The government on Wednesday approved the ‘Offshore Banking, Bill 2024’ aimed at increasing the inflow of foreign currency against the backdrop of the prolonged financial crises affecting the majority of people in the country.

The proposed law, approved by the weekly cabinet meeting, will allow offshore units of banks to open accounts for non-resident Bangladeshis and entities having investments in the country.

The accounts can be opened in five foreign currencies – US dollar, Euro, British Pound, Japanese Yen and Chinese Renminbi – cabinet secretary Mahbub Hossain said in a briefing at the secretariat following the meeting.

The cabinet meeting also decided not to hold any iftar parties by the government during the upcoming Ramadan to avert food waste, said the cabinet secretary.

Prime Minister Sheikh Hasina chaired the cabinet meeting at her Tejgaon office.

While approving the proposed ‘Offshore Banking Act 2024’ in principle, the cabinet noted that it would strengthen offshore banking activities in the country, said the cabinet secretary.

Former Bangladesh Bank governor Salehuddin Ahmed said enforcement of the act is more important than formulating it.

Offshore banking had been operating for a long time without giving any major benefit to the economy because of the monitoring weakness of the central bank, he said.

He noted that BB should record offshore banking transactions strictly.

The cabinet secretary said that any relative of a Bangladeshi living abroad could open an account and manage the account as a supporter.

He also said that account holders of the offshore banking unit could remit money without any prior approval from Bangladesh Bank.

Prepared by the Financial Institutions Division under the Ministry of Finance, the proposed act exempts income tax and other direct  or indirect taxes on profits and interest earned from offshore banking businesses.

The cabinet secretary said that the passage of the act would help the government solve the dollar shortage while referring to the successful operation of offshore banking in many countries.

Answering a question, the cabinet secretary said the offshore banking units of the scheduled banks should offer attractive interest rates to attract deposits.

Former BB deputy governor SM Moniruzzaman said the proposed act would allow the central bank to increase its monitoring of offshore banking.

Since offshore banking activities were regulated by directives given from time to time in the past, it was always a difficult task for monitoring agencies to keep a tab on this and take action when needed.

The approval of the proposed law came amid a serious dollar crisis, which saw the country’s forex reserves come down to around $20 billion from $48 billion in August 2021.

BB has imposed restrictions on imports and is also taking loans from the International Monetary Fund to assist with the balance of payments under stress to meet the import bills for energy items.

An instrument under the Universal Pension Scheme was introduced in the past year to attract expatriate Bangladeshis to increase the inflow of foreign currency.

However, less than five per cent of the overall 19,158 subscribers subscribed to the particular instrument in the first six months.

The cabinet secretary said that the PM gave the directive to not hold any iftar parties at the government level to avert waste.

He also said that the government would discourage private groups from doing the same.

Answering a question, he said that the PM suggested the distribution of food to the poor by rich people instead of arranging iftar parties.

The government adopted a policy of maintaining austerity measures in FY23 to tackle the ongoing financial crisis that has pushed inflation close to double digits for the past two years.

As part of austerity measures, the government announced a suspension of funds for public housing.

The finance division announced to suspend the procurement of new vehicles, vessels, and aircraft under the operating budget with a provision for replacing 10-year-old vehicles with consent from the finance ministry.

The government has also suspended foreign tours by government officials, except for special requirements.