New deal with IMF soon on policy support instrument
Sunday, 19 August 2007
Shakhawat Hossain
Bangladesh will enter into a new deal with the International Monetary Fund (IMF) under which the country will get its economy reviewed by the multinational institution for attracting overseas aid.
The fresh agreement called Policy Support Instrument (PSI) will be signed shortly as the Poverty Reduction Growth Facility (PRGF), under which the IMF provided aid, expired June last, sources said.
The ministry of finance (MoF) has already sought approval from its adviser Mirza Azizul Islam for signing the new deal.
The PSI, introduced in October 2005, enables the IMF to support low-income countries that do not want or need financial assistance.
The modalities of the PSI were discussed and fixed between two parties during a visit of IMF South Asian executive director Adarsha Kishore in Dhaka early this month, the sources said.
They did not elaborate on the modalities of the PSI. According to the IMF external relations department, PSI encourages countries to deepen and broaden policy ownership.
"It signals that a country's economic policies have been discussed with the IMF," it said, adding that experience to date had been positive for countries and their development partners.
Since it was established by the IMF's executive board, four countries in Africa -- Nigeria, Uganda, Cape Verde, and most recently Tanzania -- have adopted the PSI.
The key features of the PSI, according to the IMF external relations department, is to promote a close policy dialogue between the IMF and a member country and providing more frequent fund assessments of a member's economic and financial policies than what is available through the regular consultation process which is known as surveillance.
On policy support and signaling, the IMF said in recent years several low-income countries have made significant progress toward economic stability and no longer require IMF financial assistance.
However, while they may not want-or need-Fund's financial support, they might still seek ongoing IMF advice, monitoring and endorsement of their economic policies-what is called policy support and signaling.
"Signaling" refers to the information that fund activities can indirectly provide about countries' performances and prospects. Such information can be used to inform the decisions of outsiders.
In low-income countries, such signals previously have been sent mainly in the context of the IMF's PRGF.
The country signed the PRGF with the IMF in 2003. It received about US$467.4 million until October 2006 in five installments.
The Washington-based multilateral agency approved a total of $590.7 million under the PRGF, which includes $78.7 million as Trade Integration Mechanism (TIM) credit.
Bangladesh will enter into a new deal with the International Monetary Fund (IMF) under which the country will get its economy reviewed by the multinational institution for attracting overseas aid.
The fresh agreement called Policy Support Instrument (PSI) will be signed shortly as the Poverty Reduction Growth Facility (PRGF), under which the IMF provided aid, expired June last, sources said.
The ministry of finance (MoF) has already sought approval from its adviser Mirza Azizul Islam for signing the new deal.
The PSI, introduced in October 2005, enables the IMF to support low-income countries that do not want or need financial assistance.
The modalities of the PSI were discussed and fixed between two parties during a visit of IMF South Asian executive director Adarsha Kishore in Dhaka early this month, the sources said.
They did not elaborate on the modalities of the PSI. According to the IMF external relations department, PSI encourages countries to deepen and broaden policy ownership.
"It signals that a country's economic policies have been discussed with the IMF," it said, adding that experience to date had been positive for countries and their development partners.
Since it was established by the IMF's executive board, four countries in Africa -- Nigeria, Uganda, Cape Verde, and most recently Tanzania -- have adopted the PSI.
The key features of the PSI, according to the IMF external relations department, is to promote a close policy dialogue between the IMF and a member country and providing more frequent fund assessments of a member's economic and financial policies than what is available through the regular consultation process which is known as surveillance.
On policy support and signaling, the IMF said in recent years several low-income countries have made significant progress toward economic stability and no longer require IMF financial assistance.
However, while they may not want-or need-Fund's financial support, they might still seek ongoing IMF advice, monitoring and endorsement of their economic policies-what is called policy support and signaling.
"Signaling" refers to the information that fund activities can indirectly provide about countries' performances and prospects. Such information can be used to inform the decisions of outsiders.
In low-income countries, such signals previously have been sent mainly in the context of the IMF's PRGF.
The country signed the PRGF with the IMF in 2003. It received about US$467.4 million until October 2006 in five installments.
The Washington-based multilateral agency approved a total of $590.7 million under the PRGF, which includes $78.7 million as Trade Integration Mechanism (TIM) credit.