IMF agrees to release $1.3b in June for Bangladesh as disagreement over exchange rate flexibility resolved

Bangladesh Bank has finally reached an agreement with IMF (International Monetary Fund) over the implementation of greater exchange rate flexibility after a series of meetings conducted by the central bank's Governor Ahsan H Mansur.

Now, IMF has agreed to release $1.3 billion of the $4.7 billion loan package in June, which was previously withheld due to disagreement over the implementation of greater exchange rate flexibility through a crawling peg, confirmed a senior executive of Bangladesh Bank.

However, details of the agreement will be disclosed by the Bangladesh bank in a press conference to be held tomorrow (14 May) at its headquarters where the governor will join virtually from Dubai.

IMF keeps Bangladesh hanging on loan tranches

The agreement with IMF over loan disbursement will be formally announced at the press conference, said a central bank source.

Earlier, an IMF staff mission led by Chris Papageorgiou visited Dhaka on 6-17 April to conduct a combined third and fourth review of Bangladesh's economic reform program under the Extended Fund Facility (EFF), Extended Credit Facility (ECF), and the Resilience and Sustainability Facility (RSF).

According to a senior Bangladesh Bank official, the IMF remained insistent on implementing a truly flexible exchange rate – one that goes beyond minor corridor adjustments and eliminates multiple exchange rate windows. The central bank, however, remains cautious, citing risks of inflationary shocks and political pushback.

The IMF approved a $4.7 billion loan for Bangladesh in 2023. So far, the country has received three instalments totalling $2.3 billion.

IMF loan not critical for Bangladesh, says central bank governor

Following the breakdown of talks in February over the release of the fourth tranche, amounting to $645 million, Bangladesh's finance ministry clarified that the delay stemmed from the need to fulfil mutually agreed-upon conditions. 

"The instalments are disbursed upon fulfilment of conditions that have been mutually agreed upon by the government of Bangladesh and the IMF to strengthen the foundation of the economy. Budget support programmes are associated with the implementation of conditions, some of which require time," reads the statement.

"Hence, it was mutually decided that the two disbursements scheduled in FY2024- 25 would be combined. Therefore, the IMF agreed to combine the fourth and the fifth disbursements," it added.

The disbursement will be made in June after satisfactory completion of the review scheduled in April and approval by the IMF Board in June 2025, the ministry had said.