IMF's new loan programme may begin in January next year

The International Monetary Fund's (IMF) new loan programme for Bangladesh, prioritising revenue collection growth and banking sector reforms, may begin next January.

A fact-finding mission led by Ivo Krznar, the IMF mission chief for Bangladesh's loan programme, will hold discussions from tomorrow with Bangladesh Bank, the finance ministry, and other relevant ministries, divisions, and agencies to gather updates on reform programmes and government actions taken so far.

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A finance ministry official said the mission will be brief, lasting up to five days, compared with at least 15 days for previous IMF loan or instalment review missions.

He told The Daily Star earlier this month, on July 7, that preliminary discussions on the new programme will begin this October, on the sidelines of the IMF-World Bank Annual Meetings in Thailand, with the mission visiting Bangladesh immediately afterwards.

Talks on the core reform programme and loan amount will start in late October or November.

Subject to satisfactory progress, the new loan proposal will go before the IMF Executive Board for approval in January next year, the official added.

Another finance ministry official said on July 9 that the current fiscal year's budget has also been aligned with the IMF's reform programme.

The IMF stipulated a tax-to-GDP ratio of 9.2 percent and a budget deficit below 4 percent of GDP, compared with a previous allowance of up to 5 percent in the main budget, though actual implementation typically stayed below 4 percent.

The new programme may be designed by balancing unfinished reforms from the previous one with the priorities of the new government, ministry officials said.

The IMF earlier this year agreed to Bangladesh's request for a new loan programme to replace the existing $5.5 billion arrangement, pending approval from its Executive Board.

"Any new arrangement would need to be based on Bangladesh's balance-of-payments needs and strong policy commitments anchored by a credible reform agenda, and would be subject to the IMF's policies and Executive Board approval," Krznar said in a statement last month.

IMF staff are engaging with the Bangladeshi authorities on their reform agenda and policy priorities as part of the fund's consideration of next steps, he said, adding that the upcoming visit would allow the IMF to assess recent economic developments and evaluate the outlook and reform challenges.

The development followed a virtual meeting held on May 21 this year between Finance and Planning Minister Amir Khosru Mahmud Chowdhury and IMF Deputy Managing Director Nigel Clarke.

On May 25 this year, the finance minister said the government and the IMF had agreed to a new three-year programme.

The IMF approved $4.5 billion for Bangladesh in January 2023 under three facilities — the Extended Credit Facility, the Extended Fund Facility, and the Resilience and Sustainability Facility — later expanding it by $800 million to $5.5 billion.

Bangladesh has so far received $3.6 billion across five tranches. The sixth, part of the pending $1.3 billion, has been on hold since November last year.