IMF meeting with Bangladesh Bank today

Bangladesh Bank is repeatedly failing to meet the target set by the International Monetary Fund (IMF) in terms of 4.70 billion dollar loan waiver and reserve. In such a critical situation, the IMF will hold a meeting with Bangladesh Bank today regarding the terms of the loan.

The concerned said that the special team of the donor organization is coming to Dhaka yesterday to discuss the terms of the loan.

Loan program with IMF is ongoing. The third installment is due within two months. This team of IMF has come to Dhaka to review the work of meeting the conditions of the loan given to Bangladesh in front of various realities.

Meanwhile, Bangladesh’s net reserves have not improved. Inflation is still close to 10 percent despite the rise in bank loan interest rates. Revenue collection targets are nowhere near met. Bangladesh is lagging behind in the process of reforming the banking sector.

From Wednesday (April 24), the party will start meeting with the finance department of the finance ministry, Bangladesh Bank, National Board of Revenue (NBR) etc. The meeting will continue till May 8. Every year before the budget a team of IMF comes to Dhaka at this time.

Earlier, in January 2023, the IMF imposed several conditions against the loan program of USD 4.7 billion for a period of three and a half years. Bangladesh has received the money in two installments in two installments by fulfilling almost all the conditions except the reserve. Now it’s the turn of the third installment – which is supposed to be received after two months, i.e. next June. This installment will be discounted based on the evaluation of how much the loan conditions have been fulfilled till last December. This information is known from sources of finance department.

After receiving the first installment of the IMF in February 2023, Bangladesh received the second installment last December. Bangladesh could not fully achieve the time-based target before receiving the second installment. Especially at the end of last June, the foreign exchange reserve conservation target was not achieved. However, the organization approved the exemption that Bangladesh formally sought from the IMF to reduce the reserve conservation target. Accordingly, a new target for reserve conservation is set at the end of December.

At the end of last December, net reserves were supposed to be $26.8 billion – reduced to $17.78 billion. However, net reserves were 16.75 billion dollars till December.

Even in the month of March of the current calendar year, Bangladesh could not achieve the net reserve conservation target. Actual reserves at the end of March were supposed to be $19.26 billion, but in reality were around $15 billion. In June last year, the target was 23.7 billion dollars, but the net reserve was 19.5 billion dollars.
Bangladesh Bank Governor Abdur Rauf Talukder, however, is optimistic that the third installment will be available.

After the spring meeting held at the World Bank and IMF headquarters in Washington, the governor told reporters on April 16 that there would be no difficulty in getting the next tranche of money as 90 percent of the conditions have been met.

According to the IMF, net reserves are actual or usable reserves. Bangladesh Bank has an obligation to maintain these net reserves on a quarterly basis as per IMF conditions.

Along with the failure in conservation, Bangladesh could not meet the target of revenue collection. There are still multiple currency exchange rates. Bangladesh Bank has taken some steps of bank merger in the middle.

Financial Index/MH/AHR