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High-level discussions at the Washington headquarters of the IMF on stalled fund release also ended sans agreement, leaving disbursement of the fourth and fifth tranches of its $4.7-billion loan to Bangladesh cloaked in uncertainty.
Sources at Bangladesh Bank (BB) gave such an indication Monday about outcome of the negotiations with the International Monetary Fund on the sidelines of the IMF-World Bank Spring Meetings.
A high-powered Bangladeshi delegation led by finance adviser of the interim government Dr Salehuddin Ahmed attended the meeting in the capital of the United States to talk out latest twin disagreements over more flexible exchange rate and significantly expanding the tax-GDP ratio in the country.
The disagreements between an IMF mission to Bangladesh and their counterparts held back an envisaged staff-level agreement leading to disbursement of the fourth and fifth tranches worth $650 million each.
In closed-door meetings in Washington, DC, the Bangladeshi delegation convinced the IMF to relax an ambitious tax-revenue-mobilisation target set by the Fund for the National Board of Revenue (NBR), but the lender stuck to its guns over more flexible dollar-taka exchange rates.
As a matter of fact, the sources said, the IMF's staff-level agreement with Bangladesh on disbursement of $1.3 billion under its $4.70-billion lending package for stabilising the country's macroeconomic situation stays held in abeyance.
Eventually, the stalemate over getting the IMF funds waters down to the exchange-rate dead-end as the Bretton Woods institution kept arm-twisting for a more flexible exchange regime during the IMF mission's latest Dhaka visit.
In response, the central bank governor, Dr Ahsan H Mansur, and other high officials opposed the recommendation on grounds that it could create volatility on the foreign-exchange market, which remained stable for the last few months following troubleshooting action.
As both sides fell apart trying to reach a consensus in Dhaka because of the major disagreement, the discussion was taken to the American capital city of Washington where the Spring Meetings were held last week.
Seeking anonymity, a BB official says no decision was made regarding the fund disbursement as the spring meet concluded and Bangladesh delegation left the US for home.
"It means the release of the fourth and fifth tranches by June next remains highly uncertain," the official told The Financial Express.
According to the official, the central bank brought major changes in the exchange-rate system introducing daily twice-set spot-reference-rate- driven exchange mechanism on IMF prescription.
"Since the system came into effect from January last," the central banker notes, "the exchange rate on the interbank spot market remained almost stagnant near Tk 122 a US dollar in the last several months, which becomes a matter of concern for the IMF which smells some sort of moral suasion the banking regulator applying to keep the exchange rate in check."
Because of the fact, the official adds, the IMF has been pushing for a more flexible exchange rate which will not be fixed to certain level and will help support fully floating exchange-rate regime in the near future.
Speaking on condition of anonymity, another BB official says getting funds from the IMF by June next becomes largely uncertain but there is a little possibility as the multilateral lending agency has given a timeframe for the BB over the more flexible exchange rate up to middle of next month (May).
"So, there is still a hope. Let's see," the central banker told the FE writer, adding that the country's macroeconomic situation, including the forex reserves, keeps improving in recent times. Despite the fact, the IMF sticks to its decision over more flexible exchange rate, which is "not understandable".
"If we allow more flexibility, it could raise inflationary burden through creating volatility on the forex market," the central banker added.
The next IMF board meeting is expected to be held in June and the multinational lender, in practice, fixed their meeting agenda at least a month earlier. It means the BB will have to convince the IMF by the timeline to secure the funds.
However, the IMF has agreed to cut down the additional tax-revenue- collection target by Tk 170 billion for the next fiscal year taking into consideration the current economic perspectives that cannot bear the burden of higher taxation in the upcoming budget.
As per the latest target, the NBR will have to collect Tk 200 billion from income tax, Tk 180 billion from VAT, and Tk 20 billion from customs through fiscal policy and administrative measures.
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