An IMF mission, which is expected to arrive in Dhaka next week, will look into Bangladesh’s banking sector, which has been exposed to some big financial irregularities in recent times, said official sources.
Peter Lohmus, new mission head for Asia Pacific region, will lead the three-member team. It will seek to know about the estimated expenditure of the next parliamentary elections and whether this expenditure would affect the implementation of any development projects in the new fiscal year.
According to sources, the new mission head Peter Lohmus has some experience in the European Commission’s financial sector, banks’ recapitalisation and restructuring work in Greece within the “Troika” programme.
Peter Lohmus, replaced by David Cowen, was also involved in similar works in Ireland, Cyprus, and Portugal.
A meeting will be held with finance minister AMA Muhith and Bangladesh Bank governor Dr Atiur Rahman.
In addition, the IMF team scheduled a meeting on July 7 with the Banking Division’s additional secretary Amalendu Mukherjee regarding the recapitalisation status of the state-owned banks.
It will also see agreement between Bangladesh Bank and state owned banks and will review conditions of the third tranche loan of the Extended Credit Facilities (ECF) under the IMF.
Bangladesh received $138m in March as the second tranche under ECF.
The ECF conditions include, among others: putting ceilings on the credits of Sonali, Janata, Agrani, Rupali and BASIC banks, limiting Bangladesh Petroleum Corporation’s loan from state-owned banks and shrinking the quantity of classified loans of commercial banks.
The government kept a provision of Tk260bn in the current fiscal budget to recapitalise state-owned commercial banks and capital markets. The allocation heavily depends on borrowing from the domestic financial sector.
The state-run banks have been facing a capital crisis since the Hall-Mark credit scam. On the other hand, the stock market has been highly in need of revival steps since its debacle in December 2010.
The capital shortage of the state-owned banks was recorded at more than Tk100bn. Earlier, the banking division sought Tk170bn from the finance division to make up for the shortage of the state-owned banks.
Under these circumstances, IMF has advised the Bangladesh government to allocate funds in the budget to meet capital shortages of five state-owned banks: Sonali, Janata, Agrani, Rupali and BASIC banks.
