$4.7B IMF loan: Bangladesh on course to meet most of March targets

Bangladesh is poised to meet five of the six targets set by the International Monetary Fund for March as part of the $4.7 billion loan programme.

There is uncertainty about whether the condition of maintaining a minimum net international reserves (NIR) of $22.95 billion at the end of March could be met, according to Bangladesh Bank and finance ministry officials familiar with the issue.

The IMF will do the calculation for NIR at the end of March, so it is not possible to say whether the target will be achieved, they said.

"There is uncertainty on just this. The rest of the conditions will be met easily," said a finance ministry official on the condition of anonymity.

All six targets for March are not mandatory for the release of the next tranche of about $476.27 million; it will be based on how Bangladesh fares with the targets for June.

The first review of the programme will take place in the second half of 2023, when the IMF staff team will assess the programme's quantitative targets and progress of reform implementation, Rahul Anand, the IMF mission chief, told The Daily Star.

"The authorities are taking steps to meet programme objectives, such as reducing un-targeted subsidies by raising electricity and natural gas prices and gradually moving toward a unified market-determined exchange rate. Further, increasing exchange rate flexibility and strengthening the foreign exchange reserve management framework will enhance external resilience," he added.

An IMF staff team will visit Bangladesh from April 25 to May 2 to discuss recent economic developments and policy implementation under the IMF-supported programme, an IMF spokesperson told The Daily Star.

To this end, March's performance will lend the IMF staff team an indication of how the authorities are faring with the programme objectives.

"We will be close to the March's floor for net reserves," Md. Mezbaul Haque, BB's spokesman, told The Daily Star.

NIR is calculated as gross international reserves minus short-term foreign currency drains. Short-term foreign currency drains include impending import bills and loan repayments.

As of March, gross international reserves (GIR) stand at $31.14 billion, according to data from the BB.

But going by the IMF's balance of payments and investment position manual (BPM6), which is followed faithfully by central banks around the world, GIR calculation does not include the various funds that the Bangladesh Bank has formed from the reserves as well as the loan guarantees provided for Biman, the currency swap with Sri Lanka, the loan to Payra Port Authority, deposits with the Islamic Development Bank and the below-investment-grade securities.

At present, these account for about $6.9 billion.

So Bangladesh's GIR at the end of March was about $24 billion, Haque added.

Another target for March is keeping the primary balance within Tk 148,340 crore.

For programme monitoring purposes, the primary balance is defined as the overall balance of the government excluding interest payments and including foreign grants.

As of December last year, the overall balance stood at Tk 10,166 crore.

By March, the government needs to collect at least Tk 207,380 crore in tax, as per the IMF's task sheet for Bangladesh.

As of February, the National Board of Revenue has collected Tk 196,037.5 crore. The non-NBR tax collection stands at Tk 3,563 crore in the first half of fiscal 2022-23, according to data from the finance ministry.

Data on collections up to March is not available yet, but from the trends in NBR and non-NBR receipts, it is safe to infer that March's target would be met comfortably.

At the end of March, reserve money, which comprises currency in circulation issued by the BB and deposits banks hold with the central bank, cannot be more than Tk 357,500 crore.

As of February, reserve money stood at Tk 350,346.90 crore, according to data from BB.

There is a floor on development capital investment undertaken by the government, which would be monitored by the annual development programme.

By March, the expenditure must be at least Tk 38,990 crore.

As of February, Tk 82,170 crore has been spent under the ADP, according to data from the planning ministry.

There is also a minimum level of priority social spending stipulated by the Washington-based multilateral lender.

For programme monitoring purposes, priority social spending comprises all expenditures on education, health and social safety nets.

The minimum spend for this must be Tk 60,500 crore in the first nine months of the fiscal year. Data for this could not be obtained.