The cabinet yesterday gave the go-ahead for the setting up of a fund with money from the foreign currency reserves, which would be used for government investment in long-term projects.
Sources said the fund, called “sovereign wealth fund”, could be set up as soon as this July and be used for investments in seven sectors, including power, energy and in large infrastructure projects.
“Primarily the fund will start with $2b and it will be raised in phases to $10b in five years,” Cabinet Secretary M Shafiul Alam told reporters after a cabinet meeting at his secretariat office yesterday.
He said it had been decided in principle that a law and a framework would be drafted in this regard for the cabinet's approval.
From the next fiscal year, the sovereign wealth fund would start functioning and there would be allocations for the fund in the budget, said a finance ministry official.
According to the committee report, the fund would have to be formed through a separate law and there must be a provision for appointment of an executive management and a board of directors. The fund should be managed by a team of efficient and professional financial managers capable of handling large infrastructure financing and dealing with proper risk management.
An advisory council or an expert panel, consisting eminent citizens and experts on the financial sector, might be formed to review the fund management and make recommendations for the board, the committee said.
When selecting a project for financing, it has to be ensured that the project tenure is long and that the project is financially viable.