• Tuesday, Sep 29, 2020
  • Last Update : 11:23 pm

‘Bangladesh needs a more liberal and flexible External Commercial Borrowing policy’

  • Published at 10:32 pm June 3rd, 2018
  • Last updated at 10:33 pm June 3rd, 2018
Photo: Mahmud Hossain Opu

In a bid to end the liquidity crisis in Bangladesh’s private sector Policy Research Institute (PRI), a domestic think-tank, organized a round table on the up-coming budget, that suggested entrepreneurs seek foreign commercial borrowing, as they are not getting sufficient credit from local sources. 

Presenting the keynote paper, at the round-table on “Private Foreign Commercial Borrowing”, on Sunday, PRI Executive Director Ahsan H Mansurat said: “The banking sector is currently going through a liquidity crisis, driven by diversion of deposits to the banking system, and the disappearance of liquidity through the net foreign assets channels.”

Three factors appear to be hindering the private sector access to foreign borrowing and discouraging entrepreneurs to make use of it - complexity in the application process, involvement of uncoordinated agencies, and application of arbitrary all-in cost cap, he added. 

He further said that the private sector is very cautious in utilizing their approval limit for foreign loans, which is why, less than 50% of the approval limit on foreign borrowing is utilized.

The round-table organized by PRI had Deputy Governor of Bangladesh Bank Ahmed Jamal as chief guest, and moderated by Sadiq Ahmed PRI vice-chairman.

Mansur added that, following the more liberal approach adopted by Bangladesh Bank, utilization rate was the highest in FY15, when the London Interbank Offered Rate (LIBOR) was very low, and the spread between domestic interest rate and that of foreign borrowing, was very high. At that time, exchange rate of Taka against the US dollar was very stable, with the Balance of Payments (BoP) recording large surplus in the current account and overall balance. 

Currently an application must made to the Bangladesh Investment Development Authority (BIDA), and following an initial review by BIDA, the application is sent to the designated officials of Bangladesh Bank for technical assessment. Another requirement is authoring a working paper for the scrutiny committee, peopled by members of BIDA, PMO and Ministry of Finance, etc, and chaired by the Bangladesh Bank Governor.

Delays in the approval process are a problem as the scrutiny committee does not approve projects on time, because of delays in technical assessment and/or preparation of the working paper for the committee. The lack of standard decision time varies significantly from case to case, Mansur said.

Drawing on the experience of India and other emerging markets, Bangladesh needs a more liberal and flexible External Commercial Borrowing (ECB) policy. Central banks of emerging markets have liberalized the ECB policy to attract more overseas capital and the results have been significant, he concluded.

Bangladesh Bank’s Chief Economist Faisal Ahmed, Chairman of Policy Research Institute Zaidi Sattar, CEO Standard Chartered Bank, Bangladesh Naser Ezaz Bijoy, Managing Director, DBL Group M A Jabbar, and Managing Director, Green Delta Capital Limited Md Rafiqul Islam were also present at the event among others. 

blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail