February 9, 2024
DHAKA – Bangladesh is likely to receive the third tranche of the International Monetary Fund’s $4.7 billion loan as the country has met almost all conditions, said Finance Minister Abul Hassan Mahmood Ali yesterday.
He made the comments while speaking to reporters at the secretariat following a courtesy call by IMF Resident Representative Jayendu De.
The meeting comes just weeks before a mission from the Washington-based lender is due to visit the country to assess the progress made under the third tranche of the loan programme.
A year ago, the IMF board approved the loan to support an economy facing one of its worst crises in recent times. It released $447.8 million in February last year and $681 million in December.
The IMF authorised the disbursement of the second instalment despite the country’s failure to meet the minimum net international reserves (NIR) and tax revenue collection targets.
The IMF is likely to release the third instalment in May.
During its visit next month, the IMF team will review the government’s performance against the targets set for December 2023.
The minister said: “Most of the targets that they have set for us have been met. Things are looking up. It looks like that we are going to pass in the test.”
As before, however, the government has failed to keep the minimum NIR.
At the end of 2023, the NIR needed to be at least $17.78 billion. But the country fell short of the target by $58 million.
It, however, has hit the targets on tax collection, which it missed last time, according to a finance ministry official.
The official said Bangladesh has met the conditions set for other reform measures.
For December, the goal for tax revenue, including NBR (National Board of Revenue) and non-NBR taxes, was set at Tk 143,640 crore.
Another condition for the third instalment is that the budget deficit must not surpass Tk 90,520 crore in December. As of September, the shortfall was Tk 12,402 crore, data from the finance ministry showed.
“The deficit is expected to remain within the IMF ceiling,” the official said.
The government has fulfilled conditions attached with four quantitative targets: external payment arrears, reserve money, priority social spending, and capital investment.
The IMF has attached some structural conditions as well.
One of the structural conditions is that the government will release the quarterly GDP data from December. However, the Bangladesh Bureau of Statistics has missed the target.
Yesterday, the finance minister also said the government would not introduce a market-based exchange rate.
“For now, the crawling peg system will continue.”
In January, the Bangladesh Bank unveiled a plan to introduce an interim crawling peg system for the taka to regulate abrupt fluctuations in its value.
The system will be tethered to a carefully chosen basket of currencies within a defined band corridor. A “competitive and representative equilibrium” rate will be established at the midpoint of the corridor, allowing the exchange rate flexibility within these bounds.
The BB will retain its authority to intervene in the currency market to prevent the exchange rate from breaching the limits, the central bank said in its latest monetary policy.
In June last year, the BB pledged to allow the currency to float freely for the first time in Bangladesh’s history, a key demand from the IMF to keep the loan programme on track.
Also yesterday, Canadian High Commissioner to Bangladesh Lilly Nicholls paid a courtesy call on the finance minister.
After the meeting, the minister said Bangladesh and Canada maintain a good relationship.
The two also discussed Canadian investments in Bangladesh, especially regarding setting up canola oil manufacturing mills.