DHAKA BUREAU: The International Monetary Fund (IMF) has approved a proposal to waive $682 million for the second tranche of the loan in favor of Bangladesh. Soon, this money will be transferred from the IMF to Bangladesh Bank’s Washington account. Bangladesh was approved for the second tranche of the loan without implementing two basic IMF conditions. If this amount is discounted, the country’s foreign exchange reserves will increase slightly. This will alleviate the dollar crisis to some extent. Besides, two more loans from the Asian Development Bank and the World Bank are expected to be received by the end of this month.
Finance Minister AHM Mustafa Kamal said that the second tranche of the USD 4.7 billion loan was approved at the IMF board meeting. In the second installment, Bangladesh will get a loan of 682.2 million US dollars. The Ministry of Finance announced this information in a press release at 12:30 p.m.
The meeting of the executive council of the organization was held at the headquarters of the IMF in Washington on Tuesday at 9 p.m. Bangladesh time. In that meeting, approval was given to waive off the second installment of the loan. The meeting also proposed to waive off the second tranche of Sri Lanka’s debt. According to sources, on January 30 of this year, the IMF’s executive board approved a loan proposal of 4.7 billion dollars in favor of Bangladesh. The loan is supposed to be available in seven installments every six months, with a discount on each installment. That is, the entire installment amount will be available in 42 months from the date of approval. The last installment of the loan is due in December 2026. The condition is that, before each installment waiver, the loan waiver will be decided after reviewing the progress of the implementation of the loan conditions. The average loan interest rate is 2.2 percent.
For the first installment of the loan, Bangladesh received 476 million dollars from the IMF in February this year. I am now getting the second installment of the loan. A mission came to Dhaka early last October to review the progress of the implementation of IMF conditions in the second round. They stayed in Dhaka for two weeks, met with various organizations, and made an assessment of the economy. At that time, Bangladesh sought time from the IMF to implement some conditions. In light of this, the IMF prepares a report and presents it to the Executive Board. In light of this, the board approved the loan waiver proposal.
According to sources, Bangladesh could not implement two basic conditions of the IMF. These are to keep the country’s foreign exchange reserves at least 2,446 million dollars at the end of June. At that time, the reserve was slightly less than that. Reserves were about $3 billion less than the target, as dollars had to be spent from the reserves, especially for importing fuel, fertilizers, and food products.
Besides, the target of minimum revenue collection has not been met. In the fiscal year 2022–23, the government has stipulated a revenue collection of at least three lakh, 45 thousand, and 630 crore rupees. It was not possible, as the country’s economy also suffered a recession due to the impact of the global recession. Meanwhile, the IMF has taken the initiative to increase the ratio of tax to GDP by 10.5 percent by June. Besides, many other conditions have been fulfilled.
Since the beginning of 2022, due to the impact of the Russia-Ukraine war, the country’s import costs have also increased uncontrollably due to the increase in the price of goods in the international market. This led to a dollar crisis. Gradually, it became evident. Foreign exchange reserves are also strained. Bangladesh seeks loan assistance from the IMF as an early warning to deal with this situation. The IMF agreed to give the loan after analyzing the overall data on the country’s economy.
The IMF loan is called the ‘Multilateral Credit Window’. The IMF assesses risk by analyzing the cross-section of a country’s economy. It imposes various conditions to deal with these risks. Loans are given only if those conditions are met. For this reason, getting a loan from the IMF means that there is less risk involved in the debt repayment of the respective country. For this reason, if the IMF gives a loan to a country, other organizations also show interest in lending to that country. 500 million dollars were received from the World Bank after receiving the IMF loan. I’m going to get loans from ADB and other organizations too.
