IMF attaches five new strings to its $1b loans

The IMF has attached five new conditions to the disbursement of the next instalments of its $1 billion loan.
One of the major conditions is maintaining banks' exposure to the stockmarket at 25 percent of their total regulatory capital.
The government has committed to the International Monetary Fund that the Bangladesh Bank will issue a guideline by March this year to limit the banks' exposure.
The government submitted an updated report on progresses and reform commitments -- Memorandum of Economic and Financial Policies -- at the lender's board meeting on February 20.
The exposure limit will also be included in the amended Banking Companies Act, which will be placed in parliament in March as per the new deadline.
The amendment was scheduled to be placed in parliament in September last year but it could not be done as it was not finalised then.
The amendment gives the central bank the authority to remove the chief executive officers of four state banks.
The IMF put pressure on the government to vest the power of removing the boards of the state banks alongside their chief executives to the central bank to improve governance in the state banks.
However, the government is not giving the BB the power to remove the boards.
But the amendment will provide that the banks' directors and senior management meet "fit and proper" criteria and remain fully accountable for internal controls and risk managements.
Another condition of the IMF is a complete special diagnostic examination by the BB at the four state banks focused on asset quality, liquidity management, and internal audit and control, by June this year.
The government will also have to issue guidelines and procedures on budget monitoring and reporting in accordance with the public money and budget management act within the same deadline.
The government will also have to complete a review of the foreign exchange regulation act by September.
The IMF also asked the government to complete a full external audit into the BB by a global audit firm for financial year 2012-2013, by December this year.
Some unmet conditions that were to be fulfilled last year will have to be completed within this year.
One of such conditions is that the Bangladesh Securities and Exchange Commission will approve the model and plan for demutualisation of Dhaka and Chittagong stock exchanges.
Another unmet condition to be fulfilled by June is bringing automation in issuing taxpayer identification number with links to the system of the national identification number.
The IMF has also expressed concern over giving subsidy to state enterprises every year and has set a condition to cut their losses.
The lender also urged the government to complete an efficiency audit into Bangladesh Petroleum Corporation, Bangladesh Power Development Board, and Bangladesh Chemical Industries Corporation, by June this year.
The government has also made several commitments to the IMF about loss-making national flag carrier Biman Bangladesh Airlines.
The Memorandum of Economic and Financial Policies said a five-year strategic plan will be taken from Biman Bangladesh Airlines to assess its financial viability in view of longstanding operating losses.
In April last year, the IMF board approved a three-year Extended Credit Facility of $1 billion for the country -- conditional upon certain structural reforms.
Bangladesh has so far received two instalments worth $281 million.