This has stirred unease for our economy as International Monetary Fund (IMF) has delayed further to release the remaining fourth and fifth tranches of the $4.7 billion loan package. Although the amount totaling $2.31 billion was supposed to be disbursed in last February, it is now uncertain for a longer period.
This outcome about IMF's stalled loan disbursement came to light recently after a high-level Bangladesh delegation led by Finance Adviser of the interim government Dr Salehuddin Ahmed had discussions with the IMF team on the sidelines of the IMF-World Bank Spring Meetings in Washington. But both sides agreed to continue meetings through next Saturday.
The disagreements mainly focused on two issues-revenue reforms by expanding the tax-GDP ratio and flexible exchange rate. There were also other conditions set by the global lender including maintaining adequate foreign exchange reserves, strengthening banking sector governance, improving public financial management and enhancing climate resilience through sustainable initiatives.
However, Bangladesh has already met some of the conditions and been working to implement a package of economic reforms. For instance, the present administration has already achieved the target of foreign currency reserves since September.
First of all, Bangladesh needs IMF funding very badly. This is because fund shortages could add pressure on foreign reserves and complicate budgetary planning for the next fiscal year. So, it is necessary to reach a consensus with the IMF before the announcement of our budget in June.
Understandably, Bangladesh is fully in agreement with the IMF to carry out reforms by taking domestic political and economic realities into consideration. For instance, the multilateral lender called for greater flexibility in the exchange rate by allowing it to be determined entirely through market forces. In this case, Bangladesh proposed a gradual adjustment to the exchange rate mechanism, but the IMF wanted a clear, time-bound commitment before approving further loan disbursements.
Another contentious issue is revenue reform for which IMF has urged a clearer path by pointing a finger at revenue collection shortfalls in recent months. It has also suggested structural reforms at the National Board of Revenue (NBR), including separating policy formulation from implementation in order to improve efficiency and transparency. This is a vital reform the government has agreed to in principle but wanted to adopt a go-slow approach.
Although the IMF is in view that Bangladesh is faring well in stabilizing its macro economy despite global and domestic crises, the country has serious weaknesses in the exchange rate regime, revenue generation, and financial sector supervision, particularly related to the high levels of non-performing loans.
Since the interim government is committed to speeding up massive political and economic reforms, we believe that the disagreements with IMF will be eased that will facilitate the release of the remaining funds shortly.
