FE Report
The overall food production in the current fiscal year (FY) may exceed actual production of last fiscal, although it may fall a bit short of the current year's target, according to the latest economic review by Metropolitan Chamber of Commerce & Industry (MCCI).
However, there seems to be no imminent danger for food security as there is a large stock of foodgrains with the farmers and the government, the MCCI stated.
Aman rice production this year is likely to fall 12.74 million metric ton (MT), to about a level between 11.0 and 11.5 million MT, MCCI noted.
It said in its review, against actual food grain production of 32.36 million MT in fiscal year (FY)09, the Ministry of Agriculture provisionally set the production target for food grains at 35.05 million MT in FY10 (Aus 2.49 million MT, Aman 12.74 million MT, Boro 18.80 million MT, and wheat 1.02 million MT).
But there are reports about the decline in the area of cultivation of Aman rice, perhaps as a reaction to low prices of rice received by growers last year, the chamber pointed out.
For the cultivation of Boro, the largest rice crop, the preparation of seed and rice fields has begun. Boro harvest will start in March. Cultivation of Aus crop and wheat will begin later in the year.
In the industrial sector for the quarter under review, the up-to-date official figures are not yet available. Noting this, the MCCI said, according to the latest available data, industrial production grew by 4.2 per cent in April of quarter (Q)4 of fiscal year (FY) 09, lower than the 6.5 per cent growth witnessed in Q3FY09.
"The major contribution to the growth of industrial sector comes from the growth of the manufacturing sub-sector, but this sub-sector grew by only 4.3 per cent in April, Q4FY09, compared to 6.5 per cent in 03FY09. The electricity sub-sector performed slightly better, its quantity index of production (QIP) rising by 7.6 per cent in April of Q4FY09, compared to 5.5 per cent in 3FY09."
"The mining sub-sector performed very poorly, growing by just 1.7 per cent in Q4FY09 (April), compared to a respectable 8.8 per cent growth in the immediate previous quarter. The construction sub-sector was expected to grow fast as it usually gets a boost when public development expenditure increases, but due to the slow implementation of the Annual Development Programme (ADP) at the start of the fiscal year, only a modest growth was achieved by this sub-sector.
According to the MCCI, there were, however, some positive signs in the manufacturing sector during the July-September quarter of FY10. "Even though RMG production and export declined in the period under review, the production in the export-oriented leather, footwear, home textile frozen foods and jute goods industries increased due to increased foreign purchase orders. Domestic market-oriented industries likewise, expanded at a higher rate, with a rise observed in the production of certain construction-related materials as well as chemical products, food and beverages."
"The services sector grew slowly in the quarter under review, reflecting major contractions in transport, storage and communication. Weak growth in the banking industry following weak credit growth and lower revenue from other banking services - and slow growth in manufacturing as well as electricity, gas, and water sub-sectors also contributed to the slow growth in the services sector. Value added in retail and wholesale trade, and education remained unchanged in the quarter under review."
The chamber said the central bank's easy monetary policy stance continued in July-September FY10. "Bangladesh Bank reduced the interest rate on its 91-day treasury bills by 149.0 basis points to 2.05 per cent, on 182-day treasury bills by 74.0 basis points to 3.50 per cent, on 364-day treasury bills by 163.0 basis points to 4.33 per cent."
"As of end-August 2009, reserve money expanded 29.7 per cent year on year or (YoY) reflecting a higher-than-expected cash reserve growth while broad money rose by a lower rate of 19.13 per cent (YoY) reflecting a lower level of economic activity. Private credit growth slowed down significantly to 14.3 per cent (YoY), due mainly to a slowdown in the demand for credit by the private sector in the wake of the slowdown in economic activity."
"Data on industrial term lending is not available for the period under review. Available statistics shows that the disbursement of industrial term loans during Q4FY09 was Tk 67.98 billion (6798 crore), which was 60.56 per cent higher than that in Q3FY09. The recovery of industrial term loans during 4FY09 was Tk 50.70 billion (5070 crore), which was 50.49 per cent higher than that in the previous quarter. Net disbursement of industrial term loans thus stood at Tk 17.28 billion (1728 crore) during Q4FY09, compared to Tk 8.65 billion (865 crore) during Q3FY09. This implies that in Q4FY09 there were some improvements in private investment activities supported by bank lending," the chamber noted in its review.
The MCCI pointed out that disbursement of agricultural credit during the July-August months of FY10 was Tk 12.71 billion (1271 crore), which was 30.76 per cent higher than that of July-August of FY09. "On the other hand, the recovery of agricultural credit during July-August of FY10 was Tk 19.43 billion (1943 crore), which was 100.5 per cent higher than in July-August of FY09. This means that the net disbursement of agricultural credit during the July-August period of FY10 was Tk 6.72 billion (672 crore) less than the amount of recovery during the same period."
"In Q1 FY10, total tax collection (National Board of Revenue or NBR portion) grew by 9.1 per cent compared to 20.6 percent in Q1 FY09. The lower growth in revenue collection was largely due to the decline in import-related revenues. Slide in prices of major import products in the world market, duty cuts in sugar and edible oil, a sharp fall in the import of luxury goods and capital machinery, and stuck-up revenue worth Tk 4.07 billion with Bangladesh Petroleum Corporation are the major reasons behind the low revenue collection from customs."
"Revenue collection from customs duties, in fact, registered a negative 3.0 per cent growth, while the growth of revenues from value added tax (VAT) decelerated considerably to 4.2 per cent (YoY) from 32.6 per cent, reflecting a slowdown in overall economic activity. However, income tax revenue collection increased significantly --- from 12.2 per cent (YoY) to 25.9 per cent (YoY) as a result of the shift from ex-post collection to taxation at source. Nevertheless, the combined revenue collection from customs duties, income tax and VAT posted a poor 8.20% growth in the first quarter of the fiscal while at least a 17 per cent growth is needed for achieving the revenue target in FY10," the MCCI noted.
According to the MCCI, implementation of the government's Annual Development Programme or ADP in the July-September quarter of FY10 was only 10 per cent of the total ADP allocation for FY10. "Reports by the Ministry of Finance, Bangladesh Bank and the NBR all admit that the slowdown of ADP expenditure was an important factor behind the slow growth of the economy during the quarter under review.
Outstanding domestic debt of the government at the end of August 2009 increased by Tk 85.13 billion (8513 crore) to Tk 1026.41 billion (Tk.102641 crore), or by 9.0 per cent over August 2008. Some 53.4 per cent of this domestic debt was in the form of borrowing from the banking sector, and the rest was borrowed from non-bank sources."
On the external front, export volume contracted, the chamber reported, in July and August 2009 by 0.09 per cent while export price declined by 3.2 per cent following a weakening of global demand, especially in primary products, the price of which declined by 21.2 per cent (YoY). "As a result, total export earnings in July-August of Q1 FY10 fell by 3.29 per cent to $2.81 billion compared to a 0.6 per cent contraction in the previous quarter. Meanwhile, merchandise imports in July-August of the period under review fell by 20.69 per cent to $2.97 billion compared to 17.10 per cent contraction in the previous quarter."
"For the first time in Bangladesh since FY2001-02, import payments declined, breaking the usual trend. During the two-month period, industrial raw materials imports declined by 21.81 per cent and capital goods imports declined by 22.36 per cent," the chamber pointed out.
"The latest available export data for the whole of the first quarter of FY10 presents a far gloomier picture. Exports plummeted by 11.66 per cent in the first three months of the fiscal. In September, export earnings declined 28.27 per cent compared to the same month in the previous fiscal. It was the biggest single-month decline in exports in many years and also a major upset in the start of the new fiscal, because exports were doing well in the previous fiscal ending in June 2009 despite the first bout of recession," according to the chamber.
The MCCI noted in its review: "The deficit in commodity trade balance in the first two months of the quarter narrowed down to US$166 million from US$840 million in the same period a year ago. The current account surplus during this period crossed the $1.0 billion mark due to failing import payments and surging remittance flows. The current account surplus was $1.3 billion in the July-August period, which was $244 million in the same period last year. The financial account, however, depicted a larger deficit during the quarter under review (July-August), chiefly because of the increase in the amounts of amortization of medium and long-term (M<) debts, higher amounts of net trade credit and the decline in net FDl inflows. In the first two months, net FDI fell by 37 per cent from $201 million to $126 million. The over-all balance of payments recorded a surplus of $976 million in July-August 2009, a significant increase over the surplus of US$219 million in July-August 2008."
Average inflation, the MCCI stated, fell to 5.7 per cent in the quarter under review (August 2009) from 7.2 per cent in the preceding quarter and 10 per cent in Q 1 FY2009. "On point-to-point basis, however, the inflation rate, which fell to as low as 2.2 per cent in Q4FY09 from a previous high of 10.2 per cent in 1FY09, showed an upward trend in QIFY10 and rose to 4.7 per cent in August 2009. This was primarily because the index of food prices increased by 4.9 per cent in August compared to a 0.25 per cent increase in the previous quarter, while non-food inflation increased by 4.5 per cent in August compared to 5.9 per cent in the previous quarter.
"The inflation rate in the rural areas was slightly higher than that in the urban areas," the chamber stated.
No imminent danger for food security
FE Team | Published: December 04, 2009 00:00:00 | Updated: February 01, 2018 00:00:00
Share if you like