Govt seeks waiver from IMF on borrowing limits

The government has asked the International Monetary Fund (IMF) to relax a condition for the $1 billion extended credit facility (ECF).
Under the IMF's performance criterion, the government is not allowed to exceed limits set by the IMF for hard-term loans from any external source.
But the government exceeded the quota by borrowing $1.5 billion in hard-term loans from Russia, a finance ministry official said, asking not to be named.
When the government agreed on the terms with the IMF for the ECF programme in April 2012, talks with Russia were not even on the horizon, the official added.
The second instalment of the ECF loan -- amounting to $141 million -- was scheduled for November 2012, but it was deferred to January this year as some conditions were not fulfilled.
Later, when the government signed the $1.5 billion credit deal with Russia, it was again rescheduled to this month.
A $1 billion defence purchase agreement at an interest rate of 4.5 percent was signed between Bangladesh and Russia during Prime Minister Sheikh Hasina's visit to Moscow in mid-January.
The loan is payable in 20 instalment in 15 years. Another deal of $500 million with an interest rate of 3 percent was signed to conduct a feasibility study on the Rooppur nuclear plant.
The loan is payable in 10 years, with a grace period of five years.
The IMF even warned the government in December that the two deals would take the country's hard-term borrowing past its quota under the ECF programme.
The official said that the government told the IMF that although the deal was being signed now, the repayment would not start for another four or five years -- and would have no adverse effect on debt sustainability.
“The IMF board may be satisfied with the government explanation and is likely to release the second instalment of the ECF loan,” he said, adding that the government has already fulfilled the structural conditions tagged with the ECF loan.
In early January, the petroleum price was hiked and the parliament passed the VAT law.
The IMF board meeting is scheduled on February 11. The review of Bangladesh's performance against the criterion set under ECF facility is on the agenda.