Visiting IMF Staff Mission: Banking division disappoints
The IMF staff mission's meeting yesterday with the banking and financial institutions division appears to have not gone seamlessly.
The visiting delegation particularly wanted to know about the condition of the state banks, which the banking division was unable to do, as The Daily Star learned from officials informed about the proceedings.
The banking division gave a picture of the overall banking sector.
The staff mission was also not happy about the state banks' exploits concerning the annual performance agreement signed with the Bangladesh Bank.
The Washington-based multilateral lender has cited the state banks' high and increasing defaulted loans and low capital adequacy as one of the three domestic risks that could derail the economy in the short to medium term.
The likelihood of the problem spilling over into the wider economy ranges from medium (10 to 30 percent chance) to high (30 percent or more), said the IMF staff report.
The staff mission was also disappointed when the banking division declined to give the draft of the Bank Companies (Amendment) Act that was approved by the cabinet as it was now a classified document.
As per the reform actions agreed with the IMF for the $4.7 billion loan programme, the government is supposed to submit the draft to parliament by June.
The progress of forming an asset management company to dispose of distressed assets is nothing to write home about, either.
The staff mission was also not happy with the defaulted loan scenario.
At the end of 2022, the banking sector's defaulted loans amounted to Tk 120,656 crore, which is 8.16 percent of the outstanding loans.
The staff mission also held meetings with the National Board of Revenue and the finance ministry's debt management committee.
The government has committed to increasing tax revenue, and the mission wanted to know the measures being planned. The NBR, however, was unable to inform them.
The NBR was supposed to come up with a medium-term revenue strategy. So far, a committee has been formed to work on the paper. The draft will take 6-7 months to prepare, and the final version will not be ready before 2024.
Tariff reduction is another demand of the IMF, and the revenue authority has informed the staff mission that it will be done by as much as possible this year.
The staff mission, though, had more encouraging news from its meeting with the debt management committee.
Reforms to bring down the sales of national savings certificates are on track. Besides, sales of NSCs have dropped notably.
Meanwhile, the staff mission has extended its tour of Dhaka by five days.
The wrap-up meeting will now take place on April 7, as Rahul Anand, the IMF staff mission chief, the BB governor, the finance secretary, and the Economic Relations Division secretary will all be in Washington, DC, for the 50th-anniversary celebrations of the World Bank and Bangladesh's relations.