IMF fourth tranche: committee to review progress on loan conditions

Amid the prevailing economic challenges, the implementation coordination committee is gearing up to assess progress on meeting the loan conditions of the International Monetary Fund, or IMF, aiming for the seamless release of the fourth tranche.

The discussion will address economic issues, including political transitions, deteriorating law and order affecting trade, delays in implementing and halting projects initiated by the previous government, revenue deficits, tax-to-gross domestic product ratio, reserve adequacy, and inflation spikes.

Representatives from the finance ministry, Bangladesh Bank, Planning Commission, National Board of Revenue, or NBR, Energy and Mineral Resources Division, and other stakeholders tied to the loan programme will attend the meeting on Wednesday.

The IMF’s next mission is scheduled for Dec 3.

Ziaul Abedin, additional secretary of the macroeconomic wing of the Finance Division and chair of the meeting, said: “This meeting is part of our preparatory measures. We believe there will be no issues from our end in meeting the conditions.”

When asked if all conditions for the fourth tranche had been met, he said: “There are no problems on our side. We have fulfilled all the requirements.”

The meeting’s agenda includes assessing progress on policy actions under the loan programme and identifying measures needed to meet deadlines within the fiscal year.

During the IMF’s previous mission, NBR faced scrutiny for failing to meet a target of increasing the tax-to-GDP ratio by 0.5 per cent in FY 2023-24.

While the revenue board met its value-added tax targets, it fell short in income tax and customs duties.

In response to IMF pressure, NBR has conducted a tax expenditure analysis, removed exemptions in certain sectors, and imposed a 27.5 per cent corporate tax on IT firms that fail to digitise all transactions, replacing the earlier zero-tax benefit.

Bangladesh received $1.15 billion in its third tranche of the IMF loan on Jun 27.

This included $932 million under the Extended Credit Facility, or ECF, and Extended Fund Facility or EFF, and $220 million under the Resilience and Sustainability Facility, or RSF.

Initially, Bangladesh was set to receive $686 million in the third tranche, but the IMF increased the ECF and EFF allocations, allowing for the higher disbursement.

The IMF approved the $4.7 billion loan in January 2023 to help Bangladesh address a foreign currency crunch.

The South Asian country received the first tranche of $476 million in February 2023, followed by $681 million in December.

To receive the third tranche, Bangladesh had to meet a net reserve target of $14.76 billion by the end of June 2023, revised down from $20.10 billion.

Bangladesh Bank, which provides net reserve data to the IMF under the BPM6 method, last reported reserves below $20 billion.

As of Nov 12, following the Asian Clearing Union, or ACU, import bill payments, reserves stood at $18.19 billion.

Under the revised conditions, the country must maintain net reserves of $14.88 billion by the end of September and $15.30 billion by December 2024.