The government is in talks with the International Monetary Fund (IMF) over a new three-year loan programme to replace the existing arrangement, whose terms are in conflict with the ruling BNP’s election pledges.
Bangladesh can get up to $5 billion as per its special drawing rights allocations under the new programme, whose duration would be three to four years, The Daily Star has learnt from finance ministry officials involved with the proceedings.
Talks are being held virtually with the Washington-based multilateral lender every week over the terms of the loan and the final amount.
The move to abandon the loan programme negotiated by the Awami League-led government in 2022 comes after the IMF made it clear that no further tranches would be released without progress in economic reforms in the meetings held on the sidelines of the IMF-World Bank Spring Meetings in Washington, DC.
Bangladesh was due to get the fifth and sixth tranches of the loan, amounting to $1.3 billion, by June.
The IMF programme began during the previous Awami League government, which was unelected, Finance Minister Amir Khosru Mahmud Chowdhury told reporters upon his return from Washington, DC on April 19.
The programme contained many conditions that may not be acceptable to the new BNP government, he said.
“We are an elected government. We will not accept any condition that goes against public interest. This programme will end in six to seven months, after which we will decide whether to continue further,” he said.
Key areas of disagreement include a single VAT rate, reduced tax exemptions, market-based exchange rates, cuts in power and fertiliser subsidies, and reforms in the banking sector and the National Board of Revenue.
The government is unwilling to go for any of these reforms now, the finance ministry officials said.
And yet, Bangladesh needs an active IMF programme, which acts as a “seal of approval”. It restores international investor confidence and unlocks further financial assistance from other development partners.
The government would require $3 billion to $4 billion annually in budget support to finance its large upcoming budgets and fulfil electoral commitments.
Securing at least $1 billion a year from the IMF would help unlock further financing from other development partners, according to finance ministry officials.
Based on the spirit of the talks so far, the government is confident that the IMF would issue comfort letters, a written assurance that the country is good for lending, they said.
Multilateral lenders like the WB or the Asian Development Bank typically require this assurance before they release structural adjustment loans or budget support.
Bangladesh expects to secure around $3 billion in budget support by June from lenders including the WB, the ADB, the Asian Infrastructure Investment Bank and Japan International Cooperation Agency.
“Discussions are ongoing,” Khosru told The Daily Star on Tuesday when asked about the discussions with the IMF.
The details of the discussions cannot be disclosed at this stage, he said.
