DHAKA: Bangladesh Finance Minister AMA Muhith announced that the government is going to use $1 billion of the hefty foreign currency reserve, lying idle in Bangladesh Bank, to create an investment fund.
The initial $1 billion fund can be raised up to $5 billion, he added.
The proposed fund will be utilized to finance ‘big and profitable’ projects, for which the government is taking foreign loans and paying interests now.
Bangladesh has huge foreign currency assets, which are rising faster than the country’s international trade and business can accommodate. Until Thursday, the central bank had $31.75 billion reserves.
As the food reserve has been satisfactory for several years, the government is facing criticism for not utilizing the huge reserves. Economists have been recommending investing some of the reserves.
Finance Minister Muhith has also hinted earlier that the reserves would be invested.
He revealed a specific government plan to use the reserves while speaking to reporters at the Secretariat on Thursday after getting the report of a committee on ‘Sovereign Fund’, which has been talked about for years.
“Reserves are quite high. This $31 billion is equal to the import cost of eight months.
“And it will be good for the country if we take the money from the Bangladesh Bank instead of foreign sources,” he added.
In this way, Muhith said, Bangladesh Bank will get interests on loan and so the money will stay in the country, which will have a positive impact on economy.
“But the projects that will be taken with this fund…must be economically very sound. We cannot just take any project, it should profitable,” he said, referring to recommendations made in the ‘Sovereign Fund’ report.
He, however, thinks it will take time to create the fund.
“I haven’t gone through the full report. But from what I have heard of and read, I think I shall have a law for creating this ‘Sovereign Fund’,” Muhith said.
“It will take three to four months to make the law. I hope I’ll place it in the next session (of Parliament).
“I need the money for the mega projects. This would be something new for Bangladesh,” he added.
He hopes to place the matter before the Cabinet in January.
Asked for details, Additional Secretary Mohammad Muslim Chowdhury told bdnews24.com: “It (the fund) has been decided on principle. It will first go to the Cabinet. The interest rate and the process of repayment will be fixed later.”
“This is not a bond, but fund,” he clarified.
