IMF will release funds after seeing the budget’s commitments reflected
Bangladesh’s $4.7 billion loan program with the International Monetary Fund (IMF) has been delayed in receiving the installments this time. Bangladesh has received the previous three installments. The fourth installment was supposed to be received in December, which has not been received so far.
Sources said that the IMF has asked the interim government about the progress of financial sector reforms. The organization has sought a progress report by this month. An initial schedule has been prepared for a delegation of the organization to visit Dhaka again in April.
It is learned that the fourth installment of the $4.7 billion loan agreement with the organization was supposed to be released in February, but it will be postponed to June. Even the organization will decide on the release of the loan installment after seeing the reflection of the commitment with the IMF in the upcoming 2025-26 budget. The fourth installment is supposed to be $645 million. The loan program with the IMF started on January 30, 2023. Bangladesh received $476.3 million of the first installment on February 2, 2023. The second installment of $681 million was received in December that year. In June 2024, $1.15 billion of the third tranche was received. That is, Bangladesh received $2.31 billion from the IMF in three tranches. There is $2.39 billion left.
The IMF Executive Board approval is required before receiving each tranche. Earlier, an IMF team came to Dhaka to review the progress of fulfilling the loan conditions. The IMF team came to Dhaka last December to approve the release of the fourth tranche. Then, on February 5, the organization’s board meeting was supposed to approve the release of the fourth tranche, but it was postponed due to natural disasters in the United States. The meeting will be held on March 12. But that meeting also did not approve it. The Ministry of Finance informed that the IMF will release the two tranches (4th and 5th) of the loan payable in the current 2024-25 fiscal year together next June. On the other hand, Finance Advisor Dr. Salehuddin Ahmed said, we are not desperate for the IMF loan installment for now. Earlier, the IMF had said that if the conditions are not met properly, it will stop the loan installment at any time. The areas where the IMF has emphasized the most and has asked for progress are – making changes in budget management, completely removing subsidies, introducing smart methods to adjust fuel prices, maintaining reserve accounts in accordance with international standards, increasing tax-GDP, and fully implementing the amended VAT Act-2012. A progress report on the dynamics of the macro economy, including these issues, is being prepared, which will be sent to the IMF’s South Asia Director.
It is learned that the first three installments were released on time as part of emergency assistance. The organization even relaxed the conditions for the release of funds. At that time, the country’s economy was very unstable. Commodity prices had also increased. Taking those issues into account, the IMF provided quick assistance to Bangladesh. Currently, the country’s economy is largely stable, commodity prices have also decreased slightly. Reserves have increased. Export earnings have also returned to a positive trend. However, the pace of budget implementation is very slow. There is no progress in the changes that are supposed to be brought in budget management. Again, the instability in the stock market and banking sector has not decreased. Even though the government has changed, good governance has not been established in the financial sector. Apart from the manpower, there have been no significant changes in the central bank. Therefore, the IMF is showing strictness in fulfilling the conditions regarding the release of the fourth installment.
Meanwhile, the IMF has recommended further acceleration of reform activities to strengthen the regulatory framework in the financial sector and ensure good governance. At the same time, it has been asked to know what visible initiatives have been taken to increase transparency and accountability in the financial sector. The organization believes that the government is still forcibly maintaining the value of the taka against the dollar. For this, it has been advised to further devalue the taka.
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