Carolyn Cohn of Reuters reports that Bangladesh is in the planning phase for a new SWF. Apparently, it will be modeled on Singapore’s GIC and could be worth as much as half a billion dollars. The impetus for the new fund was the country’s rapidly growing forex reserves, which have doubled in the past 15 months to $11 billion.
The Reuters article also seems to suggest that this new SWF is linked to a new IMF credit facility that Bangladesh is negotiating, which would be a pretty interesting scoop if true (that said, the article is a bit sketchy on this point…so it’s hard to know exactly what’s going on).
For those keeping track, this is the 13th (!) new SWF that has been announced in 2010 alone (i.e. in the last 9 months). This includes Colombia, Ghana, India, Iran, Lebanon, Mauritius, Nigeria, Papua New Guinea, Rwanda, Saudi Arabia, Taiwan, and Tunisia (though some of these countries have since reconsidered). And, on top of that, we had Ben Bernanke telling a bunch of state governors that they should consider setting up SWFs of their own (of which five already have).
Anyway, let’s just say that the new Bangladeshi fund gives further support to those who see SWFs as an integral part of the ‘new normal’.
WB (august 2010): “Relatively strong progress on development has occurred within a challenging governance environment, characterized by paralyzing political rivalry, weak checks and balances among branches of government, weak accountability, inadequate systems for public resource management and a widespread culture of corruption.”
If SWF governance reflects the source country’s state governance characteristics, the IMF may end up funding a little hedge fund for locals who deserve to be rewarded… Maybe the Fund should open a prime brokerage department.
Absolutely. And what’s more is the apparent willingness of the IMF to get involved with Bangladesh outside of one of their normal programs (with all the associated conditionality). The credit facility will be much laxer…and without it I don’t think Bangladesh would be able to use its reserves in this manner. IE it seems to me the IMF is helping this country lower the point at which reserves turn into excess reserves. This means that we may be living in a sub-optimal equilibrium for policymaking in which all parties now acknowledge that a “balanced global economy” is unlikely to happen any time soon. And that countries will go on hoarding reserves because no international backstop (the IMF) exists that can do the job. Anyway, lots to think about here…