IMF begins talks on fresh loans

The third review mission of International Monetary Fund (IMF) yesterday entered into discussions with the interim government of Bangladesh regarding potential conditions for a fresh $3 billion loan.

The IMF mission, whose primary task is to assess the country's progress in meeting its criteria for releasing the fourth tranche of a $4.7 billion loan, will continue the discussions until December 17.

The IMF mission led by Chris Papadakis held separate meetings with Finance Adviser Salehuddin Ahmed and Bangladesh Bank Governor Ahsan H Mansur alongside other senior officials.

"We discussed the disbursal of the existing loan package and also sought extra funds. As the government is going for many reforms, it will need more money," Ahmed said after the meeting.

But other than financing reforms, particularly in the banking sector and revenue collection, the funds will also be needed to address any deficit in the country's current account and foreign exchange reserve.

Having already sought funds for its reform activities, the government is expecting a total commitment of $6 billion from the World Bank, IMF, OPEC Fund and others by next June, he added.

After taking office in August, the interim government said it would seek an additional $3 billion loan from the IMF to reduce the existing pressure on the foreign exchange reserves.

On the last week of September, an IMF mission came to take stock of the country's economic situation and what it requires to recover.

In October, Bangladesh opened discussions with the IMF regarding the new loan in a sideline meeting when Ahmed visited Washington to attend the annual meeting of the World Bank and IMF.

Following this discussion, the mission came to Bangladesh to review the country's performance and compliance with structural reform conditions for the fourth tranche of the $4.7 billion loan.

The finance adviser informed that the mission came to observe the country's condition in terms of revenue collection, its fiscal deficit, GDP growth, and inflation.

"They want to know what strategies the government has taken and will take. The mission also will meet with the central bank to see what steps were taken to reform the banking sector," he said.

Ahmed also informed that the government had argued that stability has returned to the banking sector in part.

"Already, the foreign exchange rate is not fluctuating heavily like in previous months," he said.

Besides, even a troubled lender like Islami Bank is starting to perform well even though it initially needed liquidity support.

"So, all other the banks will also soon become financially stable," he hoped.

Regarding the economic situation, Ahmed said inward remittance was at a satisfactory level and export growth was not low either.

Furthermore, Ahmed said although imports are still low, they have been increasing lately, with the interim government working to raise the inadequate level of capital machinery imports.

"Whatever measure we take will be good for the country in the long run. Besides, we will not take any whimsical steps that the next government cannot follow," he said.

"The IMF will give some targets (for the new loan) and we will try to fulfil them," Ahmed added.

The IMF mission expressed satisfaction about the reform activities of Bangladesh Bank but is concerned about the stubbornly high inflation rate, according to central bank officials present at the meeting.

The central bank officials told the IMF mission that the policy rate has been increased twice and inflation has not been tamed. Still, they expect it will at least relieve some of the inflationary pressure.

"The IMF mission said the policy rate could be increased further if inflation does not come under control," said a Bangladesh Bank official on condition of anonymity.

The multilateral lender approved the $4.7 billion loan in January 2023. Bangladesh has already received $2.3 billion of the total amount in three tranches.

Of the $2.3 billion received so far, $1.1 billion arrived as the third tranche in June this year.