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BB fears pressure on forex reserves to rise further

  • Published at 01:19 am May 3rd, 2017
BB fears pressure on forex reserves to rise further
Bangladesh Bank fears that pressure on the country’s foreign exchange reserves will increase if the government approves overseas equity investment by the local firms. Bank and Financial Institutions Division said it is not clear whether the local firms may return home their equity investment. The central bank feared the pressure on foreign exchange reserves as Akij Group, Nitol Niloy Group and Ha-Meem Group are now interested to invest overseas. Local firms’ investment proposals in aboard will go to the Cabinet Committee on Economic Affairs as the Bank and Financial Institutions Division did not take decision for its own in this matter. Bank and Financial Institutions Division has forwarded the Bangladesh Bank proposals to the cabinet committee. Bank Division’s proposal will be placed at a meeting of the Cabinet Committee on Economic Affairs next week as Finance Minister AMA Muhith is going to Japan this week to attend the annual meeting of the Asian Development Bank. Akij Group has proposed to invest $20m in Malaysia, Ha-Meem Group $10m in Haiti and Nitol Niloy $7m in Gambia. Ha-Meem intends to invest in the island nation’s garment sector to prop up its shipments to the US, while Akij Group wants to buy a Malaysian company that produce fire board and hardboard. Nitol Niloy plans to in Gambia’s banking sector. The proposal said the local investors are not interested to invest in the country and thus the additional liquidity stands at Tk2,77,956.29 crore in the banking sector. But the Bangladesh needs invest 32% of GDP locally to achieve targeted economic growth. In the proposal, Bangladesh Bank said Bangladeshis firms are capable and has capacity to invest on foreign lands. As funds are being spent to import fuel oil and capital machinery along with consumer products, the growth foreign exchange reserves becomes slow. Deficit in the balance of payment stood at $ 790m at the end of December 2016. Foreign exchange reserves now stood at around $33bn -- enough to honour at least 7-8 months’ import bills. Bangladesh Bank hopes that there will be new frontier of export earning if Bangladeshi businessmen invest overseas. There is a possibility that the three firms will return home some foreign earning. Usually, Bangladesh Bank has examined four matters including ensuring foreign exchange funds will be used in the specific foreign projects and get back foreign exchange funds. The country will financially benefit from the local firms’ foreign investment. Besides, the government will form a $10bn sovereign funds from the Bangladesh Bank foreign exchange reserves which also put a pressure on foreign exchange reserves. Dr AB Mirza Azizul Islam, former finance adviser to Caretaker Government, told Dhaka Tribune that Bangladesh Bank has shifted its responsibility to the cabinet committee for approval of the firms’ investment plans in aboard. He criticised Bangladesh Bank to forward the proposal to government and avoid making decision although there is a committee concerned to handle such types of matters.