International Monetary Fund Managing Director Christine Lagarde speaks at the Brookings Institution on “Seizing the Moment: Thinking Beyond the Crisis” in Washington on Thursday.

WASHINGTON: A stronger firewall is needed to protect the world economy from Europe’s debt crisis, but the International Monetary Fund may not need as much money as it thought just a few months ago, the head of the global lender said on Thursday.

Speaking before meetings of finance chiefs in Washington on April 20-21, IMF Managing Director Christine Lagarde said a deal among countries on giving more money to the fund would likely take time, signaling an agreement may not be sealed next week.

However, she said economic and financial risks the IMF had identified just three months ago had receded and the global lender’s funding needs were now smaller.

In January, the IMF estimated it would need an additional $500 billion to lend and another $100 billion for reserves to erect an adequate safeguard against the risks posed by the euro zone’s crisis.

Both advanced and emerging economies, including Japan and Canada, have said they want Europe to do more to help itself before they offer fresh resources to help. Lagarde said she was not concerned about building up IMF resources for the euro zone but for countries outside the region that could face fallout.

“A stronger global firewall will help complete the ‘circle of protection’ for every country,” she said at the Brookings Institution. “The IMF can help. But to be as effective as possible, we need to increase our resources.”

The meetings of the IMF’s 187 member countries next week will be dominated by discussions on new IMF resources, growing concerns Europe’s crisis could widen to Italy and Spain, and slowing growth in major emerging markets, including China.

Lagarde said the IMF was reassessing risks to the global economy, and how actions taken by Europe to address its crisis may have tempered them. “The needs now may not be quite as large as we had estimated earlier this year,” she added.

Still, the former French finance minister said the “the risk that looms largest is that sovereign and financial stresses return with renewed force in Europe.”

Lagarde said policy actions in Europe helped to restore some stability in financial markets.

“Some of the dramas that we envisioned in 2011 and the very beginning of 2012 not only have not materialized but some good news has actually restored a little bit of the confidence,” she said.

The Daily Sun/Bangladesh/ 15th April 2012

The board of the International Monetary Fund (IMF) sits in Washington today to decide on a US $1 billion credit facility for Bangladesh.

“We hope the government will get $ 1 billion under the Extended Credit Facility (ECF) of the global lender though a $ 1.5 billion proposed loan from the World Bank to construct Padma Bridge is now hanging on corruption charges”, a senior official of the finance ministry said yesterday.

The proposed loan, which tags 11 conditions including automatic price adjustment of fuel oils to be fulfilled by December, 2012, would ease the country’s balance of payment and foreign exchange reserve problems, he added.
The fund will come in six tranches, of which the first $167 million installment will be released for the current fiscal year, if the board approves the proposal.

At present the ECF carries a zero per cent interest rate and will have to be repaid by the country within 10 years. If the loan is approved, Bangladesh will get IMF credit after nine years.

Meanwhile, finance minister AMA Muhith has already informed the IMF the details on what steps the government will take in the next three years to fulfill its conditions.

Earlier, Prime Minister’s energy adviser Tawfiq-E-Elahi Chowdhury said progress in price hike of petroleum products, tagged with the release of the ECF fund, will also be placed at today’s board meeting.

The Energy Division is likely to increase fuel oil prices again before the announcement of next budget in June, he said, adding that the process might begin from next month.

Energy Division may also adopt a formula soon which will put in place a system to automatically adjust domestic retail petroleum prices in line with their international rates, he added.

The 11 conditions of the loan include demutualisation of Dhaka and Chittagong stock exchanges by December this year, among others.

As per the conditions, the government should bring down budget deficit to five per cent of GDP, but a finance ministry report showed that budget deficit may increase to 5.1 percent at the end of current fiscal due to huge fuel subsidies.
Drastic fall in receiving foreign assistance may also result into widening budget deficit.

Meanwhile, different government agencies have already made significant strides in implementing the conditions entwined with the IMF loan facilities. The cabinet has approved the draft value added tax law which will be placed in the next session of parliament as a bill.

Economists and experts, however, expressed mixed reaction about the IMF loan conditions.
Dr AB Mirza Azizul Islam, former adviser to a caretaker government, told daily sun recently that the ECF fund will help ease the foreign currency crisis of the government.

“We need foreign currency to strengthen local currency taka,” he said, sounding a note of caution that the government should not take IMF loan accepting the painful conditions that might go against the interest of the country.

Islam said the IMF’s policy reform conditions will not benefit the government as it’s not possible to implement all the conditions.

Ashan Mansur, executive director of Policy Research Institute, told daily sun that the government needs the low-interest credit of IMF to ease its balance of payment problems.

Implementation of IMF conditions will also streamline the economy and help reduce inflation rate, he added.

Professor Anu Muhammad, who teaches Economics at Jahangirnagar University, told daily sun that Bangladesh did not require the ECF loan as the foreign exchange reserve of the central bank has increased significantly in the last five years.

The remittance flow from expatriate Bangladeshis is enough to solve the balance of payment problem, he added. He termed IMF as a controversial global lender, adding that it wants countries like Bangladesh to fall under it loan trap.

Showing example he said, Malaysia achieved high economic growth without financial help from global lenders like IMF and WB, while countries like Brazil and Argentina faced economic hardship availing their loans, he added.

The Daily Sun/Bangladesh/ 11th April 2012

Bangladesh Bank has advised the people not to transact with unapproved financial institutions that are active across the country.

A handout issued by the central bank said that many unauthorised organisations ask the people to invest in their businesses by offering high rate of profits, but the people might be cheated in such transactions with these firms.

The central bank is concerned as some organisations are running banking business throughout the country, although they don’t have any approval from the Bangladesh Bank, said the officials.

High official sources in the Bangladesh Bank told daily sun that the central bank will take necessary measures in this regard if they are formally instructed by the Ministry of Finance.

The Daily Sun/Bangladesh/ 2nd April 2012

Bangladesh gets closer to the $1 billion credit promised by the International Monetary Fund (IMF) as the lender plans to place a proposal for the loan at its board meeting on April 11.

The credit will come in six instalments and $167 million will be available for the current fiscal year if the board approves the proposal, according to officials of the finance ministry.

The government and the IMF have already finalised a number of reforms the government will have to carry out under the scheme.

The commitments the finance minister made in his budget speech about the reforms have also been included in the list of conditions for getting the loan, the officials said.

The donor agency had earlier set some prior actions that were to be fulfilled by the government before the loan proposal is placed at the IMF board meeting for approval.

The government has already implemented the prior actions. The last of those -- approving the draft value added tax law in the cabinet -- has also been done.

Besides the prior actions, the IMF imposed 16 conditions, which include the demutualisation of Dhaka and Chittagong bourses by December.

The government will have to fulfil some other conditions such as introduction of an automated taxpayer identification number and adoption of an automatic adjustment mechanism for retail prices of petroleum to ensure full pass-through of international prices.

By June, the new VAT law has to be placed in parliament and an implementation plan and timetable for the new law has to be approved by the finance minister, according to another IMF condition.

Another law, the Banking Companies Act (amendment), has to be placed in parliament by June. The act will aim at giving Bangladesh Bank the sole legal supervisory and regulatory authority over all commercial banks, and setting proper criteria for major shareholders, board members and executive officers of the banks.

The IMF also asked the government to design a set of new regulations on loan classification and loan-loss provisioning, in line with the international best practices, by June 2014.

The IMF said a new organisational structure of the National Board of Revenue to support VAT implementation has to be approved by the finance minister by September.

The IMF also asked the central bank to issue another order by September to adjust the new amended banking law, establishing a limit on a commercial banks shareholdings in the stockmarket to 25 percent of its total regulatory capital.

The Daily Star/Bangladesh/ 28th March 2012

Bangladesh Bank Governor Dr Atiur Rahman said bank notes are not only the medium of barter but also reflect the country’s heritage and culture.

He said almost every country in the world shows the portraits of their fathers of the nation on currencies as a means of showing honour and gratitude to the national leaders

Atiur was addressing a ceremony organised by Bangladesh Bank to formally release three new bank notes of Tk 10, Tk 20 and Tk 50 imprinted with the portrait of Father of the Nation Bangabandhu Sheikh Mujibur Rahman at the BB conference room on Wednesday.

Hours after releasing the new notes, the central bank however has withdrawn the new Tk 50 note as a spelling mistake of Shilpacharya Zainul Abedin on it was identified.

We have chosen March 7 to release these new notes considering the historic importance of the day, the BB governor said in his speech.

He also informed that metallic coins worth Tk 5 each, imprinted with the portrait of Bangabandhu, would also be circulated in the market soon.

The central bank primarily released a total of 1 million pieces of each denomination. Governor of Bangladesh Bank Dr Atiur Rahman signed the notes.

Eminent artist Mustafa Monwar, Director General of Security Printing Corporation (Bangladesh) Ltd (SPCBL) Ziauddin Ahmed and deputy governors of Bangladesh Bank, among others, also spoke on the occasion.

Following the official launching of the new notes, the BB started distributing the notes at its headquarters yesterday. The notes will be available at all branches of BB and commercial banks across the country from now on.
All the metallic coins and paper notes, running currently, will also exist in the market.

While addressing the ceremony, Mustafa Monwar said the new notes contain some special security features, making counterfeiting almost impossible.

He also viewed that the portrait of Bangabandhu is the symbol of country’s independence while agriculture still remains the base of the country’s economy.

So the portrait of Bangabandhu along with the illustration of agriculture have made an appropriate combination, he added.

The Daily Sun/Bangladesh/ 8th March 2012