12:01 AM, July 20, 2014 / LAST MODIFIED: 01:53 AM, March 08, 2015

Another $1b loan may come from IMF

Another $1b loan may come from IMF

Rejaul Karim Byron

Bangladesh may get another Extended Credit Facility (ECF) loan from the International Monetary Fund after successfully completing the current programme.
The government has already held preliminary talks with the multilateral lender, where it was indicated that a $1 billion interest-free loan would be extended.
But the formal discussions will start at the beginning of next year, said a finance ministry official.
Early this month, Naoyuki Shinohara, deputy managing director of IMF, said: “The IMF will maintain a close dialogue with the Bangladesh authorities on our mutual engagement, including on whether there will be a successor arrangement.”
ECF is an IMF scheme to provide financial assistance to countries to help maintain sound balance of payments.
Under the current ECF programme, the country has already received five of the seven instalments, with the remaining two due by April next year.
The government needs to fulfil certain conditions before the IMF releases the two instalments, which the official said would not be difficult.
The IMF has already reviewed the country's achievement on the macroeconomic front on the basis of the data available until September last year.
The GDP growth has been 6.1 percent on average over two years and per capita GDP (US dollar) grew 6.5 percent, the review said.
When the ECF was approved in April 2012, foreign currency reserve stood at $9.5 billion and it rose to $16 billion in September 2013.  In recent times, the reserves have piled upwards $22 billion.
In the review period, non-food inflation steadily declined and tax revenue increased 0.4 percentage points of GDP, the IMF said.
The poorly targeted energy subsidies were curbed during the two-year review period, creating space to execute development and social spending, it said.
At the end of September last year, a total of 27 structural benchmarks and prior actions had been completed.
Major laws, too, were passed during the ECF programme period, such as the Value-Added Tax Law, Banking Companies Act and Demutualisation Act for the stock exchanges.
The reforms that cannot be made during the present ECF programme will be seen through in the next one, according to the official.
The main focus will be on implementation of the VAT and new income tax law and offloading the shares of state banks, the official added.
About the reforms that will be emphasised if the IMF continues with another programme, Shinohara said: “Whatever the agreed upon modality, the IMF will continue to work with the authorities to support their policies to safeguard macroeconomic and financial stability and ensure sustained, inclusive growth.”
The rate of interest on the existing ECF loan of around $1 billion is zero and is payable in 10 years but the repayment will start 5.5 years after the start of loan disbursement.


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