Loan of 4.5 billion dollars: the IMF team will arrive tomorrow
A delegation from the International Monetary Fund (IMF) is due to arrive in Dhaka tomorrow for a nine-day trip to discuss the government’s request for a $4.5 billion budget support loan.
Rahul Anand, division chief in the IMF’s Asia and Pacific department, will lead the team in meetings with senior officials from the finance ministry, central bank, National Board of Revenue and economic relations division.
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If all goes well, the loan deal could be finalized by October this year, a finance ministry official said yesterday.
The request for budgetary support comes to reinforce the precarious foreign exchange reserves, which amounted yesterday to 39.8 billion dollars, the lowest since October 14, 2020.
That’s enough to cover about five months of import bills.
As a general rule, the World Bank and IMF prescribe three months’ import cover, but in times of economic uncertainty they advise keeping sufficient reserves to cover imports for 8-9 months.
Going forward, even if imports contract slowly, high levels of inflation around the world mean that the chances of a slowdown in remittances and export orders, two sources of foreign exchange for Bangladesh , are high.
IMF officials will examine the impacts of the Russian-Ukrainian war and escalating global commodity prices on Bangladesh’s economy, the state of recovery from the global coronavirus pandemic and the country’s vast subsidy program. government.
They will see if the subsidy expenditure is justified and compare it with other countries. If it is deemed excessive, the IMF mission can suggest ways to reduce it.
Expenditure on subsidies in the just-ended fiscal year stands at Taka 66,825 crore, 24.1% higher than the original allocation thanks to spiraling fuel and fertilizer prices on the world market.
In this fiscal year budget, Tk 82,745 crore has been earmarked for grants.
But considering the trend of oil, gas and fertilizer prices in the international market, the estimated expenditure may be 15 to 20 percent higher than the initial estimates, Finance Minister AHM Mustafa Kamal said in his speech on the budget in June.
The Washington-based multilateral lender could tie the terms of the loan program.
Conditions could include measures to increase revenue, reduce subsidy spending, a market-based exchange rate and lending rate, and reforms in the banking sector and tax administration, the official said. of the Ministry of Finance.
The government has already decided to tighten its belt.
He unveiled a relatively reduced budget for the current fiscal year, suspended low-priority projects, suspended overseas tours of government officials, adjusted gasoline and diesel prices to some extent, and eased policy. exchange rate.
The government has also signaled that it may increase the price of fuel oil and has proposed to the Bangladesh Energy Regulatory Commission to increase the electricity tariff to reduce the subsidy burden.
Surjit Bhalla, the IMF’s executive director for India, Bangladesh, Bhutan and Sri Lanka, who represented Bangladesh on the board of the Washington-based lender, is also expected to visit Bangladesh separately.