Govt to seek more time for reforms tied to IMF loan
The government may seek another three months from the International Monetary Fund to meet the conditions for the last two instalments of the ECF loan programme.
The Extended Credit Facility (ECF) loan programme, which ushered in some major reforms in the economic field, is scheduled to end on July 31.
The report on the two last instalments, amounting about $280 million, was due to be placed before the IMF Board today, as per the multilateral lender's board schedule. But the proposal has now been dropped from the schedule after two important conditions remain pending.
The government is now planning write to the IMF this week seeking an extension of the programme to October, according to a high official of the finance ministry.
The multilateral lender deferred the sixth of the seven-part instalments for the $1 billion loan in November last year after the government failed to meet three of its pertinent conditions.
A thorough audit of the Bangladesh Petroleum Corporation's balance sheet by an international firm is one of the three conditions.
It is being delayed as it requires an amendment to the law that legalised the establishment of the corporation.
Finance Minister AMA Muhith on July 16 told The Daily Star that amending the law was not possible within the timeframe, so it may have to surrender the last two instalments of the credit.
The government is now rethinking its earlier position, according to the finance ministry official. It may now amend the provision to get the BPC balance sheet audited by an international firm.
By October, the amended law is likely to be approved by the cabinet meeting and sent to the law ministry for vetting, he said.
The other two conditions are related to the VAT law.
The amended VAT law has to be approved in the cabinet meeting, and the cabinet on June 29 gave it the green light. The other condition was that the government would assign a vendor to implement the tax automation system, which may be approved by the cabinet committee on purchase today. The finance minister wants the ECF programme to end successfully, as it would enhance the country's image abroad in various ways, said the official.
After the programme ends, the government would send a proposal next year for another loan programme, Muhith told The Daily Star.
Approved in April 2012, the ECF programme has enforced a series of major reforms in the economic sector.
One of them was the amendment to the Banking Companies Act to heighten the power of the central bank.
The IMF did a mid-term review in 2013 and found that the reforms increased foreign currency reserves, decreased non-food inflation, raised tax revenue and curbed poorly-targeted energy subsidies. Bangladesh achieved economic growth of above 6 percent during the period.
The official said the IMF programme played a positive role in maintaining macroeconomic stability.