Govt goes slow on $3b IMF loan offer
In a rare move, the government is not rushing into a $3-billion loan offer from the International Monetary Fund (IMF) as Bangladesh has received a huge amount of budget support from multilateral lenders to fight the impacts of the coronavirus pandemic.
Last month, the IMF informed the country that it could avail the new credit as budget support on the condition of implementing 33 reform programmes.
The offer came after the board of the lender approved a general allocation of special drawing rights equivalent to $650 billion on August 2 to boost global liquidity. About $275 billion of the new allocation will go to emerging markets and developing countries.
Bangladesh has already received a sizeable amount of foreign loans from major multilateral development partners since the onset of the pandemic to support the economy and buy coronavirus vaccines.
So, the government is not rushing into the offer as it has available funds for the current fiscal year. The offer might be considered later, said officials of the finance ministry.
Last week, Finance Minister AHM Mustafa Kamal told The Daily Star that the government would take a decision on the IMF offer after a meeting with the secretaries of the Economic Relations Division, the finance division and the planning ministry.
"The government needs to understand the demand of various ministries before taking any decision. We will proceed logically. At present, there is no hurry. And, there is no shortage of funds," he said.
According to the offer, the IMF will give the fund in the next three years.
The lender has set 33 conditions related to reform initiatives, including a reduction in interest rates on savings certificates and scrapping the unconditional scope to legalise untaxed money.
Other conditions include relaxing the foreign exchange policy and lessening the interference of Bangladesh Bank so that the foreign exchange market can function on its own.
The government has already cut the interest rate on the savings instruments. However, a senior official of the finance ministry said the rate cut was aimed at bringing down interest expenses.
The IMF has proposed the government initiate reforms about the banking industry, revenue mobilisation, macro-economic management, and efficient use of the resources in the health sector.
Another senior official of the finance ministry says it has not agreed to all of the conditions of the IMF. Discussion is underway to bring down the number of conditions, he said.
An IMF mission will visit the country this year when the issues will be thrashed out, he said.
Last year, Bangladesh received $732 million from the IMF as emergency assistance to address the challenges posed by Covid-19.
In the same year, the Asian Development Bank provided $650 million as budgetary support. Another $1.44 billion came this year.
The Manila-based lender may extend a further $250 million in the current fiscal year.
The World Bank approved $2 billion budget support in 2020 and extended $600 million to the health ministry to buy coronavirus jabs and health-related equipment. It has assured Bangladesh of another $250 million in assistance.
Apart from these, the government is expecting a combined $600 million from the Japan International Cooperation Agency and the Asian Infrastructure Investment Bank for vaccine purchase.
Bangladesh will need to spend around Tk 17,000 crore in the current fiscal year to buy vaccines and meet vaccine-related expenses.