After a two-week visit, the International Monetary Fund (IMF) has withheld approval for the next loan installment for Bangladesh. Instead of a green light, the IMF has issued a “last chance” warning, stating that although Bangladesh is on the right path, further reforms are required. If all conditions are met promptly, a final decision may come by June.
A 14-member IMF delegation led by mission chief Chris Papageorgiou stayed in Dhaka from April 2 to 17, holding a series of meetings with the Ministry of Finance, Bangladesh Bank, the National Board of Revenue (NBR), and other regulatory bodies. At a press briefing on April 17, Papageorgiou stated, “While Bangladesh is heading in the right direction, the decision on the installment remains pending due to unmet conditions.”
He also noted that discussions are ongoing and the issue will be addressed at the upcoming IMF-World Bank Spring Meetings. Without a “staff-level agreement,” the loan installment cannot be approved by the IMF board.
What Reforms Does the IMF Want?
To unlock the third and fourth installments—totaling around $1.15 to $1.3 billion—Bangladesh must meet four key IMF conditions:
- Exchange Rate Management:
While the IMF wants a market-based exchange rate, Bangladesh Bank is not yet ready for full liberalization. However, with narrowing gaps between official and open market rates, and a more stable reserve, the IMF considers this an ideal time for transition. - Tax Reforms:
The IMF calls for increasing the tax-to-GDP ratio, reducing tax exemptions, and diversifying tax rates to boost revenue. - Subsidy Reduction:
Visible progress is expected in reducing government subsidies, particularly in energy, electricity, and agriculture sectors. - Banking Sector Transparency and Loan Recovery:
The IMF has raised concerns over rising non-performing loans, especially after the recent change in government. They recommend stricter supervision and policy reforms.
Final Decision in June
The IMF will make its final decision regarding the fourth and fifth loan tranches during its board meeting in June. Although a staff-level agreement was reached last December, it did not move to final approval.
Government and Bangladesh Bank officials claim they are showing realistic progress toward meeting the IMF’s conditions, despite facing challenges in some areas. Analysts believe that while delays are testing the IMF’s patience, Bangladesh still has a window of opportunity. Strong political will and genuine reforms could help restore global confidence during this economic crisis.