New IMF credit prog ‘based on BoP needs, reform commitments’

A fresh IMF financial arrangement sought by Bangladesh to support its economic reforms is to be determined by its balance-of-payments (BoP) needs and reform commitments, the international Monetary Fund said Wednesday.

The IMF staffs are now 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," says Ivo Krznar, the IMF Mission Chief for Bangladesh, in a statement.

The lender notes that Bangladesh's current arrangements under the Extended Credit Facility (ECF), Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) have provided an important policy anchor during a very difficult period.

However, the macroeconomic and political contexts have changed substantially since the Fund-supported programme was approved in January 2023, and the authorities now face a more complex set of challenges.

Banking-sector weaknesses and low revenue mobilisation underscore the need for a renewed and sustained reform effort.

"The authorities' request for a successor arrangement provides an opportunity for the Fund and the authorities to agree on a potential programme that both reflects the current challenges and incorporates the new authorities' objectives and priorities," the IMF acknowledges.

The statement mentions that planning is underway for a staff visit to Bangladesh, which would allow IMF staff to take stock of recent economic developments, engage with the authorities on their policy priorities, and assess the outlook and reform challenges.

Discussions about the parameters of a potential new IMF-supported programme -- including its size and related reform commitments -- would take place in the context of a subsequent programme negotiation mission.

syful-islam@outlook.com