Bangladesh hopes to receive fourth tranche of IMF loan in June: Finance adviser
We have not yet fulfilled one or two of IMF conditions. They are insisting on immediate implementation, but we have requested more time, he says
Finance Adviser Salehuddin Ahmed has expressed hope that Bangladesh will receive the fourth tranche of the loan from the International Monetary Fund (IMF) this June, despite ongoing negotiations over set conditions.
"We are reviewing their conditions. If an organisation like the IMF refuses to release funds, other international financial institutions also become hesitant," the adviser told journalists at a pre-budget discussion with the Economic Reporters' Forum (ERF) at the Secretariat today (25 March).
Salehuddin explained that before releasing a loan instalment, the IMF set specific conditions for implementation. "We have not yet fulfilled one or two of those conditions. They are insisting on immediate implementation, but we have requested more time."
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"Additionally, we have asked for two tranches to be disbursed together in June so that we receive a substantial amount at once," he added.
Speaking on condition of anonymity, a senior policymaker from the Ministry of Finance told The Business Standard that if Bangladesh does not comply with the IMF's conditions or if the IMF delays loan disbursement, other institutions such as the World Bank and Asian Development Bank (ADB) will also hold their funding.
"This could put approximately $9 billion in loans at risk."
Pending IMF conditions
At the meeting, Finance Division officials confirmed that Bangladesh was supposed to receive an IMF loan tranche in February, but it was withheld due to non-fulfilment of conditions.
The IMF board may reconsider the disbursement of funds in June, but before that, Bangladesh must fulfil two key conditions – introducing a uniform VAT rate and allowing the exchange rate to be fully market-driven.
The government of Bangladesh is expected to introduce a uniform VAT rate with the announcement of the new fiscal year's budget in June.
However, dismissing the possibility of a fully market-determined exchange rate by June, adviser Salehuddin said, "Letting the exchange rate float freely could push the economy into uncertainty, similar to what happened in Sri Lanka."
The adviser also pointed out that if IMF and other international organisations do not provide budgetary support, Bangladesh will need a massive increase in Foreign Direct Investment (FDI) and export earnings, which cannot be achieved overnight.
Finance Secretary Khairuzzaman Mozumder, National Board of Revenue (NBR) Chairman Abdur Rahman Khan, and Financial Institutions Division Secretary Nazma Mubarak were also present at the meeting.
