BB cold-shoulders IMF proposal on financial sector review

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FE Report
The Bangladesh Bank (BB) is yet to decide its position on the proposal by the International Monetary Fund (IMF) to review the country's financial sector.
The central bank does not agree with the rationale of the IMF proposal for taking a fresh stock of the sector, in consideration of bank's own expertise, developed over the years, to make such an assessment by itself.
"A letter in this connection intimating the Fund about the central bank's position on the matter will be forwarded to the concerned authority shortly," an official of the BB told this correspondent.
The arrival of the proposed IMF mission to review Bangladesh's financial sector was tentatively scheduled for January next, but the central bank, which also oversees the sector, considers global policy lender's proposal redundant at this stage, the sources said.
The sources noted, the central bank itself has itself prepared recently a review report on the domestic financial sector.
The IMF has a full-fledged team of experts to conduct financial sector review in its borrowing countries and it prepared the latest report exclusively for Bangladesh back in 2002, BB officials said.
Meanwhile, a BB official said: "Our policy analysis unit and other wings have inducted a critical mass of talented and efficient manpower who are well-positioned to do the job. If you take look at our own review, you will find a better picture of the sector."
The review report, prepared by the central bank, has identified a lot of weaknesses of the financial sector and the official said "steps are being taken to overcome those shortcomings plaguing the sector as a whole."
"I don't see any rationale behind assigning the IMF to conduct such a review any more, given the significant knowledge base gained by our team," another official maintained.
The sources said the IMF has recently sent a proposal and sought BB's cooperation to facilitate the upcoming work of its 14-member team.
Part of the reason why the IMF proposal is not being favourably considered by the BB is to avoid any 'unplatable' potential recommendations that the IMF may tag to implement, for overhauling the sector, as conditionalities for future loans from the Fund.
"We've adopted the strategy very carefully. I think, our stance will help improve the public perception about the domestic policy and the way we handle multilateral lenders," a senior BB official maintained.
Most of the policy recipes by the IMF have been subject to 'severe criticism' within the country, the sources said.
Bangladesh, a recipient of IMF loan, has received US$590.7 million in loan from the lender under a multi-year poverty reduction and growth facility (PRGF).
The IMF's Executive Board approved Bangladesh's three-year PRGF arrangement on June 20, 2003 for an amount about US$512 million.
The Board also approved on July 28, 2004, Bangladesh's request for activation of the newly created Trade Integration Mechanism with an augmentation of the PRGF arrangement amounting to SDR 53.33 million. As a result, the total amount under the PRGF arrangement increased to about US$590.7 million.