Bangladesh is set to receive a $2.39 billion loan installment from the International Monetary Fund (IMF), pending a review of the agreed-upon conditions. To assess the progress on these conditions, an IMF delegation will arrive in Dhaka on April 5.
According to sources from the Finance Division of the Ministry of Finance, the IMF team will evaluate the implementation of various loan conditions before approving the disbursement. The delegation will conduct meetings with multiple government departments from April 6 for two weeks.
During their visit, the IMF representatives will engage in discussions with the Finance Division, the National Board of Revenue (NBR), the Power Division, the Power Development Board, the Bangladesh Energy Regulatory Commission (BERC), and the Energy and Mineral Resources Division. The delegation will conclude their visit with a press briefing on April 17. Additionally, they will hold meetings with Economic Advisor Salehuddin Ahmed on April 6 and April 17.
Key Challenges in Securing IMF Funds
Experts highlight three major challenges that Bangladesh must address to receive both loan installments:
- Adopting a market-driven exchange rate.
- Increasing revenue collection by 0.5% of GDP.
- Separating tax policy from tax administration under the NBR.
While the Bangladesh government has assured the IMF of its commitment to fulfilling these conditions, sources from Bangladesh Bank and the Ministry of Finance indicate that progress has only been made on separating tax policy from tax administration, with little advancement in the other two areas.
When asked about implementing a market-driven exchange rate by June, Economic Advisor Salehuddin Ahmed stated in a recent pre-budget discussion that the matter remains uncertain. He emphasized the need to monitor inflation first, warning that a sudden shift to a market-based exchange rate could create economic instability, similar to situations in Pakistan and Sri Lanka.
Current Exchange Rate Policy
Currently, Bangladesh follows a crawling peg system to regulate exchange rates, preventing sudden fluctuations in the value of the US dollar. Under this system, the exchange rate remains stable at 122 Bangladeshi Taka per dollar.
Since the IMF loan program began on January 30, 2023, Bangladesh has received $2.31 billion across three installments. The remaining $2.39 billion is pending approval. While issues delayed the fourth installment, the government hopes to receive both the fourth and fifth installments together by June.
In a recent discussion with the Economic Reporters’ Forum (ERF), Economic Advisor Salehuddin Ahmed reiterated that the IMF loan is essential for budgetary support. Consequently, both the Bangladesh government and the IMF have agreed to release the two upcoming installments together for the 2024-25 fiscal year.
