BB needs to take cautious steps for new banks: IMF

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Offline fatema nusrat chowdhury

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BB needs to take cautious steps for new banks: IMF
« on: February 25, 2015, 03:16:28 PM »
The visiting IMF (International Monetary Fund) mission chief Wednesday said the central bank is to take steps cautiously in respect of giving its final nod to the new banks.

He said: "If these banks are properly managed and operated, I think, they will be able to contribute to the Bangladesh economy."

IMF Mission Chief for Bangladesh, Asia and Pacific Department, David Cowen was speaking at a question-answer session of a formal press briefing.

Held at the Bangladesh Bank (BB) conference room in the city the press conference was organised on Bangladesh's Extended Credit Facility (ECF) arrangement.

IMF's resident representative for Bangladesh Eteri Kuintradze, its external relations officer Keiko Utsunomiya and BB general manager AFM Asaduzzaman were also present during the press briefing.

Mr Cowen said BB should ensure that the liquidity conditions are supportive in allowing new banks into the market.

The IMF mission chief in his visit in September last opposed the central bank's move to issue new licences to banks.

IMF Mission Chief David Cowen

Mr Cowen said they don't see any wrong in giving letters of intent (LoIs) to nine new banks as the central bank has maintained rules and requirements properly in this connection.

Mr Cowen said: "It (BB) has the resources it needs to properly supervise and regulate all the banks including new ones on the list."

The IMF mission chief said the country's GDP (gross domestic product) growth is expected to slow to 5.5 per cent, less than 1.5 per cent of the government target, in the current fiscal year.

He said the ECF arrangement, a concessional lending facility available to low-income member nations, is equivalent to special drawing rights (SDR) 639.96 million (around US$ 1.0 billion) - the largest ECF arrangement to date in SDRs.

He said Bangladesh's macroeconomic pressures have been intensified, necessitating policy adjustments and reforms to preserve macro-stability and bolster growth and poverty reduction efforts.

"Macroeconomic pressures in Bangladesh have been intensifying over the past 18 months," he added.

He also said fiscal pressures intensified as subsidy costs for fuel, electricity, food and fertiliser increased, expanding government's domestic borrowing and putting liquidity pressures on banks.

"Rising global prices and accommodative policies fuelled double-digit inflation, with the non-food rate hitting record highs," he added.

He said tax revenue must rise as Bangladesh has been maintaining a very low rate of tax mobilisation even in East and South Asia.

Mr Cowen said Bangladesh should create more fiscal space for public investment.

He said Bangladesh should take measures to attract foreign direct investment.

He said the country should bring down budget deficit and contain subsidy.

About the rising subsidy expenditures, he said the government should adjust oil and power prices upward to reduce subsidies.

The mission chief said adequate room should be provided for private sector credit growth to ensure GDP target.