Dhaka, Bangladesh (BBN) – The International Monetary Fund (IMF) has recommended that policymakers in Bangladesh adopt a carefully designed strategy to address weak banks, as this is essential for ensuring stability.
“….Swift action is needed to operationalize new legal frameworks that facilitate orderly bank restructuring while safeguarding small depositors,” the Washington-based global monetary watchdog said in a statement on Wednesday.
It also said robust asset quality reviews for all large and systemic banks, bank restructuring aimed at forward-looking viability, strengthened risk-based supervision, and enhanced governance and transparency will be key to rebuilding trust and supporting the sector’s soundness.
“At the same time, institutional reforms to bolster the independence and governance of Bangladesh Bank will be essential for ensuring long-term macroeconomic and financial stability and for the effective implementation of broader financial sector reforms,” it noted.
Meanwhile, the Bangladesh government and the central bank have undertaken a series of reform measures aimed at streamlining the country's banking sector.
As part of the initiative, the Bangladesh Bank (BB), the country's central bank, has reconstituted the boards of 14 private commercial banks to improve the financial health of the troubled institutions.
However, the IMF said monetary tightening, enhanced exchange rate flexibility and reinforced foreign exchange reserve buffers will bolster the economy's resilience to external shocks. In this regard, steadfast implementation of the new exchange rate regime will remain critical.
It also emphasized the need for tax reforms to boost the tax-to-GDP ratio and called for a reduction in subsidies for the power sector.
BBN/SSR/AD