The Bangladesh government should reform the existing banking laws to curb defaults on loan repayments, the International Monetary Fund (IMF) has said.
The IMF also suggested Bangladesh Bank play an even stronger role and reinforce measures to ensure good governance in the banking sector, in order to “purge it of anomalies and corruption”.
In 2011, the IMF provided $978 million to Bangladesh under its extended credit facility (ECF) program on several conditions.
Last month, an IMF team led by Daisaku Kihara visited the country to monitor whether the conditions had been properly fulfilled.
“Most of the banks in Bangladesh, particularly the state-owned specialized ones, are grappling with numerous challenges, including the looming loan default problem and capital shortage,” Daisaku said at a press briefing in the Bangladesh Bank auditorium on Thursday.
“So there should be some initiatives to address the issues.”
Team leader Daisaku underlined the need for consolidating the financial sector through the development of the country’s stock market and banking sector.
Another member of the IMF team called on the regulatory body to “play a vital role” in stemming the rise in the number of loan defaulters, calling for more improvements to be made to risk management in banks, and a reworking of existing laws.
When pressed about the government’s approval for a further three banks while nine of the existing banks are reeling from numerous crises, Daisaku said: “It entirely depends on the government’s principles. But I think the existing laws and regulations should apply equally to every bank.”
Daisaku’s attention was also drawn to money laundering, especially through the over invoicing. “The IMF is always concerned about money laundering,” he said.
The IMF official said there was no cause for concern over the inflation rate, which rose to a 12-month average of 5.70% in December 2017.
“Though Bangladesh is currently experiencing a relatively higher inflation rate, the overall inflation situation is still under control so there is nothing to worry about,” he said.
Daisaku also observed that Bangladesh’s gross domestic product (GDP) would continue to rise as it is driven mainly by the private sector. He could not, however, provide an IMF estimate for this year’s growth rate.
He further said: “Bangladesh’s import volumes are increasing due mainly to a rise in the import of raw materials and capital equipment. As a result, its export volumes will increase further in the days to come.”
Turning to the ongoing Rohingya crisis, the IMF official said the influx of refugees from Myanmar’s strife-torn Rakhine state has placed a “burden” on Bangladesh.
“The international community should continue to render its support to the country in an effort to lessen the pressure on its government,” he said.
Daisaku’s team also held meetings with high-ups of the central bank, Finance Ministry, and the National Board of Revenue during their visit, which ran for eight days from February 25.
This article was first published on banglatribune.com