Getting 2nd installment of IMF loan
Staff Correspondent: Bangladesh Bank officials have sought regulatory relax of the condition for improving the net reserves of foreign currency at $24.46 billion by the end of June 2023. The actual reserve stood at about $18 billion.
The International Monetary Fund (IMF) approved a $4.7 billion loan to Bangladesh last February. At that time various conditions are given before each installment is discounted. For the second tranche of this, the organization had set a condition of keeping the net international reserve (NIR) of $24.46 billion by June this year, although Bangladesh failed to fulfill it.
Until then, Bangladesh’s reserves were $ 3 billion short of the IMF target. Gross International Reserves (GIR) as of June stood at $24.75 billion. So, Bangladesh Bank has sought exemption from NIR target conditions. The first review opening meeting of the central bank with the organization begins yesterday. Several top-level officials of Bangladesh Bank confirmed this information to Daily Industry that the matter has discussed in the meeting.
They said that the delegation of the organization came to see the progress of the targets given by the IMF before giving the second tranche. Most of their targets have been implemented. However, we were lagging behind the net reserve target. Therefore, they will be exempted by discussing this issue. However, there should be no fear of getting the second installment of the loan for this. Because the condition of Bangladesh is not so bad.
However, Bangladesh Bank has not received any official statement on this matter. According to sources, the International Monetary Fund (IMF) had given six conditions for the loan of $4.7 billion till June this year. Bangladesh could not fulfill two of them. Why Bangladesh has failed to fulfill these two conditions, the Ministry of Finance has written a letter explaining to this lender.
It is known that apart from Net International Reserve (NIR), Bangladesh has failed to fulfill the other condition, which is the target of minimum revenue collection. Last fiscal year, the National Board of Revenue (NBR) collected Tk 14,000 crore less than the revenue target set by the IMF. For this, NBR has to collect 0.5% additional revenue in proportion to GDP in the current financial year. As per the IMF conditions, the NBR will have to collect around Tk 25,000 crore more revenue than its normal target in the new financial year.
The conditions that Bangladesh has been able to fulfill by June are the introduction of the corridor system for determining interest rates and the publication of the reserve report as per IMF BPM-6. In this case, Bangladesh Bank discloses Gross International Reserve (GIR) data, not Net International Reserve (NIR). Currently, there is a reserve of $18 billion as GIR. And the central bank has $27.05 billion as its own. Besides, Bangladesh Bank failed to meet the September target. According to the terms, Bangladesh was supposed to keep $25.32 billion as NIR in September. But here it fails as NIR as well as fails as GIR.
Apart from this, the agency was also required to introduce a market-determined exchange rate of the currency and finalize the risk-based supervisory action plan as well as publish the financial stability report of the banks. Bangladesh has been able to fulfill these two conditions.
Sources said that the IMF delegation has already arrived in Dhaka to start the first review of the program to assess the quantitative targets of the loan program and the progress of implementing reforms. The mission is led by Rahul Anand, head of the IMF’s Asia-Pacific Division. On the second day of his stay in Dhaka, the Governor of Bangladesh Bank Abdur Rauf Talukder and Finance Secretary Khairuzzaman Majumdar were attended in the meeting with IMF officials. During their stay in Dhaka till October 19, they will hold a series of meetings with more than a dozen ministries, departments and organizations of the government. As part of that, the opening meeting with Bangladesh Bank has started yesterday.
The organization will hold several meetings at the head office of Bangladesh Bank. IMF representatives were busy all day. It is known that they have participated in various technical meetings. Bangladesh Bank Governor Abdur Rauf Talukder hold a meeting with the IMF delegation on the day. He was accompanied by Deputy Governors. Besides, Head of BFIU, Chief Economist and executive directors in charge of various departments and spokesperson of Bangladesh Bank attend the meeting. The IMF delegation participated in information review discussions with the directors and responsible officers of various departments.
According to Bangladesh Bank sources, various problems of the financial sector has discussed in the meeting. This includes a review of recent performance and outlook of the financial sector, risks, new regulations, climate stress testing and other key challenges and action plans. Besides, economic development, gross reserve development, various issues of banking sector and security assessment-related discussions has been prioritized. The delegation will review the progress and development of Bangladesh Bank’s reform plans during their visit.
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