The government may create a sovereign wealth fund worth US$ 5 billion using the Bangladesh Bank foreign exchange reserve for implementing its mega development projects.
A government-formed committee, headed by Bangladesh Bank deputy governor SK Sur Chowdhury, is now working on making recommendations to the finance ministry on formation of the fund, said central bank officials.
The recommendations would be made based on a concept paper prepared by Policy Research Institute executive director Ahsan H Mansur on how to create the fund by utilising the BB’s foreign exchange reserve.
Mansur last week submitted the concept paper to the 14-member committee after it sought his opinion.
Finance division additional secretaries ARM Nazmus Sakib and Mohammad Muslim Chowdhury, bank and financial institutions division additional secretary Arijit Chowdhury and BB chief economist Biru Paksha Paul are also members of the committee.
In his concept paper entitled ‘Sovereign Wealth Fund for Bangladesh : Issues to be Considered’, Mansur said that based on recent global experience with Sovereign Wealth Funds and the repaid reserve build up of the BB, government could establish a ‘Bangladesh Sovereign Wealth Fund’ initially with an asset base of about US$ 5 billion.
He noted that the nature of the fund could be more like an infrastructure investment fund since it will be dedicated to domestic infrastructure investment.
Mansur said that a fund with asset base less than US$ 5 billion would not be attractive enough form investors’ perspective.
‘The size of the fund should be respectable. Otherwise, it would have no significant impact in catalyzing domestic infrastructure investment and would not have any psychological impact on domestic and foreign private investors in PPP projects,’ he said.
He said that a new law could be enacted to establish and govern the fund.
BB officials said that Mansur suggested for forming a body with efficient management and professional management team to operate the fund.
The body, like a company, will have a strong board with representatives from the ministry of finance and BB along with eminent private sector experts, he suggested.
Finance minister AMA Muhith said on October 18 that the government would announce a plan in the fiscal budget for 2017-18 on how to invest the country’s foreign exchange reserve in implementing its development projects.
The government will fix the rate of interest to take loan from the foreign exchange reserve in the next fiscal budget, Muhith said at a function on the occasion of ‘Bangladesh Bank Remittance Award-2015’ at the Bangla Academy auditorium in the city.
The BB official said that the committee will submit its final proposal to the government in the shortest possible time on how to use the foreign exchange reserve in implementing the mega projects.
The committee may submit the proposal based on Ahsan H Mansur’s concept paper.
Mansur told New Age on Sunday that the government should use the foreign exchange reserve in two methods.
‘Under one method, the government can issue Treasury bond to take loan from foreign exchange reserve. The government can create an equity participation system under the other method’, he said.
The government has to pay high interest rate if it takes loans from the foreign exchange reserve by issuing T-bond, he said.
The government, however, will not pay any interest rate if it takes fund from the foreign exchange reserve in line with the equity participation system, he said.
Under the equity participation system, the BB and government will jointly provide fund to implement the mega projects, Mansur said.
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