IMF’s $4.7B Loan: Only one condition missed for third tranche

Bangladesh has met all but one quantitative target set for December 2023 by the International Monetary Fund to qualify for the third instalment of the $4.7 billion loan.

As before, the government failed to keep the minimum net international reserves (NIR), which is a mandatory condition. At the end of 2023, the NIR needed to be at least $17.78 billion. But the country fell short of the target by $58 million.

It, however, has met the targets for tax revenue collection, which it missed last time, according to a finance ministry official.

On December 12 last year, the IMF board authorised the disbursement of the second instalment of $681 million despite the failure to meet the minimum NIR and tax revenue collection targets.

The review mission for the third instalment is expected to arrive in March. The team will review the government's performance against the targets set for December 2023.

The difference in NIR against the target might narrow in the final calculation, said a central bank official.

"As the gap in reserves is minimal, it will not be an issue for the release of the third instalment," he said, citing the case for the second instalment that saw the IMF staff mission give a waiver for falling short of the NIR target in June last year.

Usually, a waiver is sought from the IMF board if a loan-seeking country misses out on any quantitative target.

If the other reform measures remain on track, it might not be necessary to ask for a waiver for the reserve target, the official added.

For December last year, the goal for tax revenue, including NBR and non-NBR taxes, was set at Tk 143,640 crore. The government has already met the target, the finance ministry official said.

One of the loan conditions for the third instalment is that the country's budget deficit must not surpass Tk 90,520 crore in December last year.

As of September last year, the deficit was only Tk 12,402 crore, according to data from the finance ministry.

"The deficit is expected to remain within the IMF ceiling," the official said.

Bangladesh has met the other four quantitative targets: external payment arrears, reserve money, priority social spending and capital investment.

Apart from the quantitative and indicative targets, there are some structural conditions set by the IMF.

One of them is that the government will adopt a periodic formula-based price adjustment mechanism for petroleum products.

The first price adjustment will be done by March, according to the finance ministry official.

From then on, Bangladesh will adjust petroleum prices in line with the international market every three months.

Another structural condition is that the government will release quarterly GDP data from December last year.

The Bangladesh Bureau of Statistics plans to release the first quarterly GDP report by January after falling behind in publishing the data due to the national election.

The Washington-based lender is likely to dispatch the third instalment in May.