Foreign investments by Bangladeshis and their capital outflow to money market abroad have been put on a ‘low’ priority list in the recently approved road map the government laid out centring on reforms in the existing foreign exchange regulations.
The road map that outlines priorities and timeframe has been sent to the International Monetary Fund in the past week as it has for long been pressing the government to upgrade the old foreign exchange regime, according to a Bangladesh Bank document.
‘Provisions and measures falling under the “low priority” criteria of the road map means that their implementations will be taken place three years after the date of the approval,’ a top central bank official told New Age on Saturday.
‘The economy and the foreign exchange reserve will face no immediate and abrupt threat because of the decisions as the forex reserve is expected to double or reach more than $30 billion at the time the capital account will be convertible to facilitate the outflow of money for investments from the country,’ he added.
The finance minister, Abul Maal Abdul Muhith, approved the five-year road map on October 1, withdrawing restrictions on capital account convertibility allowing local businessmen to invest abroad.
The minister approved the plan at the insistence of the IMF as it sought such policy decisions from the government under its extended credit facility programme, officials said.
A central bank official said that the strategies in the road map would not harm the economy as its implementation would take time but experts said that the decision was ‘too early’ in view of ‘high-risk elements’ associated with the policy change.
Former caretaker government adviser AB Mirza Mohammad Azizul Islam said that the decision was too early.
‘Risk elements in the decision are high while more than $16 billion reserve is not a valid ground for allowing local investments in foreign countries as the reserve is good when import is low,’ he told New Age recently.
Central bank officials, however, said that the stand of Aziz would have been more appropriate if the government had decided to implement the sensitive policies immediately.
The central bank document on the road map put the 17-point action plan into three categories — low, medium and high — considering risks associated with the reform package.
The measures falling under the ‘low category’ priority list will be implemented after three years from October, a tenure from one to three years will be needed to give effects to the policy changes bracketed under the ‘medium group’ of the list and the maximum of a year will be taken to implement the reforms under the category of ‘high’ priority list, the document says.
The areas falling under the ‘medium’ priority list will review 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, repatriation of divestment from unlisted firms, procedures for short-term inflows from NRBs, managing capital inflow and the central bank branch based authorised dealer licensing approach.
The high-priority list that will be implemented in the next one year include the review of current reporting routines for all current transactions, setting up multi-stakeholder high-profile consultative body for recommendation on phased opening of capital account, setting up a Bangladesh Bank authorised dealers’ forum, the review of mode of operation for money changers and replacing personal travel quotas with global foreign exchange entitlement for multiple current transaction purposes.
-With New Age input
