Bangladesh is expected to go for full currency convertibility in capital account in a bid to attain full confidence of overseas investors in a maximum liberal atmosphere, the Bangladesh Bank Governor said yesterday, reports UNB.

"We are preparing grounds this financial year for the capita) account convertibility, if everything goes well, we are hoping to step in the full convertibility of the Taka in capital account next fiscal year," Lutfar Rahman Sarker said.

Opening a workshop on Convertibility of Taka at the National Press Club, the central bank governor ruled out any immediate plan of devaluation as it may adversely affect the current low level of Inflation, now 2.6 per cent.

The overall economy is also doing well with exports marking rise and imports, mainly of consumer goods, registering fall. We may consider adjustment in future for further growth in export." he said.

Referring to the allegations that foreign portfolio investors siphoned off a huge amount

from the capital market, the governor said the outflow of portfolio investment had totalled 123 million US dollars against inflow of 23 million in three months of boom.

The total inflow of portfolio foreign investment had amounted to about 200 million US dollars since the country's capital market was opened for foreign investment in early 1992.

On the convertibility issues Sarker said the conditions for full convertibility would be set if the political stability continued and the economy faced no internal or external shock.

The government is trying to build a foreign-exchange reserve of 2.3 billion US dollars to protect the economy from any potential risk in the fully convertible currency regime, the central bank chief said.

"If we can build a foreign-ex-change reserve of two billion dollars, we will consider it safe and a go-ahead signal." he told the workshop, arranged by the Economic Reporters Forum (ERF).

The Bangladesh Bank Governor, however, noted that there had been some economic mismanagement still prevailing and needed to be addressed to stop capital flight when the currency would be fully con-

Sovernment was continuing iscussion about the issue of capital account convertibility with International Monetary Fund (IMF), the donor agency which gives advice on fiscal and monetary issues.

The Bangladesh government recently has opened a dialogue with the IMF for a 600 milliondollar loan under the Enhanced Structural Adjustment Facility (ESAF) as a measure to build a comfortable forex reserve.

According to official figures, the country’s foreign exchange reserve now stands at around 1900 million dollars which is equal to import bills for three months. But the government plans to build a bigger reserve.

Bangladesh attained convertibility in current account in early 1994 under which Taka is freely usable for buying other currencies for settlement of all current external transactions like trade, travel and services payments and transfers.

A full convertibility in capital account means a currency usable freely to buy foreign cur-

rencies for all settlements and transactions, including transfer of capital.

As the Taka is yet to be convertible in capital account, the export proceeds and other earnings abroad by residents must still be repatriated, goods must stiD be brought in against import payments sent and resident-owned capital cannot freely be transferred abroad.

The capital account is. however. already open to the extent that inflows and outflows of non-resident investments are practically restriction-free, according to a central bank official.

Lutfar Rahman Sarker said the current account convertibility was going on well despite the fact that the country is yet to develop expertise for the operation of the convertibility. The performance of current account convertibility is still satisfactory," he said.

The current account convertibility of Taka has already resulted In rapid expansion of the external sector of economy. Both imports and exports have grown fast and now accounted for over 30 per cent of the GDP, up from 20 per cent in 1989-90.

Later, MAM Kazemi, a general manager of the Bangladesh Bank presented a paper on Taka Convertibility — Its Impact on the Economy' in the technical session.