The government will request the International Monetary Fund to waive a condition about the exposure limit of commercial banks in the stockmarket. The condition is tagged with a loan.

Earlier the IMF asked the government to keep such an exposure limit of a bank at 25 percent of its total capital -- as a condition to release the second instalment of its $1 billion loans for Bangladesh.

But the government wants the exposure limit to be at 40 percent of a bank's total capital. The existing exposure limit of a bank is 10 percent of its deposits.

An IMF mission will visit Bangladesh for two weeks from today to review the implementation of its conditions before releasing the second instalment or $141 million by November.

The lender has approved a $987 million loan for Bangladesh to help it overcome macroeconomic pressures and build a buffer reserve.

Bangladesh entered the three-year loan deal by committing to a wide-range of structural reforms.

Bangladesh received one of the seven instalments last year.

Before getting each of the six equal instalments, the government will have to fulfil a set of conditions of the Washington-based lender.

The government by this December has to meet 11 more conditions.

The Bangladesh Bank will have to issue an order consistent with the amended banking company act to set a bank's stockmarket exposure limit at 25 percent of its total capital.

The condition was scheduled to be fulfilled by September.

A finance ministry official said the government will request the IMF to relax the condition and increase the limit to 40 percent of a bank's total capital.

However, the central bank in a previous proposal sent to the finance ministry recommended the limit at 25 percent.

Officials said the finance ministry in March formed a seven-member committee to further scrutinse the central bank's proposal.

The committee recommended raising the ceiling to 40 percent.

The finance ministry official said, as per the recommendations of the committee, the ministry has already finalised the proposal for amendment to the banking company act. The committee also made a proposal for keeping the ceiling at 40 percent.

The official said the proposal will soon be placed in a cabinet meeting for approval.

The IMF mission has already sought to know from the government about the status of the new BB order on the banks' stockmarket exposure limit.

The IMF imposed another condition that the government cannot make hard-term borrowing beyond $1 billion. The government will not need to cross the limit by December. But the government's various requirements next year may need around $3 billion.

The finance ministry official said the government plans to issue $750 million worth of sovereign bonds in the international market.

Besides, the government's guarantee for the private sector power producers will require about $2 billion next year.

The finance ministry official said they will also request the IMF to increase the limit of hard-term borrowing for the next year.

The official said they hope to implement the other conditions, including the demutualisation of Dhaka and Chittagong bourses and the adoption of an automatic adjustment mechanism for retail petroleum prices, by this year.

News: The Daily Star/Bangladesh/12-Sep-12