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Financial Sector restructuring needed for faster growth
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Bangladesh will only achieve faster levels of economic growth if it restructures its financial sector, Bangladesh Bank Governor Dr Salehuddin Ahmed told a meeting of the American Chamber of Commerce in Bangladesh (AmCham) yesterday. "Faster GDP growth consistent with the poverty reduction goals cannot be met unless the extent and quality of financial intermediation in Bangladesh advances significantly," he
said at the AmCham monthly luncheon meeting in Dhaka. "In particular this would require more competitive banking and non-bank financial sectors capable of reaching out to all sections of the community, rural and urban, catering to all types of marketable financial services, Salehuddin said. One way to do this was to ensure that stricter regulatory guidelines were enforced, another was to restructure government banks and specialised banks, he said. "The merger of small banks into larger and stronger entities would be a way forward as in other developed financial markets Commenting on the AmCham's recommendation that commercial banks that perform well should be rewarded and those that perform badly punished, the governor said the central bank does not punish banks; rather it aims to correct them. Replying to another question on monetary policy, he said the central bank had not taken actions to tighten its policy but was following a cautious line. "Our target is not only the control of inflation, but also the acceleration of growth and price stability," he said. He rejected fears that the bank was sucking liquidity out of financial markets, a concern of some AmCham members who expressed worries that such a policy would prompt an economic slowdown. "We've not squeezing private sector credit, rather encouraging the banks to increase investment," he said, adding that the macro-fundamentals of the Bangladeshi economy were ok. In his speech to the chamber, Salehuddin outlined the economic prospects for Bangladesh. He said that in spite of sectoral and other temporary setbacks, "it appears plausible that the overall growth momentum evidenced over the last several years is expected to continue. He said among the risks the Bangladesh economy faced are: the upward trend and volatility in world commodity prices, food prices in particular; the rise in the inflation rate; insufficient infrastructure; and constraints in domestic revenue mobilisation which causes continuing dependence on international trade tax, with direct tax collection increasing at a pace that is lower than the domestic value added tax (VAT). Other risk factors are the low degree of monetisation that hinders the normal flourishing of the equity markets, the slow pace of complementary reforms to improve the environment for private investment including foreign direct investment, the lack of adequate human capital having enough technical or vocational education, and constraints in the opportunities of investment by non-resident Bangladeshis in productive sectors. Bangladesh also faced floods and other natural calamities, the governor said. "This year's flood inundated a vast area and damaged crops, roads and other infrastructural facilities. Therefore, disaster management for pre and post periods should be an important aspect of
Our development strategies, he said. In his welcome speech, AmCham President Syed Ershad Ahmed said due to the outdated Foreign Exchange Regulatory Act, entrepreneurs are struggling to do business, especially in international trade. Salehuddin said the central bank was aware of the problems and "we are working on changing the rules."
Robust remittance growth helps Bangladesh's BoP reach record surplus
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Bangladesh's overall balance of payments (BoP) situation continued to maintain a healthy trend in the last fiscal (July 2006 to June 2007), mainly due to improvements both in current and financial accounts.
The current account balance recorded a surplus in the fiscal 2006-07, thanks to robust growth of inward remittances, official sources were quoted by local newspaper The Financial Express as saying on Sunday.
The country received 5.98 billion U.S. dollars worth of remittances during the last fiscal against 4.80 billion in fiscal 2005-06. The amount is 24.52 percent higher than that of the previous fiscal.
However, higher imports pushed the overall trade deficit to 3. 458 billion U.S. dollars in the last fiscal compared to that of 2. 889 billion in the previous fiscal.
Despite large deficits in services and income, the current account balance recorded a surplus of 952 million U.S. dollars during the fiscal 2006-07 against the surplus of 824 million during the previous fiscal due to larger current transfers ( including remittances by wage earners), according to the central bank Bangladesh Bank.
The overall balance showed a surplus of 1.493 billion U.S. dollars during the last fiscal against the surplus of 338 million in the previous fiscal, due mainly to surplus in current account balance of 952 million and surplus of 721 million in the financial account (including foreign direct investment).
Central bank officials, however, said the export earnings and the flow of inward remittances need to remain stable in order to sustain the surplus position of the balance of payments in the current fiscal.
Maintain ethics, standards to ensure transparency
Altaf asks Chartered Accountants
Star Business Report
The Daily Star
Auditing and accounting professionals should maintain ethics and efficiently apply standards in preparing balance sheets to ensure financial transparency, said Commerce Minister Altaf Hossain Choudhury on Monday at a seminar.
He said preparation of financial statements must be measured against proper application and compliance with the Bangladesh Accounting Standards (BAS) and Bangladesh Standards on Auditing (BSA) to avoid corporate financial debacles.
He was speaking at a seminar on "Bangladesh Standards on Auditing" and launching ceremony of latest edition of BSA organised by the Institute of Chartered Accountants of Bangladesh (ICAB) at its auditorium.
"An audit of financial statements enables the auditor to express opinion whether the statements are prepared in accordance with the BAS," Altaf said adding that the corporate failures in the United States and other countries in last couple of years had caused loss of public confidence in the accountancy profession.
The minister assured the ICAB of all possible support of his ministry to uphold the 'sanctity of the accounting profession.'
The ICAB, which is the regulating body of the chartered accountancy, has so far adopted 30 BAS standards and 35 BSA standards on the basis of international accounting and auditing standards.
The ICAB President Akhtar Sohel Kasem said the institute is striving hard to introduce and enforce the accounting and auditing standards, which are the benchmarks of quality in auditing, in preparing financial statements.
The ICAB Vice-president Showkat Hossain, Controller General of Accounts Faruque M Siddiqui, former ICAB presidents Badrul Ahsan and A K Chowdhury were also present on the occasion.
Finance chiefs see brighter world economy, but storm clouds loom
AFP, Washington
The Daily Star
World finance chiefs meeting in Washington this week will express satisfaction with a rebounding global economy, but also highlight risks from surging oil prices, turmoil in Iraq and other factors.
Meetings this week of the Group of Seven finance officials and annual gatherings of the International Monetary Fund and World Bank also are expected to give greater recognition to China's economic clout, and to discuss further debt relief to the world's poorest nations.
IMF managing director Rodrigo Rato said recently that the organization was likely to upgrade its forecast for global economic growth. He said the outlook for 2004, set to be released Wednesday, would be "slightly above" the April forecast of 4.6 percent.
Rato noted however that "some downside risks have increased," including a recent spike in crude oil prices. But he said that even though some recent economic data had been below expectations, "the recovery should continue in 2004 and through 2005."
A recent cooling trend in the United States and some other countries, however, has given pause to some economic forecasters.
"The slowdown was most pronounced in the United States and Japan, but also evident in many other industrialized economies," said Nariman Behravesh, chief economist for the economics firm Global Insight.
Behravesh said that while global growth probably peaked earlier this year, "we do not expect that the recent 'soft patch' augurs the beginning of a much deeper downturn."
He said so far the rise in oil prices has had only a small impact on economic growth, China is still growing and that US economy "will probably not run out of steam soon."
But Morgan Stanley chief economist Stephen Roach sees a much more troubling economic picture.
"The world economy is on a collision course," he said in a recent essay.
"With the world's growth dynamic now being effectively driven by just one consumer, America, and just one producer, China, the odds are growing short that such an increasingly tenuous arrangement can be sustained."
The IMF, which holds its annual meetings over the weekend along with its sister institution, the World Bank, is expected to repeat its call for the United States to cut its fiscal and trade deficits, and for Europe and Japan to boost economic growth.
Economists point out that the US current account and budget deficits are a major threat, which could lead to a dollar collapse that creates economic turbulence.
Sung Won Sohn, chief economist at Wells Fargo Bank, said he does not see a catastrophic situation, but a potential for a slow deterioration in the US economy and living standards.