On a rare move, the government is in no rush to offer an International Monetary Fund (IMF) loan of $ 3 billion as Bangladesh has received huge budget support from multilateral lenders to combat the effects of the coronavirus pandemic.
Last month, the IMF informed the country that it could draw on the new loan as budget support on condition that 33 reform programs were implemented.
The offer came after the lender’s board of directors approved a general allotment of special drawing rights valued at $ 650 billion on Aug. 2 to increase global liquidity. About $ 275 billion of the new allocation will go to emerging and developing countries.
Bangladesh has already received significant amounts of foreign loans from major multilateral development partners to support the economy and buy coronavirus vaccines since the pandemic began.
So the government is not rushing to make the offer, as it has funds available for the current budget year. The offer could be considered later, Treasury officials said.
Last week, Treasury Secretary AHM Mustafa Kamal told The Daily Star that the government would take a decision on the IMF offer after meeting the secretaries of the Economic Relations Department, Finance Department and Department of Planning.
“The government needs to understand the demands of various ministries before making a decision. We will act logically. There is no rush at this time. And there is no shortage of funds,” he said.
According to the offer, the IMF will provide the fund over the next three years.
The lender has set 33 conditions related to reform initiatives, including lowering interest rates on savings bonds and removing the unconditional scope for legalizing untaxed money.
Other conditions are the loosening of the foreign exchange policy and the reduction of the interference of the Bangladesh Bank, so that the foreign exchange market can function independently.
The government has already lowered the interest rate on the savings instruments. However, a senior Treasury official said the interest rate cut was aimed at lowering interest expense.
The IMF has proposed that the government introduce reforms related to the banking sector, revenue mobilization, macroeconomic management and the efficient use of resources in the health sector.
Another senior Treasury official says it did not agree to all of the IMF’s terms. There are discussions to reduce the number of conditions, he said.
An IMF mission will visit the country this year when the issues are discussed, he said.
Last year, Bangladesh received $ 732 million in emergency aid from the IMF to help meet the challenges posed by Covid-19.
In the same year, the Asian Development Bank provided $ 650 million in domestic help. Another $ 1.44 billion was added this year.
The Manila-based lender could lend an additional $ 250 million in the current fiscal year.
The World Bank approved $ 2 billion in budget support in 2020 and granted the Department of Health $ 600 million for the purchase of coronavirus vaccinations and health-related equipment. It has pledged an additional US $ 250 million in assistance to Bangladesh.
That said, the government expects the Japan International Cooperation Agency and the Asian Infrastructure Investment Bank to collectively buy vaccines for $ 600 million.
Bangladesh has to spend around Tk 17,000 billion in the current financial year to buy vaccines and cover vaccination-related expenses.
