No IMF-prescribed reform before elections

The government has informed the International Monetary Fund (IMF) that it would not initiate any major reforms to enhance foreign exchange reserves and revenue earnings and reduce subsidies before the upcoming parliamentary elections.

However, the government promised that drastic reforms would be undertaken after the polls scheduled in January.

The IMF also agreed that it would not be possible to bring about any key reforms before the polls. So, it is going to set new targets for the $4.7 billion loan and the goals will have to be adopted after the new government comes to office, said an official of the finance ministry.

A two-week review mission of an IMF delegation in this regard is going to end today.

Yesterday, the mission worked to finalise the next course of action and prepare various programme documents.

Finance ministry officials said the delegation informed that the issue of releasing the second instalment of the loan would be placed at an IMF board meeting in the middle of December.

If the board gives its consent, the second tranche of the credit support will be disbursed within a couple of days of the approval, they said.

The officials expect the board to approve the second instalment although the country could not fulfil two conditions involving enhancing the foreign exchange reserve and the tax-to-GDP ratio.

"We have shared the reasons for the failure and they received it well," said one official.

One of the conditions to get the second instalment was keeping a minimum gross forex reserve of $24.46 billion at the end of the last fiscal year. It stood at around $21 billion.

Officials of the Bangladesh Bank and the finance ministry informed the IMF delegation why it was not possible to keep the reserve at that level.

The BB informed that it would take several steps to make the foreign exchange reserve sustainable after the national election next year.

Steps will be taken to reduce capital flight, restrict imports and manage the exchange rate, it said.

But these steps can't be taken overnight, so the IMF delegation has agreed to recommend to its board to lower the reserve requirement level, said an official of the ministry.

Another condition was to collect a minimum tax of Tk 345,000 crore in 2022-23 but the government failed to hit the target.

The government also promised that it will reduce public expenditure and increase revenue earnings in the next half of the current fiscal year 2023-24.

It will also launch a market-based pricing formula for fuels to reduce subsidies.