We'll reconsider IMF loan if it stays firm on exchange rate terms: Finance adviser

Bangladesh will reassess its participation in the ongoing International Monetary Fund (IMF) loan programme if the attached conditions, particularly on exchange rate liberalisation, prove unfavourable, Finance Adviser Salehuddin Ahmed has said.

Speaking to the media after a purchase committee meeting at the Secretariat today (29 April, he made it clear that Bangladesh will not immediately comply with the IMF's demand to fully go for a market-based foreign exchange rate.  

"If the release of future loan tranches hinges on this condition, Bangladesh will reassess its participation in the programme," he said. "We're not in a position where we need to rely on the IMF or the World Bank. The government is not desperate for IMF financing."

The adviser made the remarks after returning from the IMF-World Bank Spring Meetings held in Washington, DC, from 21 to 26 April. The delegation also included the central bank governor and finance secretary. They held separate sideline discussions with IMF officials regarding the ongoing loan programme.

"The perception that we went to Washington just to seek money is wrong. Yes, we discussed the two pending IMF tranches, and we also engaged the World Bank. But we're not begging. If we accept all IMF conditions, it might send a message that we're desperate – that would harm private investment sentiment," said the adviser.

Bangladesh has been under a $4.7 billion IMF loan programme since 2023, with three tranches already disbursed. An IMF mission recently visited Dhaka to review the fourth and fifth tranches.

However, there has been no clear indication about whether the next disbursement will proceed. The IMF executive board is scheduled to meet on 23 June to decide on the release of the next tranche.

Market-based rate not yet

Adviser Salehuddin said the forex rate is a key monetary policy tool. "If we float it entirely, it could spike to Tk280 like Pakistan, or Tk400 like Sri Lanka."

He also warned that accepting exchange rate conditions could increase the loan burden due to currency depreciation. "If the dollar hits Tk180 or more, the $3 billion loan could cost us Tk5 billion." 

Currently, the exchange rate operates under a crawling peg within a band of Tk120-122. "The IMF wants the band removed, but we've said we won't do that yet."

Despite no recent IMF disbursements, Bangladesh has maintained a stable macroeconomic environment, the adviser said. "Foreign reserves and the exchange market are stable without fresh IMF funds – this proves our economy is holding strong."

He further noted, "We've told the IMF that their money is not what's stabilising our economy. They've realised this too and are reconsidering some of their positions."

On whether Bangladesh will stay in the loan programme, he said, "That decision is ours, not the IMF's. We've seen countries like Indonesia and Malaysia push back, and IMF staff lost jobs as a result. We'll stand our ground."

He added that the IMF has not yet made a final decision. "They will let us know whether there will be a staff-level agreement. I've briefed the chief adviser, who has given directions on how to proceed."

Alternative sources available

The finance adviser also assured that project financing is not a concern. 

"We've asked for $1 billion from the Asian Infrastructure Investment Bank and are also in talks with the New Development Bank and the Islamic Development Bank. The World Bank and ADB's project lending pipelines are intact," he said.  

He added that Bangladesh is also exploring a possible $500 million stabilisation fund from the IMF, though no commitment has been finalised.