By Rodrigo Campos
April 16 (Reuters) – Bangladesh Finance Minister Amir Khosru said on Thursday his country needs to erase a capital deficit in its banks and private sector for any reforms to take hold.
“The first thing to be approached is to replenish the capital deficit that is there in the private sector, replenish the capital in the banking sector,” Khosru said during an event at the Atlantic Council on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington.
“Without this, talk about any other reforms is not going to get us anywhere.”
He said the country is suffering from a “serious” capital deficit and said the private sector is struggling.
“The private sector now needs to be salvaged. This is a big challenge,” he said, adding that “a lot of banks are practically bankrupt.”
Khosru said another serious challenge has been the spike in the cost of energy due to the war in the Middle East. The nation of 175 million relies on imports for about 95% of its energy needs, and state-run agencies have increasingly turned to the volatile spot market.
“We have been procuring from all over the world, and mostly spot buying, and when you go for spot buying, you know the pricing of the product goes up so many times,” Khosru said. “So basically, if we add it all up, the kind of expenditure on the energy sector, we are out of pocket by nearly $2 billion already. And if it continues, I don’t know what will happen at the end.”
He said the spending is compounding the lack of revenues from the low business activity. Energy spending is “bleeding the exchequer of the government, and on top of that, your tax to GDP is not increasing because of the businesses’ stress.”
Last month, the government said it would seek over $2 billion in external financing to secure fuel and liquefied natural gas imports.
(Reporting by Rodrigo Campos in New York; Editing by Paul Simao and Andrea Ricci)
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