Government slows down $ 3 billion IMF loan offer
In a rare move, the government is not rushing into a $ 3 billion loan offer from the International Monetary Fund (IMF) as Bangladesh has received huge budget support from multilateral lenders to combat the impacts of the crisis. coronavirus pandemic.
Last month, the IMF informed the country that it could use this new credit as budget support, provided it implemented 33 reform programs.
The offer came after the lender’s board of directors approved a general allocation of special drawing rights equivalent to $ 650 billion on August 2 to boost global liquidity. About $ 275 billion of the new allocation will go to emerging markets and developing countries.
Bangladesh has already received a significant amount of foreign loans from major multilateral development partners since the start of the pandemic to support the economy and purchase coronavirus vaccines.
Thus, the government does not rush into the offer because it has funds available for the current fiscal year. The offer could be considered later, finance ministry officials said.
Last week, Finance Minister AHM Mustafa Kamal told the Daily Star that the government would make a decision on the IMF’s offer after a meeting with the secretaries of the Economic Relations Division, the Finance Division and the Ministry of Finance. Plan.
“The government must understand the demands of the different ministries before making a decision. We will proceed logically. At the moment, there is no rush. And there is no shortage of funds, ”he said.
Depending on the offer, the IMF will give the fund over the next three years.
The lender has set 33 conditions related to reform initiatives, including lowering interest rates on cash certificates and removing the unconditional option to legalize untaxed money.
Other conditions include easing the exchange rate policy and reducing interference from the Bangladesh Bank so that the foreign exchange market can operate autonomously.
The government has already reduced the interest rate on savings instruments. However, a senior finance ministry official said the rate cut was aimed at lowering interest charges.
The IMF has suggested that the government initiate reforms in the banking sector, revenue mobilization, macroeconomic management and efficient use of resources in the health sector.
Another senior finance ministry official said he did not agree to all of the IMF’s terms. Discussions are underway to reduce the number of conditions, he said.
An IMF mission will visit the country this year when the issues are resolved, he said.
Bangladesh last year received $ 732 million from the IMF as emergency aid to address the challenges posed by Covid-19.
In the same year, the Asian Development Bank provided $ 650 million in budget support. Another $ 1.44 billion came this year.
The Manila-based lender could grant an additional $ 250 million in the current fiscal year.
The World Bank approved $ 2 billion in budget support in 2020 and granted $ 600 million to the Ministry of Health to purchase coronavirus vaccines and health-related equipment. It provided Bangladesh with an additional $ 250 million in aid.
Apart from that, the government is expecting a combined $ 600 million from the Japan International Cooperation Agency and the Asian Infrastructure Investment Bank for the purchase of vaccines.
Bangladesh will need to spend approximately Tk 17,000 crore in the current fiscal year to purchase vaccines and cover vaccine-related expenses.