C
ontents:
The impacts of global financial crisis on Bangladesh’s
I. financial Sector
II. real sector
Challenges for the economy
2
Crucial needs in avoiding prolonging of a recession
People-focused interventions
Measures initiated by the Government and the
Bangladesh Bank
Expressing at the outset my heartfelt
thanks to Bank Indonesia for offering
me the privilege of attending this
important seminar, let me begin with a
important seminar, let me begin with a
few words on how Bangladesh has
how Bangladesh has
I
mpacts on Domestic financial market..
Because of the limited openness of Bangladesh
economy particularly to short term capital flows, the
domestic financial market has remained free of toxic
assets and contagion from the global financial
4
tsunami.
Outflows from the modest non resident equity
holdings in local stock markets remained moderate,
and the decline in stock price indices were much
Monetary Aggregates (y-o-y growth in percent)
June 07
June 08
March 08
March 09
Total private sector credit increased by taka 296.5 billion
at the end of March 2009 compared to end March 2008
but growth of credit in this sector slowed a bit…
1. Net foreign assets 49.42 15.07 25.67 12.13 2. Net Domestic assets 12.57 18.08 13.93 21.13 Domestic credit 14.39 21.83 18.43 18.74 Credit to the public sector (incl. Govt.) 12.43 11.87 10.47 20.52
Liquidity position of the banks
(in billion taka)
Total liquid assets
Required liquid assets
Excess(+)/shortfall(-) of liquid assets
30 June 2007 448.41 305.62 142.79
(7.53)
6
30 June 2007 483.82 353.93 129.88
(5.92)
16 April 2009 661.61 414.98 246.62
(9.57)
Liquidity and credit availability remain normal,
with no episode of any bank run or credit
crunch.
Rather than themselves needing to be bailed
Liquidity and Credit Conditions in Banks
Rather than themselves needing to be bailed
out, banks in Bangladesh are in a sound
banks in Bangladesh are in a sound
position to help the real economy
position to help the real economy cope with the
fallouts of global recession triggered by the
I
mpacts on the real economy…
Selected Indicators (y-o-y growth in percent)
FY06
FY07
FY08
FY08
(July-March)
FY09
(July-March)
8
March) March)
Export
21.6
15.9
12.3
12.4
14.5
Import
12.2
16.3
26.1
23.9
12.4
GDP
6.6
6.4
6.2
-
5.9*
(
Contd
.)
20 25 30
ce
n
t
Growth of export and import
0 5 10 15
FY06 FY07 FY08 FY09
(July-March)
P
e
rce
The impact of global economic recession
The impact of global economic recession
on the real economy has so far remained
on the real economy has so far remained
moderate.
moderate.
Export growth has slowed somewhat, but
(Contd.)
10
(
Contd
.)
Domestic demand has also upheld well in
FY09, with good output response in agriculture
and manufacturing.
Real GDP is projected to grow by 5.9 percent in
FY09, against the 6.2 percent growth of FY08.
A declining trend in capital machinery imports
in FY09 signals slack in investment momentum
however, with implication for growth, going
Selected External sector Indicators
(in million US dollar)
FY07 FY08 FY08 (July-March)
FY09 (July-March)
Workers’ remittance 5979 7915 4841 6148*
(Contd.)
12
Current account balance
936 672 299 816
International reserves
5077 6149 5303 5872**
Migration of workers to job markets abroad has
slowed, and there are sporadic episodes of return
of laid off migrant workers. However, workers’
remittance inflows are still buoyant, growing 22.4
percent y-o-y in first eleven months of FY09.
(Contd.)
BOP current account balance and overall balance
are in a surplus over the past nine months resulting
in an improvement in the international reserves.
C
hallenges for the economy…
Unless the global economy recovers rapidly, FY10 is
likely to be more challenging for the Bangladesh
economy:
Export growth may further fall with some redundancies
in the export production sectors;
14
in the export production sectors;
return of migrant workers laid off in recession-ridden
host countries may continue;
Workers’ remittance inflows and investment
Even with the recent sustained stock
price gains in global markets signaling
some positive outlook for global recovery
(Contd.)
some positive outlook for global recovery
in H2 FY10, observers are projecting a
slower FY10 real GDP growth of around
C
rucial needs in avoiding prolonging of a
recession…
Basic subsistence safety net and opportunities of
alternative employment for the laid off workforce
are crucial needs in avoiding prolonging of a
recession.
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recession.
While sounding self evident, the need for primary
focus on people hurt by failures of markets and
institutions often lose out to the clamors for
(
contd
.)
Prompt interventions helping the laid-off workforce
and other vulnerable population segments may
P
eople-focused interventions…
The government and the central bank (Bangladesh Bank) in
Bangladesh are committed to people-focused interventions;
co-opting initiatives of the financial system including
microfinance NGOs.
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microfinance NGOs.
About a third of the government's annual budgetary outlays
are typically allocated for pro-poor social sector expenditure
including safety net programs for the weak and vulnerable
population segments, and also for financing self-employment
(
contd
.)
Despite resource constraints, the still rudimentary
social safety net programs are being expanded
steadily in coverage.
With the looming risks from global recession, the
With the looming risks from global recession, the
FY10 budget will provide substantially larger
allocations for programs of income support from
temporary jobs in maintenance and expansion of
(
contd
.)
SMEs being typically less capital intensive and short
gestation options for creation of new employment and
output, the financial sector in Bangladesh (including
microfinance NGOs) is extensively engaged in
20
financing SMEs, supported by refinance from the
Bangladesh Bank (BB).
MDBs like the WB and ADB are also co-financing the
Credit to SME sector by banks and
financial institutions
30 June 2008 31 Dec. 2008 30 March 2009
Outstanding credit to SME sector (in billion taka)
350.37 434.39 757.71
(contd.)
taka)
Outstanding credit to SME sector as
percentage of total outstanding credit (%)
(contd.)
The government and BB has placed special
emphasis on the agriculture sector in generating
new employment and output;
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BB has made engagement in agricultural
financing mandatory for all banks, with refinance
Trends in agricultural credit
(in billion taka)
Target Disbursement Recovery
FY06 55.4 55.0 41.2
FY07 63.5 52.9 46.8
(contd.)
FY07 63.5 52.9 46.8
FY08 83.1 85.8 60.0
FY09 (July-March) 93.8* 69.1 60.6
(contd.)
BB has also acted to heighten awareness of corporate
social responsibility in the financial sector to promote its
spontaneous proactive engagement in programs
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helping out population segments hurt by natural
disasters, social iniquities or man made debacles like
O
O
ther
ther measures initiated by the Government
measures initiated by the Government
and BB to mitigate global financial crisis…
and BB to mitigate global financial crisis…
Safe investment of reserves : In the context of global
financial crisis, BB made arrangement for shifting reserves
invested in the international commercial banks to different
central banks. central banks.
Relaxation of loan rescheduling policy : Rescheduling
without necessary down payment has been allowed up to
September 30, 2009 on the banker customer relationship for
the affected export oriented industries especially Frozen
(contd.)
Re-fixation of rate of interests: The rate of interest on loan for
financing in the Agriculture, Term and Working Capital Loan to Large and Medium Scale industries, Housing Loan, Trade Financing has been lowered and fixed to a maximum at 13%.
Rationalization of service charges: Bangladesh Bank has issued
necessary instructions for rationalization of different service charges
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necessary instructions for rationalization of different service charges received by banks.
Capital adequacy of the banks: With a view to strengthening the
capital base of banks and making them prepare for the
Additional allocation in FY09 : Additional allocation of taka
34.24 billion as fiscal stimulus has been made in the current
financial year to support the recession hit sectors as under:
taka 25.50 billion as additional subsidy (of which taka 4.50
(Contd.)
billion to three export sectors namely jute, leather and
frozen food; taka15.00 billion to agriculture sector; and taka
6.00 billion to power sector.
taka 5.00 billion for agricultural loan recapitalization, and
(Contd.)
Lending from the Export Development Fund has already been raised to 150 million US dollar. Single borrower
credit limit from this fund has been increased from 1.0 million to 1.5 million US dollar.
Following special funds under the supervision of BB has
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Following special funds under the supervision of BB has been enhanced:
- The SME Fund increased by taka1.00 billion to taka 6.00
billion, and
C
oncluding
Remarks
…
People-focused approach in stimulus packages for rapid recovery from recession is more a matter of social sensitivity than of
resources.
We have seen reports of laid-off debt ridden jobless in affluent USA taking refuge in motels and 'tent cities', losing homes in mortgage foreclosures.
mortgage foreclosures.
While West European countries have done much better in ensuring basic shelter and subsistence for their citizenry, and far less
generously endowed Cuba is reputed for the quality of its social safety nets.
Heightened awareness and discussion of any issue is a pre-requisite in reinforcing the willpower for concrete action
thereon, which is why I wished to raise the issue in this regional discussion forum today.
I would like to conclude with sincere thanks to Bank
Indonesia, for giving me an excellent opportunity to share my views with this august forum.
(contd.)
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Indonesia, for giving me an excellent opportunity to share my views with this august forum.
While I am confident that wellwell--designed and properly designed and properly coordinated policies and stimulus packages
coordinated policies and stimulus packages will help global
economy bounce back from Global Recession, let us also
ensure that the population segments which were hurt by the ensure that the population segments which were hurt by the failed markets and institutions do not lose out
failed markets and institutions do not lose out in priority to
