Capital flight in full swing
The revelation by the Swiss National Bank (SNB), the country's central bank, that deposits from Bangladesh have gone up by 62 per cent is cause for serious concern to policymakers. The serious upward surge in outflow of money from Bangladesh is indicative of a number of factors that is plaguing Bangladesh. While we are constantly boasting about our more than US$20billion in foreign exchange reserves, what we fail to point out is that there has hardly been any domestic investment over the past fiscal. Though it is easy to put the blame on “political unrest” of the last quarter of 2013, the country is six months past a national election; we are yet to see investors' confidence return.
That hundreds of millions of dollars are being laundered through informal channels such as “hundi” goes to show that, rich people feel unsafe to keep their deposits in the country. It also goes show the inefficacy of anti-laundering activities by the government to deal with the situation. The over-invoicing for imports of capital machinery in an investment-stagnant economy speaks volumes of the irregularities that exist in a largely-unregulated system. The central bank remains on the back foot as the government has no agreement in place with Switzerland on information on money laundering. Of course to get any information, Bangladeshi authorities will have to show sufficient evidence of money laundering to the Swiss authorities beforehand. With so many “ifs” and “buts”, the present trend of cash outflow will very likely continue to be the trend until something substantive is done to stem the flight.
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