IMF sceptical about 35pc-higher revenue target, bank overhauls

International Monetary Fund creditworthiness-review mission appears unsatisfied with Bangladesh finance officials' explanation over ramped-up revenue target handed to the revenue board for the current fiscal year, and the means of mobilisation.

Finance Division sources said the visiting IMF team, at a meeting last week, sought to know specific grounds and rationale of raising the target steeply by over 35 per cent compared to last fiscal's actual earnings.

In the current fiscal year, the National Board of Revenue (NBR) has been given the target of generating Tk 4.99 trillion compared to Tk 4.8 trillion in the previous year.

Against the target of Tk 4.8 trillion for the fiscal year 2024-25 the revenue board could generate Tk 3.68 trillion, leaving a wide shortfall.

Officials said the IMF team, which has been in Dhaka since October 29 reviewing progress on the terms binding the Fund's US$5.5-billion lending programme--pending payout of next tranche--also wanted to know the rationale for the fixing of such a big revenue-earning target.

"They also inquired whether the revenue board has the capacity to generate such a large sum of money as revenue," one of the sources said.

Finance Division officials, sources said, at the meeting informed the IMF team that the total expenditure for the current fiscal budget was set at Tk 7.9 trillion. The main source of earnings of the government is revenue sector while external and domestic borrowings cover a portion of the needs.

They also pointed out that government's annual expenditure has been on the increase every year and so the earnings also need to be increased. Thus the NBR has been given such a big target though the previous records of revenue generation compared to the annual target were far off the expectations.

The finance officials at the meeting also argued that the tax-to-GDP ratio in Bangladesh is slightly higher than 7.0 per cent, one of the lowest in the world, which leaves tax potential untapped.

"The NBR has the scope to enhance revenue generation if proper steps are taken," the government side was quoted as saying.

However, the Finance Division officials at the meeting could not be specific what kinds of additional steps can help generate increased revenue to meet the target.

Sources say the IMF team will sit with the Macroeconomics Wing of the Finance Division Wednesday (tomorrow) where the officials have to give an explanation on the rationale behind raising the target so high compared to the immediate-past achievement.

Meantime, on Monday, the IMF team at a meeting with finance division and financial institutions division of the finance ministry made a stocktaking of measures taken by the post-uprising government for banking-sector reforms against the backdrop of past mismanagement and alleged plunder.

They, particularly, inquired about the bank-resolution procedure, the possible ways of arranging funds for the five banks up for merger into one state-owned shariah bank.

Also, they discussed recapitalisation of other banks, if necessary, the backup funding arrangements for the deposit-protection fund, establishing indemnity for central bank's (potential) liquidity provisions to weak banks, and legal and operational efforts to support banks' asset recoveries.

A major point of reappraisal was corporate insolvency act.

syful-islam@outlook.com