The proposal for the second installment of the loan waiver for Bangladesh is being discussed today at the International Monetary Fund (IMF) executive board. The meeting at the organization’s headquarters in Washington, D.C., is scheduled to begin at 9:00 a.m. local time. Despite the conditions set for the loan program, which may not be met in terms of foreign exchange reserves and revenue collection, the recent visit of the IMF mission to Dhaka has shown a positive attitude towards the waiver.
The Ministry of Finance officials are hopeful that the proposal for the waiver of the second installment will be approved at the IMF board meeting. As a result, an additional $68 million is expected to be received. Additionally, about $80 million is expected to be received from the World Bank and the Asian Development Bank (ADB) next month. The government is anticipating a total of $1.5 billion from these institutions in December. If these funds are added, the amount in the foreign exchange reserves is expected to increase.
The IMF approved a loan of $470 million for Bangladesh to tackle economic challenges in January of this year. Following the approval, the first installment of $476.3 million was disbursed. The total amount is expected to be provided in seven installments until the year 2026. The recent visit of the IMF mission to Dhaka in October focused on reviewing progress in meeting the conditions for the second installment of the loan. However, despite progress in various areas, meeting the targets for reserves and revenue collection has not been achieved.
According to sources in the Ministry of Finance, although there has been some progress in meeting other conditions, it has not been possible to fulfill both conditions due to various global and internal reasons. The mission has been informed by Bangladesh that although progress has been made in other areas, the realization of the two conditions is not possible. Efforts will be intensified in this regard after the elections.
Due to similar reasons, the determination of the automatic fuel pricing mechanism has been postponed until March. After reviewing progress in meeting other conditions, the mission informed in a briefing on October 19 that although some concessions have been made in other areas, it has not been possible to fulfill two conditions in the global and economic context. The mission will make the final decision on the waiver of the second installment at the IMF executive board.
Regarding this, Dr. Zahid Hossain, former chief economist of the World Bank’s Dhaka office, stated that the IMF mission has reached a consensus with the government, meaning they have recommended the waiver of the second installment. Therefore, there is a high probability of approval for the waiver of the second installment. He further explained that, based on available information, it is expected that the target amounts for reserves and revenue will be slightly reduced during the approval of the second installment. However, for subsequent installments, additional efforts may be required in economic terms after the elections.
The Ministry of Finance has learned that the net reserve of foreign exchange in the country was $24.46 billion at the end of June last year. However, at that time, it was $24.47 billion. The progress on the waiver of the third installment will depend on the progress at the end of December. At the end of December, the new target amount for net reserves could be around $17 billion.
In the past fiscal year, the National Board of Revenue (NBR) had a target of collecting Tk 3,45,600 crore in revenue. However, by the end of the year, the target was Tk 6,600 crore behind. For the current fiscal year, the target amount has been set at Tk 4,01,000 crore, reducing the target amount by Tk 4,100 crore. The Asian Development Bank (ADB) is providing a loan of $40 million to address the impacts of climate change. The board of the institution approved the loan on Friday, and the agreement for the loan was signed by the organization. Ministry of Finance officials are saying that this money will be released soon.
