Photo : TDM
The country is eagerly waiting for second instalment of the IMF loan as Bangladesh faces a prolonged dollar crisis, with the central bank's reserves dwindling every month, and the deficit continues to grow despite the inflow of dollars from export earnings and remittances, which are used to cover import expenses and old arrears.
A delegation from the IMF (International Monetary Fund) is scheduled to visit Dhaka once again to assess progress in meeting the conditions of the ongoing $4.7 billion loan agreement with the IMF and to discuss the concession for the second tranche. The delegation is expected to be in Dhaka from October 4 to 19.
During their stay in Bangladesh, the IMF delegation will engage with various related organisations, including the Finance Department, NBR, and Bangladesh Bank (BB). Their discussions will encompass the progress of the financial sector reform programme, modernisation of revenue management, banking sector reform, liquidity management, dollar market rate transactions, the method for calculating expendable reserves, interest rates, and the implementation of monetary policy, among other topics.
According to sources at BB, one of the 38 conditions of the IMF's loan project stipulates that the IMF can withhold loan instalments if the conditions are not met. While the government has made partial progress in complying with most of the imposed conditions, challenges persist.
As a consequence, the dollar market is experiencing instability as the IMF's conditions are being addressed. Prices of gas, electricity, and fuel have been raised multiple times to reduce subsidies, leading to a surge in food prices, reaching a 12-year high. Strategies are being devised to enhance revenue collection, although apprehensions remain about tracking down defaulters in the banking sector.
Moreover, the government continues to overlook compliance with the export development fund in foreign exchange reserves calculations, potentially posing a significant issue for the organisation. Analysts believe that the second instalment of the loan may face delays if proper adherence is not ensured.
In response to the IMF's conditions for the loan, Ahsan H Mansur, a former IMF official and executive director of the research organisation PRI, told The Daily Messenger, "Actually, the government did not implement any reforms last year. They need to do so now, but many are struggling to comply with the revenue collection conditions."
He added, "There are also doubts about meeting the reserves target. Subsidies have been reduced, but they may not decrease as much as expected. However, it's crucial to meet the IMF's requirements. Failure to do so could erode market confidence in Bangladesh, perpetuating the dollar crisis."
Mansur emphasised, "It's important to remember that what the IMF is asking us to do should have been done long ago for our own benefit. The IMF is calling for a reduction in defaulted loans, a recommendation echoed by economists daily. The government and Bangladesh Bank are making efforts, and if the government takes strong steps to reduce defaulted loans as per the IMF's requirements, it would be highly beneficial."
Meanwhile, officials in the finance division emphasised the critical nature of the second tranche of the IMF loan in addressing the ongoing dollar crisis. To facilitate this, the IMF delegation is scheduled to visit Dhaka next month to assess the loan's conditions. BB has received a letter regarding the delegation's schedule and has been requested to arrange discussions with relevant departments.
Simultaneously, the Ministry of Finance has urged Bangladesh Bank, the National Board of Revenue, and the Stock Market to provide updated information on the implementation of conditions and suggestions by September 17. The delegation will return to Washington and submit a progress report to the organisation's headquarters, which will determine the fate of the second instalment.
Any delays in fulfilling the conditions could potentially postpone the release of the second instalment until mid-November. Earlier this year, in February, Bangladesh received the first instalment of the IMF loan, amounting to $4.76 billion.
In July of this year, a joint delegation from the IMF and World Bank visited Dhaka from July 5 to 17 to review and monitor the country's macroeconomic situation. Their assessment covered the reforms and dynamics within the country's financial sector, as well as the progress in implementing the reform programmes outlined by the IMF.
TDM/SD
