Funds flowing out of bourses

Funds are flowing out of the country’s bourses to other attractive investment options, including term-deposits with banks and government’s savings instruments, chief economist of the Bangladesh Bank (BB) Dr Biru Paksha Paul told a seminar in Dhaka Sunday.

dse csePaul, presenting a keynote paper at the seminar, suggested cut in both interest rates of bank deposits and yield rates of savings tools reports the Financial Express.

He expressed his frustration over the present state of the capital market and urged the government to take immediate measures to lower rates on saving instruments and term deposits with banks.

“The stock market is going down every day. If we cannot check it, it will affect our investment,” said the BB chief economist, stressing the need for taking appropriate measures to make the stock market more vibrant and lucrative.

The seminar on ‘the state of the economy’ was organised by the state-run Board of Investment (BoI) to discuss the macroeconomic policy priorities of the day at Dhaka Reporters Unity (DRU) Sagor-Runi Conference room.

To cash in on higher returns, people tend to invest more in fixed deposits, national savings certificates, government bonds that are offering higher yields at very low risks.

So it causes funds to flow out of the stock market, affecting the stock prices, the economist noted at a time when the prime bourse’s benchmark main index has hit a new low.

Paul also highlighted the urgency for reforming the judicial system so that it could effectively dispose of a huge backlog of cases pending with courts.

“The number will be as much as three million,” he said.

High corporate tax, at times double taxation, and high tax on public limited companies are also discouraging enterprises from getting listed with stock exchanges, said Nazneen Ahmed, a senior research fellow at Bangladesh Institute of Development Studies (BIDS).

According to speakers, the higher deposit rates influence the investors’ psychology and discourage people from taking investment risks while high borrowing rates work as a deterrent to investments.

They also identified lack of quality education, infrastructure and power and energy as some major obstacles hindering investment.

Presided over by BoI Executive Chairman SA Samad, the programme was also addressed,

among others, by Prime Minister’s Power and Energy Adviser Dr Tawfiq-e-Elahi Chowdhury, Director, Dhaka Mass Rapid Transit Development Project (DMRTD), Mohammed Nurul Amin and BOI Assistant Director Farhana Pervin.

Paul presented a keynote paper on ‘Bangladesh: A Stable and Vibrant Economy in a Time Series Analysis’ while Dhaka Transport Coordination Authority (DTCA) Executive Director Md. Kaikobad Hossain presented another keynote entitled ‘Strategic Transport Plan in Dhaka’.

Paul in his paper painted a picture of the national economy with comparative analysis on timeframe and highlighted its strength with facts and figures.

He pointed out that despite political disturbances, Bangladesh’s economy is moving ahead rapidly, showing resilience in most of the macroeconomic indicators. As such, he said, this economic achievement has become a role model for many others.

“Because of economic stability and resilience, an organisation like International Finance Corporation came forward to develop offshore bond market, a move that can help internationalise the currency in the long run,” the economist told his audience.

He claimed the central bank’s monetary policy could efficiently control inflation and brought it down below 7.0 per cent from 12 per cent in 1998.

He holds the hope to bring the average inflation rate below 6.5 by this coming June.

According to the BB economist, among the neighboring Sri Lanka, Pakistan and India, in terms of inflation Bangladesh’s performance has been better. Sri Lanka is highly volatile, Pakistan stands second followed by India, he said in his ratings in terms of this vital economic indicator.

Energy Adviser Dr Tawfiq-e-Elahi said Bangladesh is progressing well, growing fast despite all odds and ordeals.

“Presently about 70 per cent of our population have access to electricity as against 45 per cent in 2009,” he said, expecting cent-percent access to electricity within a few years.

He pointed out that Bangladesh did ever so well in poverty alleviation which, he said, will be reduced further when the mega-projects undertaken by the government will be implemented.

Earlier, DTCA Executive Director Md. Kaikobad in his paper highlighted the salient features of transport plans for mega city Dhaka and various mega-projects, most of which are now at various stages of implementation, and their future impact.