Hints are rife the IMF might hold back the next installment of its US$5.5-billion loan from stipulated payout by December deadline as Bangladesh couldn't complete agreed banking reforms, officials said Tuesday.
The International Monetary Fund (IMF) is not happy for the delays in some reforms in the banking sector, especially government's "inaction" on all the troubled banks, said an official who attended a bilateral meeting with the IMF high executives in Washington recently.
The Washington-based global monetary watchdog was not happy with the slow move of the Bangladesh government regarding the mergers and acquisitions of the struggling banks, including Islami Bank Bangladesh Limited (IBBL) and United Commercial Bank (UCB), he said.
Although the IMF has lauded government's recent move for the merger of five commercial banks at the bilateral meeting, but it was not happy with the delays regarding some big troubled banks, including the two, said the official, preferring not to be quoted by name.
The Bangladesh delegation, led by Finance Adviser Dr Salehuddin Ahmed, met the IMF Asia- Pacific head and some other executives at the Washington Headquarters during the recently concluded IMF-World Bank Annual Meeting.
Meanwhile, an IMF mission is set to conduct a spot check of Bangladesh's financial and economic status and government's reform initiatives tagged to the lending package of $5.5 billion.
The IMF mission is scheduled to arrive in Dhaka today (October 29) for a two-week review of progress made until last June.
According to the Ministry of Finance (MoF), the 6th tranche of the IMF credits was set to be disbursed by December this year.
But the fund release could be delayed due to some lack of reforms in the banking sector and some other areas, a MoF official told the FE.
"We will try to convince the visiting IMF mission about the status of the remaining troubled banks and further government initiatives on the reforms," he added.
"We hope we will get the 6th tranche within the stipulated time."
The IMF originally approved a $4.7-billion lending programme in January 2023. In June this year, it released the fourth and fifth installments together, alongside a six-month extension and an $800-million top-up, bringing the total package to $5.5 billion. So far, Bangladesh has received $3.6 billion.
To unlock the sixth tranche, expected to be around $450 million, Bangladesh government must meet six Quantitative Performance Criteria (QPCs)--the most binding IMF conditions. Three of these were introduced in May.
The delegation member having attended the IMF-WB annual meet said: "Bangladesh has informed the IMF about the merger of the five banks. And it has informed about some improvements of the troubled banks like IBBL and UCBL. But the IMF was not convinced."
Besides, the government delegation also informed the IMF team about the recent injection of Tk 20 billion by a shareholder which has improved the condition of the IBBL.
No such ceiling was there when the IMF originally approved the $4.7-billion programme.
Previously, Ernest & Young and KPMG, funded by the Asian Development Bank, completed an Asset Quality Review (AQR) of six banks. That review revealed the banks' dire financial condition, with default loans four times higher than previously reported.
The six banks were set to be merged included First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank, Exim Bank and the ICB Islamic Bank. However, ICB Islamic Bank has been kept out of the merger process due to its foreign ownership. Bangladesh Bank has made a preliminary decision on mergers of the remaining five Islamic Shariah-based banks into a state-owned single new entity. In July, a decision was made to conduct an AQR of 11 more banks in the second phase, funded by the World Bank.
