IMF credit-review mission due on Apr 5
BD needs to add Tk570b to raise tax-GDP ratio
Lender communicates updated condition to be met in next fiscal for remaining $2.39b of $4.7b package
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Bangladesh will need to add Tk 570 billion to its tax-to-GDP ratio under one of updated conditions the IMF sets for releasing the remaining US$2.39 billion from its lending package.
Officials say the International Monetary Fund (IMF) is set to revise the target for enhancing the country's tax-GDP ratio by 1.1 per cent from 0.7 per cent for the upcoming fiscal year.
The upward adjustment would require the National Board of Revenue (NBR) to mobilise the aforesaid additional amount of Tk 570 billion in tax revenue in the fiscal year 2025-26.
The amount is equivalent to one and a half months' collection by the NBR this year.
Officials said they had received the message on upward revision of the tax-GDP target ahead of an IMF mission's visit to Bangladesh on April 5 next.
The IMF delegation is likely to place the revised conditions on disbursement of the deferred fourth and the fifth tranches of its $4.7-billion loan on April 6, 2025 at a meeting with the revenue board.
Currently, the tax-GDP ratio is below 7.9 per cent in Bangladesh-rated one of the lowest in South Asia for reasons that include much-needed reforms and digitisation.
A senior official of the NBR said the targets revised upward accumulate last three years' missed ones which require 0.5- percent additional tax-GDP each in FY 2023-24 and FY 2024-25 and 0.7 in FY 2025-26.
"Since the NBR could not meet the targets, the multilateral lender has accumulated the left-out or missed targets for the next FY," he added.
Prodded by the raised targets for domestic revenue mobilisation, the NBR plans supplementary tax measures for the next budget.
Any tax benefits for industries that are scheduled to expire on June 30, 2025 are unlikely to get extension, save few special cases in greater national interest.
"We are unable to extend tax benefits for the industries that have long been enjoying the incentives," says the official about tightening fiscal management.
The industries may include manufacturers of electrical and electronic products such as air-conditioner, refrigerator, and television.
This year, the NBR increased the VAT, middle of the year in January, on 100 products to meet the IMF-set target of mobilising an additional Tk 120 billion through policy intervention.
Officials of the Ministry of Finance (MoF) say the IMF should not be held responsible alone for the tax hike--the government also needs domestic revenue at this stage for combating ongoing economic challenges.
There is growing concern about placing the loan proposals during the IMF board meeting in June, too, as it had been deferred twice from February 5, 2025 to March 12 and later to June 2025.
The last mission of the Fund took place in December last. Chris Papageorgiou, the chief of the IMF's visiting staff mission, led the mission.
Finance Adviser Dr Salehuddin Ahmed, earlier at a meeting with the Economic Reporters Forum, said the government was hopeful about getting both the tranches--fourth and fifth--of the IMF credit together in June next.
Bangladesh is supposed to get US$ 2.39 billion in next two tranches of total $4.70 billion worth of IMF lending package attached with strings.
The IMF mission, second one in the current interim government's tenure, will hold meetings with the MoF, Bangladesh Bank, NBR, Financial Institutions Division, PDB, Power Division, Bangladesh Energy Regulatory Commission, and Energy Division.
A wrap-up meeting covering the rigorous negotiations and indications will be held on April 17, 2025.
The IMF lending programme commenced in 2023 on January 30. Bangladesh has received three tranches so far with the first one fetching $476.3 million on February 2, 2023, the second tranche $681 million in December 2023 and the third one worth $1.15 billion in June 2024.
The three dollops received so far came to $2.31 billion and the rest $ 2.39 billion remained pending.
Three major lending conditions are market-based currency rates, increasing the tax-to-GDP ratio, and separation of tax policy from tax administration.
Revenue officials have said the bifurcation of tax policy from tax administration would require issuing an ordinance which may not be finalized before June.
Also, Dr Salehuddin Ahmed earlier had told the media that the current economic context is not fit to take the load of market-based currency rates.
Currently, the currency market has been stabilized at Tk 122 in exchange with the US dollar through crawling-peg mechanism.
Distinguished fellow of the Centre for Policy Dialogue (CPD) Prof Mustafizur Rahman says the existing situation is favourable for getting the fourth and fifth tranches released from the IMF.
"I am hopeful that Bangladesh will get the budget support in June," says Dr Rahman, on a note of optimism.
The noted economist, however, predicts the IMF may tag some close timelines to pursue its recommendations.
Responding to a query on recalculation of GDP or gross domestic product that was inflated by the past government, Dr Rahman says whether the GDP size stands or not, the IMF target meant Bangladesh needs to increase the tax-to-GDP ratio from that base.
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