during July-May of FY17 mainly

due to higher imports of capital machinery. On the other hand,

opening of import LCs increased by 13.97 per cent to US$44.119

billion in the first eleven months of FY17 from US$38.712 billion

in the corresponding period of the previous fiscal.

In spite of various measures taken by the country’s central bank, remittance inflow in FY17 has been the lowest in six years. The inflow dropped substantially - by 14.48 per cent – in FY17 compared to the previous fiscal. Remittance is a major source of foreign currency for Bangladesh and the declining trend since FY16 has progressively become a matter of concern for the government. The decline in remittance is indirectly linked with the decline in the price of petroleum products in the global market. The majority of Bangladesh’s expatriate workers now work in the oil-producing Gulf Cooperation Council (GCC) countries whose development activities mainly depend on their income from petroleum products. The fall in petroleum prices greatly squeezed the oil income of these GCC countries, and their wage payment to overseas workers declined as a result. Also, the depreciation of the Taka against the U.S. dollar and the rising trend of sending money by non-resident Bangladeshis (NRBs) using informal channels worked as a damper to the flow of inward remittances.

According to BB data, Bangladesh received US$12.769 billion in remittance in FY17 compared to US$14.931 billion in FY16 (Table 10). Remittances in the quarter under review fell by 7.70 per cent to US$3.573 billion from US$3.871 billion, while year-on-year, remittances declined by 17.33 per cent in June 2017. Remittances in the last two months (May and June) of FY17 were higher than the previous months, but not enough to push the annual receipts up. Due to the Ramadan and Eid-ul-Fitr, remittances received in May and June 2017 went up to US$1.268 billion and US$1.212 billion, respectively.

According to BB data, remittance inflow to Bangladesh from outside the GCC countries, especially the US, crashed in FY17 mainly due to uncertainty over the migration policy aimed at Muslims amid a spurt in militant activities. Bangladesh receives the third highest remittance from the US, but the inflows dropped by 30.15 per cent year-on-year in FY17 due to uncertainty over their job security. Remittance from the US normally comes through

9.0 REMITTANCES

8.0 IMPORTS Import payments (C&F) in the first eleven months (July-May) of

FY17 rose by 10.69 per cent to US$43.508 billion from US$39.307

billion in the corresponding period of the previous fiscal. Import

payments increased mainly due to higher imports of capital

machinery. In May 2017, imports stood higher by 2.02 per cent

at US$4.352 billion against US$4.266 billion in May 2016 due

to a rise in payment of bills for food products imported to meet

the demand in Ramadan. Industrial raw materials and capital

machinery imports also contributed to the growth of total imports

in May 2017 (Table 9).

Table 9 : Monthly Trends in Imports

Notes: P=Provisional; R=Revised Source: Bangladesh Bank

MonthImports (million

US$) Change(%)

FY17P FY16R

July 2942 2857 2.98

August 3797 3416 11.15

September 3531 3197 10.45

October 4125 3867 6.67

November 4222 3665 15.20

December 3994 3898 2.46January 4302 3592 19.77

February 3761 3353 12.17

March 4311 3654 17.98

April 4171 3542 17.76

May 4352 4266 2.02

Total of July-May 43508 39307 10.69



Notes: P=Provisional; R=Revised


Month

Remittances (million US$) Change

(%)FY17P FY16R

July 1006 1390 (-) 27.63

August 1184 1195 (-) 0.92

September 1057 1349 (-) 21.65

Total of Q1 3247 3934 (-) 17.46

October 1011 1098 (-) 7.92

November 951 1142 (-) 16.73

December 959 1313 (-) 26.96

Total of Q2 2921 3553 (-) 17.79

January 1009 1151 (-) 12.34

February 941 1136 (-) 17.17

March 1078 1286 (-) 16.17

Total of Q3 3028 3573 (-) 15.25

April 1093 1191 (-) 8.23

May 1268 1214 4.45

June 1212 1466 (-) 17.33

Total of Q4 3573 3871 (-) 7.70

Total of July-June 12769 14931 (-) 14.48

Table 10: Monthly Trends in Remittances

legal channel, but due to the large divergence between formal and informal rates in the foreign exchange market, there might have been a rising tendency to send money home through hundi. Remittance inflow from Malaysia, Singapore and the UK also declined in FY17. Remittance from the UK declined 4.4 per cent, from Malaysia 17.42 per cent and from Singapore 22.48 per cent.

10.0 FOREIGN AID

According to the Economic Relations Division (ERD) provisional data, the disbursement of foreign aid in the just-concluded fiscal year (FY17) decreased by 12.32 per cent to US$3.56 billion from US$4.06 billion in the previous fiscal year mainly due to slow development work following the Holey Artisan café attack in July 2016. Aid disbursements could be higher had the Holey Artisan militant attack not hindered the development works. Some development partners, including Japan, withdrew their manpower from Bangladesh immediately after the attacks. Besides, the slow progress in aid-funded ADP projects has affected aid disbursement. Government agencies and ministries spent 78 per cent of their Tk.357.97 billion foreign fund allocations in FY17. However, they performed better in spending the government’s own funds as they utilised 93 per cent of such funds in the fiscal. Meanwhile, development partners’ commitments of foreign aid increased to a record high of US$17.86 billion in FY17, 153.33 per cent higher than that of the corresponding period of the previous

Currently, 29 exchange houses are operating across the globe, setting up 1,155 drawing arrangements abroad, to expedite the remittance inflow. BB expects that the flow of inward remittances will improve in the ongoing fiscal year following different initiatives. Earlier, the central bank had taken a series of measures to encourage the expatriate Bangladeshis to send their money through formal banking channels, instead of illegal hundi system, to help boost the country’s foreign-exchange reserves.

As part of the promotional measures for ensuring better remittance services, banks have been instructed to open ‘help desk’ at each branch concerned. Also, BB asked the banks to take measures for improving the quality of remittance services so that the NRBs send their hard-earned money home through formal channel. Following the innovative measures, the flow of inward remittances improved slightly in Q4 of FY17. The remittance receipts stood at US$3.573 billion in April-June of FY17 compared to US$3.028 billion three months ago.



11.0 FOREIGN DIRECT INVESTMENT (FDI)

fiscal (US$7.05 billion) mainly due to a single-largest US$11.36 billion state credit commitment by the Russian government for Rooppur Nuclear Power Plant project. Out of the US$17.86 billion of aid commitment, government received US$17.49 billion as concessional loans and US$0.37 billion as grants from the development partners.

In the first eleven months of FY17, the net foreign direct investment (FDI) in Bangladesh increased by 27.75 per cent to US$1.625 billion from US$1.272 billion in the same period of FY16 (Table 11). According to industry experts, however, the annual FDI inflow in the country is not enough to meet its development needs. Bangladesh’s low labour cost and efficient supply chain,

especially in readymade garments industry, are generally believed to be attractive to foreign investors, but yet they hesitate to make fresh investments in the country because of the country’s underdeveloped infrastructure, and such other impediments as the shortage of power and energy, lack of consistency in policy and regulatory framework, scarcity of industrial lands, and political uncertainty. The government needs to address these impediments to attract more FDI in the country.

To boost FDI, BB has recently asked all banks dealing in foreign currencies to set up at least one ‘FDI Help Desk’ in their Dhaka and Chittagong offices with competent officials to help potential foreign investors in making productive investment. The government has also plans to develop 100 economic zones by 2030 on 75,000 acres of land to create jobs for one crore people and produce goods and services worth US$40 billion. Bangladesh Economic Zones Authority has so far awarded licence to eight local private companies to set up 10 economic zones. The government itself is setting up 4 economic zones - Mirsarai economic zone in Chittagong, Mongla economic zone in Bagerhat, Srihatta economic zone in Moulvibazar and Sabrang tourism park in Cox’s Bazar.

Bangladesh mainly takes Official Development Assistance (ODA) from multilateral organisations or countries, which are soft loans or grants. The country’s largest development partner is the World Bank (WB). Other development partners include the Asian Development Bank (ADB), Japan, the Islamic Development Bank (IDB), China, the United Nations (UN), the UK’s DFID, Russia, Germany, and India.

In the current fiscal year (FY18), the government has targeted US$7.6 billion in concessional loans and grants from different bilateral and multilateral development partners. In the previous fiscal, the target was US$5.0 billion.



12.0 BALANCE OF PAYMENTS

According to BB data, overall trade deficit increased by 42.58 per cent to US$9.198 billion in July-May of FY17 (Table 11). Merchandise exports grew by 3.80 per cent while merchandise imports grew by 10.68 per cent during these eleven months. The disparate growth in imports visa-a-vis, exports had the effect of widening the trade deficit. The deficit in trade in services, too, widened to US$3.1 billion in July-May of FY17 from US$2.433 billion in the same period of FY16. Inward remittance fell by 14.15 per cent during the 11-month period. Because of higher trade and services deficit and the fall in inward remittances, the comfortable surplus in the current account prevailing in the previous fiscal turned into a deficit in FY17.

The financial account, however, posted a sizeable surplus during July-May of FY17 - US$4.195 billion, compared to US$1.178 billion in the same period of FY16. Higher inflow of foreign investment and comparatively low pressure on external debt repayment contributed to the improvement in the financial account. The BoP data show that the net inflow of FDI increased by 27.75 per cent to US$1.625 billion in July-May of FY17 while portfolio investment jumped by around six times to US$324 million during the period. Other investment (net), too, recorded a handsome surplus of US$2.246 billion as against a deficit of US$150 million in the previous fiscal. However, because of the larger increase in the current account deficit balance relative to the surplus in the financial account, the surplus in the overall balance of payments shrank to US$2.682 billion in July-May of FY17 from US$4.143 billion in the same period of FY16.

Table 11: Balance of Payments

BPM6


Notes: P=Provisional; R=Revised; * = Both exports and imports are compiled on the basis of shipment data

** = Disinvestment, loss and repayments of intracompany loans have been deducted from gross inflows as per

Items July-March of FY17P July-May of FY16R Change

Trade Balance (-) 9198 (-) 6451 (-) 2747

Exports f.o.b (including EPZ)* 31055 29919

Of which: Readymade Garments 25625 25084

Imports f.o.b (including EPZ)* 40253 36370

Services (-) 3100 (-) 2433 (-) 667

Credit 3289 3125

Debit 6389 5558

Primary Income (-) 1800 (-) 1747 (-) 53

Credit 70 69

Debit 1870 1816

Of which: Official Interest Payment 375 352

Secondary Income 11995 13824 (-) 1829

Official Transfers 42 41

Private Transfers 11953 13783

Of which: Workers’ Remittances (current a/c portion) 11385 13261 (-) 1876

Current Account Balance (-) 2103 3193 (-) 5296

Capital Account 288 382

Capital Transfers 288 382

Financial Account 4195 1178 3017

Foreign Direct Investment (gross inflows) 2650 2330

Of which: Foreign Direct Investment (net inflows)** 1625 1272 353

Portfolio Investment (net) 324 56

Of which: Workers’ Remittances (financial a/c portion) 170 205

Other Investment (net) 2246 (-) 150

Errors and Omissions 302 (-) 610 912

Overall Balance 2682 4143 (-) 1461

(in million US$)



14.0 FOREIGN EXCHANGE RESERVES

Bangladesh Bank’s gross foreign exchange reserves (Forex)

crossed US$33 billion-mark for the first time on 22 June 2017

and rose to US$33.407 billion in the last working day of FY17

(29 June 2017). The increase in reserves was mainly due to lower

import payment pressure on the economy and higher inflow of

remittance ahead of the Eid-ul-Fitr festival (Table 13). The stable

exchange rate of the Taka against the US dollar has encouraged

the expatriate Bangladeshis to send home their earnings, which

has also helped boost the reserve. In addition, according to BB,

a fund of US$46 million received from the World Bank has also

contributed to raise the reserve to some extent. The country

would be able to settle more than nine months’ import bills with

the existing forex reserve.

Table 12: Monthly Exchange Rate

Table 13: Monthly Trends in Foreign Exchange Reserves

Note: i) P=Provisional; R=Revised, NA=Not Available ii) Exchange rate represents the mid-value of buying

and selling rates Source: Bangladesh Bank

13.0 EXCHANGE RATE

Between end-June of 2016 and end-June of 2017, the Taka depreciated by 2.81 per cent in terms of the U.S. dollar. On the inter-bank market, the U.S. dollar was quoted at Tk.80.5995 at the end of June 2017 as against Tk.78.4000 at the end of June 2016 (Table 12).

Month

FY17P (Taka per US$) FY16R (Taka per US$)

Month Average

End Month

Month Average End Month

June - - 78.4000 78.4000

July 78.4000 78.4000 77.8007 77.8000

August 78.4000 78.4000 77.8000 77.8000

September 78.4000 78.4000 77.8008 77.8000

October 78.4010 78.4161 77.8215 77.9978

November 78.5417 78.7233 78.5274 78.9364

December 78.8030 78.7004 78.7794 78.5000

January 78.8573 79.0741 78.5008 78.5000

February 79.2353 79.3700 78.5517 78.4500

March 79.5398 79.6797 78.4130 78.4000

April 79.8376 80.2300 78.4000 78.4000

May 80.4896 80.5609 78.4000 78.4000

June 80.5850 80.5995 78.4000 78.4000

MonthForeign Exchange Reserve (million US$)

FY17P FY16R

July 30039 25469

August 31165 26175

September 31386 26379

October 31895 27058

November 31371 26408

December 32092 27493

January 31724 27139

February 32557 28059

March 32215 28266

April 32519 29106

May 32246 28803

June 33407 30168

Notes: P=Provisional; R=Revised Source: Bangladesh Bank



A healthy reserve allows a country to get higher credit rating

and helps the private sector to get loans from foreign sources

at low interest rates. Also, the current reserves will help keep the

Taka stable against the US dollar and provide a more favourable

economic environment.

Manpower export of the country remained subdued in the last

two and a half years as unstable situation was prevailing in

different Middle-Eastern countries. The country faced difficulties

following the suspension of labour import by various Middle-

Eastern countries. Both public and private sectors are now trying

to expand manpower export in certain other countries, including

Thailand and Japan. Manpower demand from the Kingdom of

Saudi Arabia (KSA), Kuwait, Qatar, Oman, Jordan and Bahrain has

also shrunken. According to the Bureau of Manpower, Employment

15.0 OVERSEAS EMPLOYMENT SITUATION

and Training (BMET) data, only 247,517 workers from Bangladesh

entered the international markets with jobs during the quarter

under review (April-June of FY17). The number of emigrants was

272,973 during the previous quarter. At present, there are nearly

11 million Bangladeshis working in 162 countries, mostly in the

Middle East. Their contribution accounts for about 60 per cent of

the country’s foreign currency reserves.

Since 1991 when Bangladeshi female workers started to go

abroad for jobs, the number of oversees jobs for female workers

has gradually increased. Some 34,364 female workers entered the

international markets with jobs during the quarter under review,

a 13.02 per cent increase from 30,405 in the previous quarter

(January-March of FY17). Female workers, mostly housemaids and

garment workers, are employed mainly in KSA, Jordan, UAE, Oman,

Lebanon and Qatar.

16.0 PRICE SITUATION

In June 2017, the general point to point inflation in the country

increased by 0.18 percentage point to 5.94 per cent, the highest in

18 months, from 5.76 per cent in May 2017. The rate of inflation, 18

months back in January 2016, was the highest at 6.07 per cent. The

rise in inflation was due to an increase in the prices of some food

and essential items (Table 14). A year ago, in June 2016, the inflation

rate was 5.35 per cent. Economists predict higher inflationary

pressures in the near term as the country is facing some supply-

chain problems with rice in addition to recent floods in some

areas of the country with severe crop damage in haor regions.



The food inflation increased by 0.14 percentage point to 7.51 per cent in June 2017 from 7.37 per cent in the previous month because of

a rise in prices of rice, oil, meat, pulses, vegetable, green chilli, sugar, tea and milk. Non-food inflation also increased by 0.23 percentage

point to 3.67 per cent in June 2017 from 3.44 per cent of the immediate past month (May). Besides, the average inflation in the just-

concluded financial year (FY17) recorded a 13- year low at 5.44 per cent from 5.92 per cent in FY16 as the prices of essential items at

home and fuel oils and some other commodities in external markets were maintaining a cool trend. The year-on-year average inflation

in FY04 was the lowest at 5.83 per cent. Moreover, the average inflation in FY17 was within the government-set target of 5.80 per cent,

leaving the major macroeconomic indicator in a comfortable zone.

Table 14: Monthly Trends in Inflation (Base: 2005-06=100)

Notes: i) P=Provisional, R=Revised; ii) Food includes food, beverages and tobaccoSource: BBS

(Percent)

PeriodPoint to Point-All Point to Point-Rural Point to Point-Urban

General Food Non-food General Food Non-food General Food Non-food

FY17P

July 5.40 4.35 6.98 4.54 3.59 6.26 7.00 6.11 7.98August 5.37 4.30 7.00 4.41 3.40 6.28 7.15 6.39 7.99September 5.53 5.10 6.19 4.63 4.27 5.31 7.21 7.03 7.42October 5.57 5.56 5.58 4.87 4.89 4.83 6.87 7.09 6.63November 5.38 5.41 5.33 4.75 4.83 4.60 6.56 6.74 6.35December 5.03 5.38 4.49 4.46 4.78 3.88 6.07 6.74 5.35January 5.15 6.53 3.10 4.92 6.28 2.52 5.57 7.11 3.91February 5.31 6.84 3.07 5.14 6.66 2.46 5.62 7.22 3.91

5.39 6.89 3.18 5.19 6.72 2.49 5.76 7.28 4.14April 5.47 6.94 3.30 5.24 6.73 2.61 5.88 7.41 4.24May 5.76 7.37 3.44 5.57 7.18 2.77 6.11 7.78 4.37June 5.94 7.51 3.67 5.65 7.20 2.94 6.49 8.21 4.67FY2016-17 5.44 6.02 4.61 4.96 5.54 3.91 6.37 7.10 5.60

FY16R

July 6.36 6.07 6.80 5.88 5.43 6.69 7.28 7.58 6.96August 6.17 6.06 6.35 5.76 5.42 6.41 6.94 7.56 6.26September 6.24 5.92 6.73 5.86 5.26 6.99 6.96 7.47 6.37October 6.19 5.89 6.67 5.82 5.23 6.90 6.91 7.44 6.33November 6.05 5.72 6.56 5.61 5.00 6.76 6.88 7.42 6.29December 6.10 5.48 7.05 5.58 4.76 7.10 7.07 7.14 6.98January 6.07 4.33 8.74 5.29 3.63 8.37 7.53 5.96 9.25February 5.62 3.77 8.46 4.76 3.04 7.97 7.22 5.48 9.14March 5.65 3.89 8.36 4.79 3.15 7.82 7.27 5.61 9.12April 5.61 3.84 8.34 4.75 3.11 7.80 7.22 5.51 9.11May 5.45 3.81 7.92 4.59 3.08 7.32 7.06 5.50 8.76June 5.53 4.23 7.50 4.63 3.44 6.79 7.23 6.06 8.48FY2015-16 5.92 4.90 7.43 5.26 4.20 7.22 7.11 6.55 7.72



Table 15: Projection on Some Selected Indicators in Q1 of FY18

Notes: October – June of FY17: actual figures except June value of Import; July – September of FY18: projections (figures in bold) Sources: Bangladesh Bank, BBS and the Chamber’s own calculation

17.0 CHAMBER’S PROJECTION ON SOME SELECTED ECONOMIC INDICATORS

On the basis of observations in the preceding nine months, this Chamber has made its own projections on some selected economic

indicators for the first quarter of the present fiscal year (Q1 of FY18). These projections are presented in Table 15.

It is assumed that the peaceful political situation that currently

prevails will continue in the coming days. Therefore, export,

import, and remittances will increase further. The foreign

exchange reserve is likely to fall in July and September due to

A comparison of point to point inflation data for urban

and rural areas in June of FY17 shows that the inflation

rate was higher in urban areas than in rural areas. Thus,

the point to point general, food, and non-food inflation in

Indicators

FY17

FY18

Oct. Nov. Dec. Jan. Feb. Mar. April May June July August Sept.

Export

(million US$)

2713 2899 3107 3312 2726 3110 2776 3069 3044 3080 3190 3210

Import

(million US$)

4125 4222 3994 4302 3761 4311 4171 4352 4420 4490 4560 4650

Remittance

(million US$)

1011 951 959 1009 941 1078 1093 1268 1212 1270 1310 1360

Forex Reserve

(million US$)

31895 31371 32092 31724 32557 32215 32519 32246 33407 33350 33990 33850

I n f l a t i o n , Point to Point (per cent)

5.57 5.38 5.03 5.15 5.31 5.39 5.47 5.76 5.94 5.99 6.10 6.20

rural areas in June were 5.65 per cent, 7.20 per cent, and 2.94

per cent, respectively, while these rates in urban areas were

6.49 per cent, 8.21 per cent, and 4.67 per cent, respectively.

the payment to the Asian Clearing Union (ACU) against imports. The

rate of inflation can be expected to go up in the coming months

because of increased demand ahead and during the Eid-ul-Azha.



18.0 CONCLUDING OBSERVATIONS

In the quarter under review (Q4 of FY17), though some risk factors i.e., negative growth in the remittances; marginal growth in the export receipts and higher inflationary pressures were present in the economy, the overall economic situation was positive as indicated by steady improvements in the major economic indicators. The economy is progressing well, but below its true potential. The country experienced stable growth; inflation was a bit higher but under control; the exchange rate remained stable; and foreign exchange reserves rose to a comfortable level.

In FY17, the agriculture sector performed well, but continuous government support with inputs and finance will be needed to sustain the sector’s growth. Services and manufacturing sectors are also doing well but they will need government support in different fields. In particular, infrastructure deficits and gas and power supply problems were undermining the performance of all productive sectors of the economy. Government will need to adopt suitable measures to remove these bottlenecks in order to support the growth of this all-important sector.

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