Fin Min hesitates to implement IMF roadmap

March 30, 2014

Foreign Exchange Regulations
Fin Min hesitates to implement IMF roadmap
The finance ministry hesitates to the implement pledges that it told the International Monetary Fund it would do about reforming foreign exchange regulations to ensure foreign investments by Bangladeshis, high officials at the ministry and the Bangladesh Bank said.
The visiting IMF team under the ‘extended credit facility’ programme has expressed its disappointment about the delay in the implementation of policies the government adopted in October 2013 in a roadmap package, it is learnt.
The two-week review mission of the multilateral lending agency ends on Monday with mission members so far holding more than a dozen meetings with stakeholders within the government agencies, especially the finance ministry, the Bangladesh Bank, the National Board of Revenue and securities regulators.
‘The IMF wants a gradual implementation of the roadmap and an amendment of the Foreign Exchange Regulations so that policy measures included in the roadmap face no hurdles,’ a senior finance official told New Age on Saturday. ‘They [the IMF] seeks the amendment to the regulations by this December.’
A finance official involved in the ongoing development centring on the roadmap, the foreign exchange regulations and the IMF’s priorities said, ‘The issue is sensitive and linked to the overall soundness of the economy before setting regulations governing foreign investments by Bangladeshis by amending provisions for capital account convertibility.’
‘We are hesitant and alarmed before moving further along the roadmap on relaxing the regulations,’ another finance official said.
He said that the move for the liberalisation of the foreign exchange regime in keeping with the roadmap was aimed at creating ‘a better environment for trade and investments’ as part of a phased approach, easing resident business environment abroad to promote global integration.
The government is supposed to withdraw restrictions on the capital account inconvertibility in 2016 to help Bangladeshis to invest abroad, according to the roadmap, prepared at the insistence of the IMF, an official claimed.
Local experts, who include former caretaker government adviser AB Mirza Md Azizul Islam, expressed their exceptions to the roadmap soon after the finance ministry’s approval in 2013 saying that the decision had risk elements and it was ‘too early for a country such as Bangladesh.’
The roadmap envisages the outflow of capital owned by Bangladeshis for investments abroad, short-term foreign investments in the currency market and bringing about reforms to minimise regulatory and administrative bottlenecks centring on FDI implementation.
Other areas falling under the roadmap include review of a number of policies such as access of foreign-owned businesses to domestic borrowing, reporting system on import and export, foreign direct investment procedures including net asset valuation rules, the repatriation of divestment from unlisted firms and procedures for short-term inflows from non-resident Bangladeshis.
The roadmap also plans to set up a multi-stakeholder high-profile consultative body for recommendations on phased opening of capital account and draft of associated rules and regulations.
The body has, however, yet to be set up even five months after the date the roadmap had been adopted, an official said adding that the IMF team was not happy about the situation as no action had so far been taken on the promised areas of the roadmap.

-With New Age input

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