Overall services sector growth slightly lower, MCCI
Tuesday, 11 May 2010
Continued from Page 9
Total budget financing of the government during July-January 2010 through borrowing stood lower at Tk.34.65 billion, as against Tk.133.71 billion during July-January FY09. The amount of budget financing was just 11.9 percent of the total target of Tk. 292.28 billion for the entire fiscal year (FY10). Government financed the deficit entirely from foreign sources. In addition, domestic debt repayments were also funded from the foreign sources, somewhat inconsistent with the budget management objectives. In July-January FY10, foreign financing was Tk. 65.26 billion while domestic repayment was Tk.30.61 billion. It is significant to note that in the banking sector government's net borrowing was a negative Tk. 101.22 billion, while non-bank borrowing was Tk. 70.61 billion.
The disbursement rate of government spending during the quarter under review somewhat declined compared to the previous quarter. Despite the government's effort to accelerate spending, implementation of various projects was hindered by administrative inefficiency. Total ADIP implementation up to the end of the quarter under review was only 44 percent. This means that the remaining 56 percent of the budgeted ADP will need to be implemented in only the three months that are left of the present fiscal. This is well neigh an impossible task, without sacrificing the quality of the projects.
The outstanding domestic debt of the Government stood at Tk. 957.60 billion in January 2010, which is Tk.67.82 billion or 6.6 percent lower than Tk.1025.42 billion that lay outstanding in January 2009. The decline in the outstanding domestic debt by Tk. 67.82 was due to the government's repayment of debts to the banking sector.
Exports and Imports
On the external front, merchandise exports in January of Q3FY10 increased year-on-year by 3.49 per cent compared to 1.0 percent in Q2FY10. This was indicates that the global demand is gradually improving, which resulted in improving export performance especially in raw jute, jute products, leather, petroleum byproducts, bicycle, footwear, agro-processed food, terry towel and ceramic products. In comparison to the previous quarter, the higher growth of export earnings in January of Q3FY10 was due mainly to improvements in export prices. Improvements in the volume of exports in some items, excluding frozen foods, knitwear, woven garments and chemical fertilizer, also contributed to the increase in export earnings.
However, while export receipts recorded a positive growth in January 2010, total export receipts during July-January 2009-2010 was 4.96 percent lower than in the corresponding seven months of the previous fiscal (i.e., a negative growth of 4.69%).
Total import payments (c.i.f) in January Q3FY10 stood at US$1841 million, lower by US$ 227 million or 10.96% than US$2067 million in January 2009. The 10.96% contraction in import payments contrasts sharply with the observed 9.5 percent increase in the previous quarter. The contraction in imports was caused by a fall in imports of industrial raw materials and intermediate goods. The fall in the industrial raw material and intermediate goods imports can be explained by the decline in the import of fertilizer, iron & steel scrap and scrap vessels, and reduction of economic activities within the garments sector as a number of enterprises endeavored to restructure their operation in order to improve efficiency and remain viable. Capital machinery imports on the other hand increased in the period under review, which can be accounted for by the increase in imports of capital machinery for pharmaceutical and leather/tannery industries found necessary for increasing the production in these industries to meet higher domestic and external demand.
Balance of Payments
The commodity trade balance recorded a lower deficit of US$226 million in January 2010 compared to the deficit of US$465 million in January 2009. The balance of services trade recorded a deficit of $158 million in January 2010 compared to the deficit of $73 million in the January 2009. The balance of income recorded a lower deficit of $9.1 million in January 2010 compared to the deficit of $122 million in January 2009. The current account balance during January 2010 recorded a bigger surplus of US$537 million, compared to the surplus of US$255 million in January 2009. The improvement in the current account balance was due to a larger amount of current transfers of $1012 million. Some 94 percent of these transfers came from worker's remittances. The financial account, on the other hand, recorded a higher deficit of $560 million in January 2010, compared to a deficit of $106 million in January 2009. The higher deficit in the financial account was mainly due to a net decrease in FDI inflows and higher repayment of short-term loans. During January 2010 foreign direct investment declined to $31 million, compared to $59 million in January 2009. The over-all balance of payments showed a surplus of $57 million in January 2010, compared to a deficit of US$129 million in January 2009.
Remittance
Inward remittances in Q3FY10 stood at US$2738 million, compared to US$2529 million in the corresponding quarter of FY09 - an 8.2 percent y-o-y increase. Remittances in the immediate past quarter, i.e., Q2FY10, stood at US$2825 million. Total remittance was 3.4 percent lower in Q3, than in the previous quarter, Q2FY1 0.
Exchange Rate and Foreign Exchange Reserve
The exchange rate of Taka per US dollar underwent an overall depreciation of 0.18 per cent in Q3FY1 0 compared to Q2FY1 0. Monthwise, the Taka depreciated by 0. 12 percent in January and 0. 13 per cent in February but in March the Taka marginally appreciated by 0.07 percent. Broadly, the foreign exchange market remained stable throughout the quarter under review. The relative stability of the exchange rate was partly the result of low demand for foreign currency during the quarter caused by the decline in the import of industrial raw materials, and partly the lower supply of foreign currency caused by a lower growth of inward remittances.
At the end of the third quarter of the fiscal, foreign exchange reserve stood at $10160 million, an increase of US$4470 million or 77.1 percent increase over the reserve of US$5953 million recorded at the end of the corresponding third quarter of FY09 . Foreign exchange reserve at the end of March 2010 was equivalent to 5.5 months of estimated goods imports.
Price Situation
The average rate of inflation (12-month annual average CPI) rose to 5.95 percent in Q3FY10 (February 2010) from 5.42 percent in the previous quarter (Q2FY10). The rate of inflation on point-to-point basis increased to 9.06 per cent at end February from 8.51 per cent at end December. This was the highest point-to-point inflation in sixteen months. Food inflation increased to 10.93 percent in February 2010 from 9.5 percent in December. Non-food inflation, however, declined to 6.14 percent in February 2010 from 7.04 percent in December 2009.
The continuous increase in the rate of food inflation since the fourth quarter of FY09 has been due to the increase in food prices in the global market. But the decline in non-food inflation since Q2 of the current fiscal as is indicated by BBS data defies all logic.
It is not clear why or how, despite the perceived operation of the income effect of increased public sector salaries and the price effect of global price increase in fuels, and domestic price increases in electricity and gas, and the sharp rise in asset prices (real estate and stock exchange securities), non-food inflation did fall in the period under review.
BBS inflation data requires a close scrutiny, the MCCI said.
Total budget financing of the government during July-January 2010 through borrowing stood lower at Tk.34.65 billion, as against Tk.133.71 billion during July-January FY09. The amount of budget financing was just 11.9 percent of the total target of Tk. 292.28 billion for the entire fiscal year (FY10). Government financed the deficit entirely from foreign sources. In addition, domestic debt repayments were also funded from the foreign sources, somewhat inconsistent with the budget management objectives. In July-January FY10, foreign financing was Tk. 65.26 billion while domestic repayment was Tk.30.61 billion. It is significant to note that in the banking sector government's net borrowing was a negative Tk. 101.22 billion, while non-bank borrowing was Tk. 70.61 billion.
The disbursement rate of government spending during the quarter under review somewhat declined compared to the previous quarter. Despite the government's effort to accelerate spending, implementation of various projects was hindered by administrative inefficiency. Total ADIP implementation up to the end of the quarter under review was only 44 percent. This means that the remaining 56 percent of the budgeted ADP will need to be implemented in only the three months that are left of the present fiscal. This is well neigh an impossible task, without sacrificing the quality of the projects.
The outstanding domestic debt of the Government stood at Tk. 957.60 billion in January 2010, which is Tk.67.82 billion or 6.6 percent lower than Tk.1025.42 billion that lay outstanding in January 2009. The decline in the outstanding domestic debt by Tk. 67.82 was due to the government's repayment of debts to the banking sector.
Exports and Imports
On the external front, merchandise exports in January of Q3FY10 increased year-on-year by 3.49 per cent compared to 1.0 percent in Q2FY10. This was indicates that the global demand is gradually improving, which resulted in improving export performance especially in raw jute, jute products, leather, petroleum byproducts, bicycle, footwear, agro-processed food, terry towel and ceramic products. In comparison to the previous quarter, the higher growth of export earnings in January of Q3FY10 was due mainly to improvements in export prices. Improvements in the volume of exports in some items, excluding frozen foods, knitwear, woven garments and chemical fertilizer, also contributed to the increase in export earnings.
However, while export receipts recorded a positive growth in January 2010, total export receipts during July-January 2009-2010 was 4.96 percent lower than in the corresponding seven months of the previous fiscal (i.e., a negative growth of 4.69%).
Total import payments (c.i.f) in January Q3FY10 stood at US$1841 million, lower by US$ 227 million or 10.96% than US$2067 million in January 2009. The 10.96% contraction in import payments contrasts sharply with the observed 9.5 percent increase in the previous quarter. The contraction in imports was caused by a fall in imports of industrial raw materials and intermediate goods. The fall in the industrial raw material and intermediate goods imports can be explained by the decline in the import of fertilizer, iron & steel scrap and scrap vessels, and reduction of economic activities within the garments sector as a number of enterprises endeavored to restructure their operation in order to improve efficiency and remain viable. Capital machinery imports on the other hand increased in the period under review, which can be accounted for by the increase in imports of capital machinery for pharmaceutical and leather/tannery industries found necessary for increasing the production in these industries to meet higher domestic and external demand.
Balance of Payments
The commodity trade balance recorded a lower deficit of US$226 million in January 2010 compared to the deficit of US$465 million in January 2009. The balance of services trade recorded a deficit of $158 million in January 2010 compared to the deficit of $73 million in the January 2009. The balance of income recorded a lower deficit of $9.1 million in January 2010 compared to the deficit of $122 million in January 2009. The current account balance during January 2010 recorded a bigger surplus of US$537 million, compared to the surplus of US$255 million in January 2009. The improvement in the current account balance was due to a larger amount of current transfers of $1012 million. Some 94 percent of these transfers came from worker's remittances. The financial account, on the other hand, recorded a higher deficit of $560 million in January 2010, compared to a deficit of $106 million in January 2009. The higher deficit in the financial account was mainly due to a net decrease in FDI inflows and higher repayment of short-term loans. During January 2010 foreign direct investment declined to $31 million, compared to $59 million in January 2009. The over-all balance of payments showed a surplus of $57 million in January 2010, compared to a deficit of US$129 million in January 2009.
Remittance
Inward remittances in Q3FY10 stood at US$2738 million, compared to US$2529 million in the corresponding quarter of FY09 - an 8.2 percent y-o-y increase. Remittances in the immediate past quarter, i.e., Q2FY10, stood at US$2825 million. Total remittance was 3.4 percent lower in Q3, than in the previous quarter, Q2FY1 0.
Exchange Rate and Foreign Exchange Reserve
The exchange rate of Taka per US dollar underwent an overall depreciation of 0.18 per cent in Q3FY1 0 compared to Q2FY1 0. Monthwise, the Taka depreciated by 0. 12 percent in January and 0. 13 per cent in February but in March the Taka marginally appreciated by 0.07 percent. Broadly, the foreign exchange market remained stable throughout the quarter under review. The relative stability of the exchange rate was partly the result of low demand for foreign currency during the quarter caused by the decline in the import of industrial raw materials, and partly the lower supply of foreign currency caused by a lower growth of inward remittances.
At the end of the third quarter of the fiscal, foreign exchange reserve stood at $10160 million, an increase of US$4470 million or 77.1 percent increase over the reserve of US$5953 million recorded at the end of the corresponding third quarter of FY09 . Foreign exchange reserve at the end of March 2010 was equivalent to 5.5 months of estimated goods imports.
Price Situation
The average rate of inflation (12-month annual average CPI) rose to 5.95 percent in Q3FY10 (February 2010) from 5.42 percent in the previous quarter (Q2FY10). The rate of inflation on point-to-point basis increased to 9.06 per cent at end February from 8.51 per cent at end December. This was the highest point-to-point inflation in sixteen months. Food inflation increased to 10.93 percent in February 2010 from 9.5 percent in December. Non-food inflation, however, declined to 6.14 percent in February 2010 from 7.04 percent in December 2009.
The continuous increase in the rate of food inflation since the fourth quarter of FY09 has been due to the increase in food prices in the global market. But the decline in non-food inflation since Q2 of the current fiscal as is indicated by BBS data defies all logic.
It is not clear why or how, despite the perceived operation of the income effect of increased public sector salaries and the price effect of global price increase in fuels, and domestic price increases in electricity and gas, and the sharp rise in asset prices (real estate and stock exchange securities), non-food inflation did fall in the period under review.
BBS inflation data requires a close scrutiny, the MCCI said.