FHM Humayan Kabir
Financial analysts said rising remittances to Bangladesh should be invested in the productive sector to avert inflation and spur economic growth.
They said the idle foreign exchange in the banks could spur inflation and raise import of luxury goods, which would affect the country's macro-economy badly.
The non-resident Bangladeshis (NRBs) and workers have remitted over US$1.0 billion in November-- the highest monthly inflow recorded, central bank statistics said.
The foreign exchange reserve of the country also stood at $10.425 billion last week due to the robust remittance flow.
Former finance adviser Dr. Mirza Azizul Islam said: "On one hand, higher remittance flow is good for the economy. But, on the other, if the fund cannot be channelled to productive sector it would not have a positive impact on the overall macro-economy."
"It is really a concern for the country that the remittance and foreign exchange reserve are increasing but imports of capital machinery and raw materials are decreasing. It has already hit the private sector investment."
Import orders for capital machinery plummeted by nearly 30 per cent in the last fiscal year, ended on June 30, 2009, as the global economic crisis created a climate of uncertainty in thecountry's industrial expansion.
If the central bank can not mange the remittance properly, the commercial banks and central bank will have excess liquidity and push the inflation up, Dr Islam added.
The former finance adviser has suggested channeling the remittance to the productive sectors. "The government can encourage introduction of more fresh shares of different private enterprises where quota for the NRBs will be raised for attracting their investment."
"The government should issue investment bonds for the remittance earners for big projects and productive sectors in the country," he said.
Most of the remittances in the country are utilised to the non-productive sectors like purchase of lands, flats and luxury goods.
Chairman of the Policy Research Institute (PRI) Dr Zaidi Sattar said: "The high remittance flow is swelling the banks' liquidity and money circulation in the market. It has the potential to push the inflation further up."
"On the other hand, the country's term loan and import growth have dropped. These are concerns for the country's economy," he said adding the monetary management by the central bank is going to be more challenging in the future days amid higher remittance flow and rising forex reserve.
If the reserve increases, value of Taka would appreciate affecting the export earnings badly which would wallop the country's macro-economy, Dr. Zaidi said.
He suggested channelling of the remittance to the productive sector through setting up "NRB investment fund".
"As the NRBs are not well informed about the investment opportunity and its security in Bangladesh, the government or the private sector can utilise their money through setting up the fund for investing in the productive sectors," he said.
Former Bangladesh Bank governor Dr Salehuddin Ahmed said it was a big challenge for the economy on how to divert the remittances to the productive sectors.
"The commercial banks and financial institutions should offer new products where the NRBs will be interested to invest."
Dr Ahmed said the private sector could have some advisory services so that the NRBs could be well informed about the investment opportunities here.
"Lack of such information is the key obstacle to ensure investment of the foreign earnings to the manufacturing and other productive sectors."
"When I was the governor I proposed setting up of an SME Data Bank for the NRBs so that they could get adequate information," he said adding the proposed "NRB Bank" could be a good solution for attracting remittance to the productive sector.
Remittances from Bangladeshi expatriates stood at $4.662 billion in the first five months of the current fiscal 2009-10, growing by 24.44 per cent from that of the corresponding period of the previous fiscal.
A sizeable amount of the remittances are being spent on land or houses and luxury goods and other consumption purposes.
Tuesday, 16 March 2010
Govt's CFL project suffers setback: WB refuses to provide additional fund
The government's countrywide programme to replace the existing incandescent bulb with energy saving compact florescent lights (CFLs) has suffered a setback as the World Bank has refused to provide additional fund for procurement of 23 million lights.
The Washington-based lender has recently turned down a government request for financing the second phase of project saying it is not ready at this moment to provide more fund.
The Bank has already given US$15 million to procure 10.5 million CFLs, which consume less electricity, in the first phase of the renewable energy project.
The Economic Relations Division (ERD) a couple of month ago sought an additional $27.5 million from the World Bank to implement the second phase.
The state-owned Rural Electrification Board (REB) has already invited tenders for supply of 10.5 million bulbs under the first phase.
The government last year took up the programme to replace the existing incandescent bulbs with 33.5 million CFL in the urban and rural areas throughout the country at free of cost.
Energy ministry officials said the 33.5 million CFL bulbs will save nearly 360-megawatt (mw) electricity.
The REB has a plan to distribute 60 per cent from the total 33.5 million CFL
bulbs in the rural areas while the rest 40 per cent will be handed over to the urban areas by the PDB, DPDC, DESCO and other power distributors.
An ERD official said a World Bank project review mission last week suggested the government to get necessary money from the Infrastructure Development Company Ltd (IDCOL)'s $100 million fund under a renewable energy project.
The IDCOL too has refused to divert $27.5 million from its fund, he said.
"So, the procurement of 23 million additional energy saving lamps under the second phase has become uncertain," the ERD official said.
The government had a plan to distribute 10.5 million CFLs during the Boro rice cultivation season, which started in early January, in a bid to save electricity and divert it to run power pimps for irrigation.
Power distributors said some additional 1500mw of electricity has been added to the national grid for operation of the irrigation pumps during the Boro season (January to April).
The demand for electricity is rising at an eight percent annually in Bangladesh.
The Washington-based lender has recently turned down a government request for financing the second phase of project saying it is not ready at this moment to provide more fund.
The Bank has already given US$15 million to procure 10.5 million CFLs, which consume less electricity, in the first phase of the renewable energy project.
The Economic Relations Division (ERD) a couple of month ago sought an additional $27.5 million from the World Bank to implement the second phase.
The state-owned Rural Electrification Board (REB) has already invited tenders for supply of 10.5 million bulbs under the first phase.
The government last year took up the programme to replace the existing incandescent bulbs with 33.5 million CFL in the urban and rural areas throughout the country at free of cost.
Energy ministry officials said the 33.5 million CFL bulbs will save nearly 360-megawatt (mw) electricity.
The REB has a plan to distribute 60 per cent from the total 33.5 million CFL
bulbs in the rural areas while the rest 40 per cent will be handed over to the urban areas by the PDB, DPDC, DESCO and other power distributors.
An ERD official said a World Bank project review mission last week suggested the government to get necessary money from the Infrastructure Development Company Ltd (IDCOL)'s $100 million fund under a renewable energy project.
The IDCOL too has refused to divert $27.5 million from its fund, he said.
"So, the procurement of 23 million additional energy saving lamps under the second phase has become uncertain," the ERD official said.
The government had a plan to distribute 10.5 million CFLs during the Boro rice cultivation season, which started in early January, in a bid to save electricity and divert it to run power pimps for irrigation.
Power distributors said some additional 1500mw of electricity has been added to the national grid for operation of the irrigation pumps during the Boro season (January to April).
The demand for electricity is rising at an eight percent annually in Bangladesh.
Subscribe to:
Posts (Atom)
