IMF board okays $1.152b for Bangladesh

Bangladesh now goes to receive US$1.152 billion from the ongoing $4.7- billion IMF loan programme as the Executive Board of the International Monetary Fund approved the third tranche of the loan.

Bangladesh Bank Executive Director Md Mezbaul Haque, also spokesman for the central bank, told the FE on Monday night the IMF board meeting, held in Washington, DC, endorsed disbursement of the much-sought-after fund.   

The multilateral lender granted the loan to Bangladesh in January last year to help regain macroeconomic stability as the economy of the South Asian nation had been facing severe turbulence since the Covid-19 pandemic and the war in Ukraine.

Earlier on May 08, the IMF reached a staff-level agreement with the government of Bangladesh on the policies needed to complete the second review of the ongoing lending programme.

This time, Bangladesh was supposed to get $668 million after the completion of second review but the IMF staff team agreed to raise the dollop to $1.15 billion on request from the government.

Of the total sum, $932 million is coming as Extended Credit Facility (ECF)/ Extended Fund Facility (EFF) while $220 million comes as Resilience and Sustainability Facility (RSF).

After reaching the staff-level agreement the IMF in a release in May said Bangladesh made significant progress on structural reforms under the IMF-supported programme, including the implementation of a formula-based fuel-price-adjustment mechanism for petroleum products.

It noted Bangladesh authorities adopted some critical reforms to address macroeconomic imbalances, including the realignment of the exchange rate, adoption of a crawling-peg regime, and the full liberalisation of retail interest rates.  "It is imperative to sustain the reform momentum and ongoing efforts towards macroeconomic stabilisation," the Fund said about the dos, some of which involve pains because of hard reforms.    

Finance Division officials said Bangladesh met one but all other quantitative performance criteria and indicative targets set for the release of the third tranche of the loan package, with dateline in December last year.

So, they were highly hopeful about the release of the third tranche of the loan without facing any hurdles.  The one major condition Bangladesh could not meet is the requirement of net international reserve of foreign currencies.

Thus, the IMF staff team, according to the Finance Division officials, agreed to revise down the forex-reserves target for June to $14.769 billion from previous target of $20.10 billion.

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