The International Monetary Fund will discuss releasing $1.15 billion in the third instalment of its loan to Bangladesh during its board meeting on June 24. This is part of the IMF’s $4.7 billion loan programme for the country.
The date for the meeting was fixed yesterday. Bangladesh officials said they are hopeful that the loan proposal will be approved since the country has met all conditions except one set for the release of the third tranche.
In the board meeting, the multilateral lender will assess Bangladesh’s progress in meeting the conditions set in December last year.
Bangladesh could not meet the condition set for foreign currency reserves.
As per the loan conditions, the target for net international reserves (NIR) in December last year was $17.78 billion. However, a recent IMF review found the NIR was $16.73 billion at that particular time.
The NIR is defined as reserves assets minus reserve liabilities. Reserves liabilities are all foreign exchange liabilities to residents and nonresidents, including commitments to sell foreign exchange arising from derivatives and all credit outstanding from the IMF.
Bangladesh Bank and finance ministry officials said the country has met five other conditions, including a maximum limit of Tk 90,520 crore for the primary budget deficit in December. The government saw a budget surplus of about Tk 50,000 crore at that particular time.
The tax revenue collection target was set at Tk 1,43,640 crore for the first six months of the current fiscal year, but the government collected over Tk 1,62,000 crore.
The social spending target was set at Tk 30,990 crore for the same period, but the country spent more than Tk 55,000 crore.
For capital spending, the target was set at Tk 22,280 crore. However, Bangladesh spent about Tk 36,000 crore during the same period.
Bangladesh also met the two other targets — maintaining a ceiling on reserve money and repaying foreign debt.
Ahead of releasing the third tranche of its loan, an IMF mission, led by Chris Papageorgiou, visited Dhaka from April 24-May 8 to review the programme performances.
In a media statement after the review, the IMF said its staff and the Bangladesh authorities have reached a staff-level agreement on the policies needed to complete the second review of the authorities’ programme.
“The review is pending IMF Executive Board approval. Upon the Board’s approval, Bangladesh will have access to SDR871 million [about $1,152 million] in financing,” read the statement.
The Bangladesh authorities have made significant progress on structural reforms under the IMF-supported programme, including the implementation of a formula-based fuel price adjustment mechanism for petroleum products, it added.
The IMF also welcomed Bangladesh Bank’s “bold actions” to realign the exchange rate and simultaneously adopt a crawling peg regime with a band.
Following the liberalisation of retail interest rates, IMF also said additional tightening of monetary policy should help alleviate any inflationary pressures resulting from the exchange rate reform.
On May 26, Finance Minister Abul Hassan Mahmood Ali told reporters that Bangladesh would get the third instalment by June.
The IMF approved the $4.7 billion loan in January last year. Bangladesh has received more than $1 billion in two instalments.
