Narinjara News

Bangladesh backs out of “Counter Trade”
with Southeast Asian countries including

Dhaka, 28 February:  Bangladesh had to cancel the import of Malaysian palm oil worth 20 million US dollars through a “counter trade” plan, reports the Janakantha, a Bengali language daily in Dhaka yesterday.

The intervention by the International Monetary Fund (IMF) has finally compelled the government of Bangladesh to back away from a “Counter Trade” plan with Malaysia, Thailand, Russia and Burma.   A reliable source in the government has said that, the message on the inability to conduct such deals has been relayed to the relevant authority of Malaysia.  Though the Bangladesh side took the initiative to solicit Malaysia for advice on this point, it had to back out of the proposal in the face of some of the stipulations laid down by IMF.

The explanation given by Bangladesh side in this regard is that, since it has been conducting rounds of discussions with IMF on debt issue, it is not possible for the country to carry on imports by Counter Trade at this moment.  The guarantee of the central bank is a prerequisite among other stipulations in a counter trade process.  In this issue IMF categorically said that, no public guarantee on part of the central bank in such negotiations can be allowed if Bangladesh goes for future loans from the institution. 

It may be mentioned that those countries that are facing foreign currency crisis usually conduct foreign trade through this process in which the two countries involved mutually conduct export and import for a certain period (extending usually to three or six months) without making any currency payments, after which they reciprocally check their volumes of trade and do the coordination and work out the accounts for payment of dues.

Sources in the government say that Bangladesh has meanwhile conducted talks on counter trade issues with Malaysia, Thailand, Russia and Burma and received positive response from them all.  Bangladesh initiated the rounds of talks with a view to increase its volume of export in the face of decreasing export to the markets in USA and Europe since last year.  But the door to export opportunity will not be open unless guarantee from the central bank is received.

Meanwhile, the Finance Minister M Saifur Rahman made requests to the IMF for emergency loan assistance last October to deal with the acute bank reserve crisis.  Since then there have been a number of rounds of talks with IMF on this issue.  Recently a high level team of IMF representatives left with negative impressions on the overall situation prevailing in the country.  Without making any promises for further cooperation the team clearly directed the government to begin reformation in the economic sector with the establishment of transparency and good governance without which they said they are unable to make any recommendations.

Another high-level team to discuss the loan situation is expected to come to Bangladesh in April next.  If the   discussion gets fruitful by that time, Bangladesh may be able to clinch a 1,800 million US dollar loan in three years from IMF.  #