IMF team arrives Mar 1 to discuss $1.0b ECF loan
Siddique Islam | Friday, 25 February 2011
Siddique Islam
Bangladesh will hold further discussions with an International Monetary Fund (IMF) for the US$1.0 billion loan under the latter's Extended Credit Facility (ECF). This loan facility is purported to providing support for the balance-of-payments (BoP) management and helping spur the country's economic growth. An IMF team, lead by the Deputy Division Chief of IMF for Asia-Pacific, David Cowen, will visit Bangladesh from March 01 to March 12 for discussions in this connection, officials said Thursday. In December 2010, the Washington-based multilateral lender agreed to provide Bangladesh with $1.0 billion ECF fund for a three-year period, subject to approval of the lender's management and executive board. Authorities concerned, including those in the Bangladesh Bank (BB), are now doing the homework to negotiate with the IMF mission, considering the country's latest economic situation. As part of the preparations, different departments of the central bank have been asked to complete their works and make relevant data available, before the arrival of the IMF team. "We're now taking preparations for discussions with the IMF mission about its promised $1.0 billion loan," a senior official of the Bangladesh Bank (BB) told the FE. During the meetings with the BB's high-ups, the issues like the latest position of the country's overall balance of payments position, foreign exchange cash flow and overdraft facility will be discussed between the IMF team and the BB officials. Besides, stocks of arrears on external debt contracted or guaranteed by the public sector, along with stocks of domestic debts including the outstanding balance of treasury bills, treasury bonds and national saving certificates, will be reviewed at the upcoming discussions, the central bank officials confirmed. Currently, three T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods. On the other hand, four government bonds - five-year, 10-year, 15-year and 20-year -are being traded in the markets. "We're scrutinising carefully the IMF's ECF conditionalities, taking the country's latest economic situation into consideration," the BB official said, adding that the central bank would make an objective assessment of the IMF conditionalities and their impact on the economy, before accepting the terms of the proposed loan from it. Meanwhile, the Centre for Policy Dialogue (CPD), a private think tank, earlier cautioned the government about some risks of borrowing ECF fund from the IMF, while stating the conditionality-based loans would increase the costs of doing business and limit scope for strategic support to domestic industries. The CPD also said the borrowing from the IMF would limit the government's fiscal flexibility and may lead to a contractionary monetary policy. "..this may constrain the policy space of the government in undertaking supply-side measures for sustained high growth, on one hand, and, on the other, could further aggravate the inflationary and balance of payment pressure," the CPD said in its report titled, 'On emerging challenges for Bangladesh economy in the second half of FY2010-11'. The conditions, as the CPD pointed out, include phasing-out of bank lending rate ceilings, further liberalisation of tariff level, pursuing a monetary tightening stance and putting in place new value added tax (VAT) and income tax laws. However, the think-tank considered some of the conditions such as raising of CNG and furnace oil prices and establishment of a framework to monitor losses of state-owned enterprises as being in line with the necessary reform agenda.
Bangladesh will hold further discussions with an International Monetary Fund (IMF) for the US$1.0 billion loan under the latter's Extended Credit Facility (ECF). This loan facility is purported to providing support for the balance-of-payments (BoP) management and helping spur the country's economic growth. An IMF team, lead by the Deputy Division Chief of IMF for Asia-Pacific, David Cowen, will visit Bangladesh from March 01 to March 12 for discussions in this connection, officials said Thursday. In December 2010, the Washington-based multilateral lender agreed to provide Bangladesh with $1.0 billion ECF fund for a three-year period, subject to approval of the lender's management and executive board. Authorities concerned, including those in the Bangladesh Bank (BB), are now doing the homework to negotiate with the IMF mission, considering the country's latest economic situation. As part of the preparations, different departments of the central bank have been asked to complete their works and make relevant data available, before the arrival of the IMF team. "We're now taking preparations for discussions with the IMF mission about its promised $1.0 billion loan," a senior official of the Bangladesh Bank (BB) told the FE. During the meetings with the BB's high-ups, the issues like the latest position of the country's overall balance of payments position, foreign exchange cash flow and overdraft facility will be discussed between the IMF team and the BB officials. Besides, stocks of arrears on external debt contracted or guaranteed by the public sector, along with stocks of domestic debts including the outstanding balance of treasury bills, treasury bonds and national saving certificates, will be reviewed at the upcoming discussions, the central bank officials confirmed. Currently, three T-bills are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods. On the other hand, four government bonds - five-year, 10-year, 15-year and 20-year -are being traded in the markets. "We're scrutinising carefully the IMF's ECF conditionalities, taking the country's latest economic situation into consideration," the BB official said, adding that the central bank would make an objective assessment of the IMF conditionalities and their impact on the economy, before accepting the terms of the proposed loan from it. Meanwhile, the Centre for Policy Dialogue (CPD), a private think tank, earlier cautioned the government about some risks of borrowing ECF fund from the IMF, while stating the conditionality-based loans would increase the costs of doing business and limit scope for strategic support to domestic industries. The CPD also said the borrowing from the IMF would limit the government's fiscal flexibility and may lead to a contractionary monetary policy. "..this may constrain the policy space of the government in undertaking supply-side measures for sustained high growth, on one hand, and, on the other, could further aggravate the inflationary and balance of payment pressure," the CPD said in its report titled, 'On emerging challenges for Bangladesh economy in the second half of FY2010-11'. The conditions, as the CPD pointed out, include phasing-out of bank lending rate ceilings, further liberalisation of tariff level, pursuing a monetary tightening stance and putting in place new value added tax (VAT) and income tax laws. However, the think-tank considered some of the conditions such as raising of CNG and furnace oil prices and establishment of a framework to monitor losses of state-owned enterprises as being in line with the necessary reform agenda.