Finance minister clarifies stance on letter to IMF for $4.5b loan

Finance Minister AHM Mustafa Kamal said the $4.5 billion balance of payment support from the International Monetary Fund (IMF) was not publicly disclosed in order to get an upper hand on the negotiations.

Explaining why the government had written to the IMF for the loan while saying loans were not needed at the moment only five days ago, he said if the need was expressed too much in advance, then the government would not be in a strong position to negotiate loan terms and interest rates with development partners.

Speaking to reporters after the meeting of the cabinet committee on government procurement on Wednesday, he confirmed a formal proposal had been sent to the IMF seeking balance of payment support.

The decision to take a loan will be made by considering the terms and conditions given by the IMF and whether the terms are in favour of the country and are compatible with the development policy of Bangladesh, he said.

Claiming that the country's economy was not in a bad state, the finance minister said, "If the economy is bad, why would the IMF give a loan? Rather, Bangladesh is a suitable country for IMF lending. Because Bangladesh has a good debt repayment system and there has never been a delay in debt repayment."

On whether interests rates on deposits and loans would be capped at 6% and 9% interest rates according to the advice of IMF, he said the country's economy was in good shape because of the interest rates, adding businesses would have shut down if rates weren't fixed this way and those had to face 20-22% interest.

"Because of this decision, the banking sector is stable and the private sector is also doing well. Just because the IMF says the government will withdraw from this decision, it is not the case. But in view of the reality, if this decision needs to be changed, then the government will do it," he said.

Meanwhile, the Prime Minister's Principal Secretary Ahmad Kaikaus said the situation in Bangladesh did not reach a bailout scenario, adding some media had wrongly interpreted the IMF budget support request.

"Taking balance of payment support from different international financial institutions, including the IMF, is a continuous process," he said.

Finance Ministry officials said that IMF's macro-stress testing mission is coming to Dhaka on September 11-15. During this time, the officials of the mission will train 20 officials of various departments of the Ministry of Finance, including seven officials of the Bangladesh Bank.

Before this, the mission will go to India on September 5-9 and 6 Bangladesh Bank officials will be trained there.

According to the IMF website, upon completion of this course, participants should be able to identify the main sources of financial stability risk and summarise the principles for developing macro-financial stress scenarios.

The participants should be able to link changes in macroeconomic and financial variables with financial results and measure their relative impact and assess the resilience of individual entities and the financial system to solvency and liquidity stress.

Amid rising concerns on the country's economic health, Prime Minister Sheikh Hasina on Wednesday said Bangladesh would be able to meet six to nine months of import expenditures with the existing foreign currency reserves.

"We have money in our hands to import foodgrains and others [essentials items] for at least three months during any crisis. We'll be able to import food for six to nine months, not only for three months, with the reserve that we have now," she said.