The International Monetary Fund has again asked the government to recapitalise the errant state-owned banks despite its observation that decisive steps are needed to improve their overall conditions. Visiting IMF official Rodrigo Cubero in a press statement on Wednesday said the government should recapitalze the SCBs gradually as required despite the fact that unprecedented loan scams during the last few years were the main reasons for capital shortfall in the SCBs.
Sonali, the largest of the SCBs, faced swindling of more than Tk 3,600 crore by a little known Hallmark Group. The government could not recover a single penny despite the scandal was detected in 2012.
BASIC Bank is in worst condition after detection of disbursement of questionable loans worth more than Tk 5,000 crore.
The portfolio of nonperforming loans increased by a staggering Tk 10,761.62 crore in the first six months of the current calendar year to Tk 51,344.63 crore from Tk 40,583.01 crore in December 2013.
Rodrigo who led the visiting IMF team between September 17 and 30 in the capital in connection with the fifth review of a three-year Extended Credit Facility deal said they looked forward to further decisive steps to improve the financial position of the state-owned commercial banks through enhanced supervision and corporate governance.
The government paid more than Tk 1,000 crore to recapitalise Sonali last year following IMF’s suggestion.
The IMF said the growth in gross domestic product was expected at about 6¼ per cent this year due to strong domestic demand against the backdrop of calm political environment.
‘Economic activity is gaining momentum,’ it said.
The IMF observed that the government needed to preserve macroeconomic stability and create fiscal space for critical infrastructure investment and well-targeted social spending for ensuring sustained rapid growth and poverty reduction in the medium term.
It highlighted that the persistent revenue shortfalls related to budget expectations reinforced the importance of pressing ahead with tax reforms.
‘This should be complemented by reforms to strengthen revenue administration and automation of data management and reporting procedures,’ said the IMF statement.
Implementing the new VAT remains the foremost priority as it has the potential to mobilize considerable additional resources,
reduce compliance costs, and boost growth.
‘However, the introduction of a new value added tax, a key government reform to boost fiscal space for development spending, is facing delays,’ said the IMF.
The IMF lauded the government for progress in improving working and safety conditions in the garment industry, the mainstay of the country’s exports with more than US$ 24 billion income last year.
It stressed the need for liberalizing the foreign exchange regulations gradually to boost the investment climate. Continued progress on these fronts should contribute to promoting sustained high and inclusive growth, said the IMF.
-With New Age input
