Dhaka Bureau: The International Monetary Fund (IMF) delegation visiting Dhaka will hold talks with Finance Minister AHM Mustafa Kamal next Wednesday. And on this day, the terms of the loan requested from the organization will be finalized.
The terms of the USD 4.5 billion loan from the International Monetary Fund (IMF) include ensuring transparency and accountability in public spending, establishing good governance in the economic sector, reducing the burden of subsidies on the economy, lifting the interest ceiling on banking sector loans and reducing non-performing loans and reserves and non-performing loans. Change in accounting method.
Bangladesh can accept most of these IMF conditions. A few more conditions are said to be under final stage of discussion. These matters will be finalized on Tuesday through a meeting with Finance Department Senior Secretary Fatima Yasmin. Bangladesh will be considered eligible for this loan in the next three years only if it agrees to comply with these conditions.
According to sources, meetings have already been held with the relevant officials of the Ministry of Finance and Bangladesh Bank on various issues of IMF conditions. Yesterday too, IMF officials held two rounds of meetings with the top officials of the two wings of the Finance Department. A meeting was held by the Chief Additional Secretary of Macroeconomics Wing. Md. With Khairuzzaman Majumdar. The other meeting was held with Budget-1 Additional Secretary Sirajun Noor Chowdhury. The IMF’s terms of reference were discussed in the meetings.
However, none of the two additional secretaries agreed to talk about what was discussed in the meeting. Referring to the matter as very ‘sensitive’, it was asked to wait till November 10.
Related sources said that while several conditions of the IMF are good for the economy, they are quite sensitive for the government. For example, the IMF has talked about reducing subsidies. But it has been said by the government that the government is not giving any kind of subsidy on fuel oil. In addition, due to the maximum price increase of 52 percent, now the government energy marketing organization Bangladesh Petroleum Corporation (BPC) is making a profit by selling oil. But at the moment it is not possible to reduce subsidy on fertilizer and electricity. Because inflation has reached close to double digits in the meantime. And reducing the subsidy on these products at this election time is a matter of political decision. Therefore, it is not possible for the finance department to take any decision regarding the subsidy.
According to sources, the IMF has been told that everyone wants the issue of economic governance. Bad debt and foreign exchange reserves have assured Bangladesh to comply with the conditions laid down in international standards of accounting. A positive attitude has been shown to raise the ceiling on loan interest without lifting it altogether.
It has been said that Bangladesh Bank is considering increasing the loan interest rate to 12 percent in some cases in addition to the maximum of 9 percent.
Earlier, in July last July, the finance minister asked the IMF for a loan of 4.5 billion dollars to solve the foreign exchange crisis. A 10-member IMF delegation arrived in Bangladesh on a 15-day visit on October 26 to discuss loan conditions. The delegation is led by Rahul Anand, head of Asia and Pacific division of the organization. In the meantime, the Patinidhidal has held meetings with various departments of the government including the Ministry of Finance, Bangladesh Bank, National Board of Revenue (NBR), Bangladesh Energy Regulatory Commission (BERC).
The IMF has already objected to Bangladesh Bank’s foreign exchange reserve account. The organization’s statement is that reserves should be calculated by excluding about 8.5 billion dollars invested from the 35 billion dollars shown by the central bank. In addition, the IMF has raised questions on various aspects of the country’s macroeconomics, including the lack of good governance in the banking sector, defaulted loans, fixing interest rates on loans and deposits. The organization also wanted to know specifically about the plans of the government and the central bank to restore order in the banking sector.
The IMF has asked the National Board of Revenue (NBR) to raise tax rates and withdraw tax exemptions. For this reason, it is said to collect more tax from the taxpayers at the marginal level by increasing the tax coverage. Besides, IMF has also offered assistance to NBR for capacity building.
The Power Development Board (BPDB) has been asked about alternative arrangements for government subsidies in the power sector. The IMF has proposed price adjustments to reduce the gap between production costs and sales in the power sector by ending subsidies. Instead, it has been asked about the possibility of taking loans from private banks. At the same time, the agency has also sought to know about the way to reduce the rent (capacity payment) of the power plant, the detailed account of income and expenditure of BPDB and the current situation of electricity.
In a meeting with the Ministry of Commerce, the IMF representatives said that the tariff rate is still high on the import of some products of Bangladesh. After transitioning from LDC, the tariff line of Bangladesh should be simplified logically and structurally. Tariff rates are currently high in Bangladesh, with an average of 29.6 percent. According to WTO calculations, it needs to be brought down to 25 percent. Otherwise, there will be a negative impact on Bangladesh’s export earnings after becoming a developing country in 2026 after leaving the list of least developed countries (LDCs). At the same time, what will be the impact on the economy due to the recent imposition of strictness on opening of LAC by Bangladesh Bank on behalf of IMF.
