Fiscal performance gets stronger, MCCI says in its review
Friday, 5 February 2010
FE Report
The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) Thursday said during the October-December FY10 quarter, the main challenge for monetary policy was to maintain stability in the domestic financial markets.
Reviewing the economic situation of October-December 2009, the leading chamber of the country said in the background of excess domestic liquidity which could have fuelled the inflationary pressure and led to a sharp depreciation in the exchange rate, the Bangladesh Bank tightened its monetary policy stance somewhat by increasing the treasury bill rates.
As in the first quarter of FY10, high growth of foreign assets characterized monetary developments in Q2 of FY10 as well, resulting in a rise in the stock of reserve money. Thus, as of end-November 2009, reserve money expanded 32.96 percent (year on year) compared to 24.77 percent in September 2009, reflecting a higher than expected foreign assets growth. Broad money rose by 20.46 percent (yoy) in November 2009 from 16.9 percent in September of the year commensurate with the improvement in economic activity. Private credit expanded by 16.73 percent (yoy) in November 2009 compared to 13.7 percent in September 2009, reflecting some improvement in private sector investment during the second quarter.
Available statistics shows that the disbursement of industrial term loans during Ql FY10 was Tk 54.03 billion, which was 20.5 lower than that in Q4FY09. The recovery of industrial term loans during Q1 FY10 was Tk 38.32 billion, which was 24.4 percent higher than that in the previous quarter. Net disbursement of industrial term loans thus stood at Tk 15.71 billion during Q1FY10, compared to Tk 17.28 billion during Q4FY09.
This implies that in Q1 FYI 0 there was some decline in private investment activities supported by bank lending.
Disbursement of agricultural credit during Q2FY10 was Tk 36.84 billion, which was 35 percent higher than in FY09. On the other hand, the recovery of agricultural credit during Q2FY09 was Tk 27.78 billion, which was 60.7 percent higher than in Q2FY09. The net disbursement of agricultural credit thus stood at Tk 9.02 billion in Q2FY10 compared to the net disbursement of Tk 10.02 billion Q2FY09.
Thus in Q2FY10, net agricultural credit disbursement marginally declined by 9.4 percent.
Analysing Public Finance, the MCCI Review said with the pick up in economic growth, fiscal performance was stronger than expected in Q2 of FY10. Growth in government's revenue collection in October-November 2009 accelerated to 25.2 percent from 9.1 percent in the previous quarter.
The increase was largely due to a rise in VAT receipts (31.1 percent yoy). Customs duties increased by 11.0 percent (yoy) in response to two upward adjustments of fiscal measures in the present fiscal year.
The collection of income tax, which ranks second after VAT in the county's tax structure, also remained strong, growing by 19.4 percent in the quarter under review.
Total budget financing of the government during July-October 2009 through borrowing stood lower at Tk.13.13 billion, as against Tk.89.49 billion during July-October 2008. The amount of budget financing was just 4.5 percent of the total target of Tk.292.28 billion for the entire fiscal year (FY10). Of this total amount, domestic financing was Tk.2.24 billion (or 11.1 percent of the total domestic borrowing target) and the remaining Tk.10.89 billion (12.6 percent of total foreign borrowing) came from foreign financing.
It is significant to note that total budget financing of Tk.2.24 billion came entirely from the government's net non-bank borrowing from the public, and the balance of Tk.42.11 billion was used to repay the government's past loans from the banking system. In other words, government's
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The Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) Thursday said during the October-December FY10 quarter, the main challenge for monetary policy was to maintain stability in the domestic financial markets.
Reviewing the economic situation of October-December 2009, the leading chamber of the country said in the background of excess domestic liquidity which could have fuelled the inflationary pressure and led to a sharp depreciation in the exchange rate, the Bangladesh Bank tightened its monetary policy stance somewhat by increasing the treasury bill rates.
As in the first quarter of FY10, high growth of foreign assets characterized monetary developments in Q2 of FY10 as well, resulting in a rise in the stock of reserve money. Thus, as of end-November 2009, reserve money expanded 32.96 percent (year on year) compared to 24.77 percent in September 2009, reflecting a higher than expected foreign assets growth. Broad money rose by 20.46 percent (yoy) in November 2009 from 16.9 percent in September of the year commensurate with the improvement in economic activity. Private credit expanded by 16.73 percent (yoy) in November 2009 compared to 13.7 percent in September 2009, reflecting some improvement in private sector investment during the second quarter.
Available statistics shows that the disbursement of industrial term loans during Ql FY10 was Tk 54.03 billion, which was 20.5 lower than that in Q4FY09. The recovery of industrial term loans during Q1 FY10 was Tk 38.32 billion, which was 24.4 percent higher than that in the previous quarter. Net disbursement of industrial term loans thus stood at Tk 15.71 billion during Q1FY10, compared to Tk 17.28 billion during Q4FY09.
This implies that in Q1 FYI 0 there was some decline in private investment activities supported by bank lending.
Disbursement of agricultural credit during Q2FY10 was Tk 36.84 billion, which was 35 percent higher than in FY09. On the other hand, the recovery of agricultural credit during Q2FY09 was Tk 27.78 billion, which was 60.7 percent higher than in Q2FY09. The net disbursement of agricultural credit thus stood at Tk 9.02 billion in Q2FY10 compared to the net disbursement of Tk 10.02 billion Q2FY09.
Thus in Q2FY10, net agricultural credit disbursement marginally declined by 9.4 percent.
Analysing Public Finance, the MCCI Review said with the pick up in economic growth, fiscal performance was stronger than expected in Q2 of FY10. Growth in government's revenue collection in October-November 2009 accelerated to 25.2 percent from 9.1 percent in the previous quarter.
The increase was largely due to a rise in VAT receipts (31.1 percent yoy). Customs duties increased by 11.0 percent (yoy) in response to two upward adjustments of fiscal measures in the present fiscal year.
The collection of income tax, which ranks second after VAT in the county's tax structure, also remained strong, growing by 19.4 percent in the quarter under review.
Total budget financing of the government during July-October 2009 through borrowing stood lower at Tk.13.13 billion, as against Tk.89.49 billion during July-October 2008. The amount of budget financing was just 4.5 percent of the total target of Tk.292.28 billion for the entire fiscal year (FY10). Of this total amount, domestic financing was Tk.2.24 billion (or 11.1 percent of the total domestic borrowing target) and the remaining Tk.10.89 billion (12.6 percent of total foreign borrowing) came from foreign financing.
It is significant to note that total budget financing of Tk.2.24 billion came entirely from the government's net non-bank borrowing from the public, and the balance of Tk.42.11 billion was used to repay the government's past loans from the banking system. In other words, government's
Continued to page 11