Exiting IMF loan programme will harm Bangladesh’s long-term economic interests: Selim Raihan
Rather than pulling out, the economist thinks Bangladesh should intensify its dialogue with the IMF to identify reform trajectories
Highlights:
- IMF engagement offers strategic leverage for essential reforms in banking, taxation, and exchange rates
- Pulling out now risks a return to policy complacency and delayed reforms
- IMF conditions can help governments overcome domestic resistance to difficult decisions
- Delays in loan tranches stem from real issues like weak revenue, subsidy inefficiencies, and poor reform progress
- Active dialogue with the IMF needed to shape reforms aligned with Bangladesh's development goals
Any decision to withdraw from the existing IMF loan programme will be short-sighted and ultimately detrimental to the long-term economic interests of the country, said noted economist and Dhaka University's economics department Prof Selim Raihan today (4 May).
"It is worth looking beyond the immediate economic cost of the loan and valuing the strategic advantage the IMF programme represents in leveraging towards decisive structural reform in areas that have hitherto seen deferment - banking, taxation, public expenditure, and exchange rate management," he said in a Facebook post this evening.
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In the post, the economist wrote, "It is true that the size of the IMF loan, $4.7 billion spread over several instalments, is not a transformative sum for the economy of Bangladesh. But to reduce the IMF programme to purely financial transactions is to miss the bigger picture."
He noted that the real value of IMF engagement is the policy discipline it enforces and the opportunity for reform it offers.
Bangladesh may opt out of IMF loan programme if more conditions imposed: CA's special asst
"Over the decades, Bangladesh has struggled to implement necessary reforms due to weak internal demand for change and entrenched institutional resistance. It is in these conditions that external pressure, particularly from institutions like the IMF and World Bank, has had critical effects in the past," reads the post.
By tying disbursements to particular policy actions, the IMF can create opportunities for governments to overcome domestic resistance and move forward with actions that are otherwise politically difficult.
Selim, the executive director of South Asian Network on Economic Modelling (SANEM), said, "However, if there is no domestic ownership of the IMF conditions and governments do not engage effectively with the IMF to design the reform agenda, many of these conditionalities may appear externally imposed and, therefore, may lose their domestic support."
Consequently, he added that there are both success and failure stories of IMF loan programmes across developing countries.
Professor Raihan stated that exiting the IMF programme now would be to risk relapsing into a 'comfort zone' among the policymakers, a zone in which hard but necessary decisions are always postponed.
He opined that this would be a repetition of the defensive policymaking style of the previous regime, which typically avoided reform in the interest of preserving short-term stability, only to face more painful problems later on.
"The delays in IMF loan tranches are not due to arbitrary demands but because of genuine concerns - sluggish revenue collection, a non-market exchange rate, insufficient subsidy rationalisation, and lack of progress in banking sector reform. These are not new issues; they have been discussed and deferred for years," he said.
Rather than pulling out, the economist thinks Bangladesh should intensify its dialogue with the IMF to identify reform trajectories that are both realistic and politically feasible.
"Reform is not a one-size-fits-all process; there is room for sequencing and bargaining. With active engagement with the IMF, Bangladesh can shape the reform agenda, align it with its own development agenda, and provide social protection interventions to cushion the poor," he added.
He noted that the opt-out from the IMF loan programme would be a step backwards that undermines the credibility of the country's economic governance.
He mentioned that it is not the conditionality but the absence of reform momentum that skews the economy.
"Bangladesh must stay committed, not for the money itself, but for the opportunity to build a better, open, and sustainable economic future," said the economist.
