A fresh government move gets underway to open negotiations with the International Monetary Fund (IMF) in mid-July to secure some US$4.0 billion under a new lending package to attain macroeconomic stability, officials say.
The fresh loan move comes after the newly elected government has decided to scrap the ongoing credit programme that loses steam in prolonged negotiations on part of the Fund about disbursement of the remaining tranches of a $5.5-billion loan.
To this end, a delegation of the IMF will visit Dhaka next month to discuss the new financial arrangement to support Bangladesh's economic-reform programme, they add.
Ivo Krznar, the IMF Mission Chief for Bangladesh, will lead the team which will stay in Dhaka on July12-17 discussing the credit programme with the Bangladeshi authorities on their reform agenda and policy priorities.
The new credit programme will replace the ongoing $5.5-billion loan arrangement that now has become stalled after the Tarique Rahman-led government expressed unwillingness to continue with the deal made by the now-defunct Awami League government back in 2022.
Finance ministry officials say they are now taking preparation by gathering necessary facts and figures to begin the discussion. Also, they are listing the reform measures that will be carried out during the three-year tenure of the bankrolling recipe.
A senior finance official says the present government is scrapping the ongoing credit programme finding many of the previously listed reform measures tough to implement at this stage.
"However," he says, "in the new programme the IMF may not agree to ditch those important reform measures but may accept their implementation at a later stage."
Citing an example, another finance official says reform measures for boosting revenue mobilisation, bifurcation of the revenue board, and banking-sector reforms and greater exchange-rate flexibility will definitely be included in the new credit programme with the IMF.
Earlier this month, the IMF in a press release said the IMF staffs were engaging with the Bangladeshi authorities on their reform agenda and policy priorities as part of the Fund's consideration of possible next steps.
"Any new arrangement would need to be based on Bangladesh's balance-of-payments needs and strong policy commitments anchored by a credible reform agenda, and would be subject to the IMF's policies and executive board approval," said Ivo Krznar in the statement.
It recognised that the macroeconomic and political context changed substantially since the Fund-supported programme was approved in January 2023, and the authorities now faced a more complex set of challenges. Banking-sector weaknesses and low revenue mobilisation underscore the need for a renewed and sustained reform effort.
The IMF granted $4.7 billion worth of loan to Bangladesh in January 2023 amid macroeconomic instability created due to the Covid-19-related volatility and war in Ukraine.
The macroeconomy of the country began to be destabilised as export earnings fell, remittance inflow tumbled, and foreign-exchange reserves squeezed. Thereafter, the government turned to the IMF for credit support where the lender came up with reform proposals to help revive the economy of Bangladesh.
The loan was scheduled to be given in seven installments by May 2026. In June last year, the loan amount was increased by another dollop of $800 million. Until now, Bangladesh has received $3.595 billion under the lending package.
syful-islam@outlook.com
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