An International Monetary Fund (IMF) team will engage in weeklong parleys with finance officials from tomorrow to assess Bangladesh’s macroeconomic situation and discuss new financing packages, officials say.
The IMF Mission Chief for Bangladesh, Ivo Krznar, will lead the 11-memebr delegation which will stay in Dhaka until July 17 discussing with Bangladeshi authorities their reform agenda and policy priorities.
On the first day, officials from the Finance Division and the central bank will make presentation on policy plans, preparation process and necessary elements for a possible second Resilience and Sustainability Facility (RSF) and hold discussion on key possible programme parameters under the RSF.
The IMF mission will also make the stocktaking of reform measures and achievements under the first RSF and the Bangladesh Climate Development Partnership. Initial discussion will be on potential coverage and strategic focus of reform measures in the second RSF, sources say.
On the first day, they will also hold talks on the FY27 budget and medium-term budget framework, including ADP and capital spending, major investment projects and its implementation plan, funding resources, medium-term budget assumptions like GDP growth, revenue measures, expenditure ceilings, and policy on subsidies and social protections.
The IMF team will also have discussion on salary and allowance budgeting, the number of civil servants, plans for new hiring, pay scale, annual-increase formula and allowances, family card and farmer card and the cost in FY27 and in medium term. Consolidation plan of other programmes in FY27 is also slated for discussion.
Sources say during the assessment week, the Fund mission will also have discussion on electricity, natural gas, fuels, fertiliser, food and other subsidies, the power-sector capacity charge, import cost and other costs, financial flows between the ministry of finance and Bangladesh Power Development Board, and plans for further electricity tariff adjustments.
Furthermore, discussion will take place on the funding for bank resolution, debt-financing plan, financing of state-owned enterprises, external public debt, stock and composition, external financing, disbursements, pipeline, and rollover needs, commercial borrowing, and non-concessional plans, risks to external financing, geopolitical developments and fiscal policies of donors.
Sources say the Finance Division officials, while reviewing the status of reform areas under previous credit programme, found achievement of good progress in areas like transition to a market-based exchange-rate framework, modernisation of monetary-policy operations, enactment of the Bank Resolution and Deposit Protection Act, risk-based supervision, climate reforms under the RSF, and progress in reserves rebuilding.
However, there are some areas requiring further actions. The revenue mobilisation remained below programme targets, digital transformation of income-tax administration not achieved, VAT rationalisation and tax-expenditure reforms remained incomplete, financial-sector reform strategy yet to be finalised, bank resolution and its capitalization, and governance of the central bank need further action.
The finance officials also identified some challenges in the macroeconomic context, which include elevated global uncertainty, geopolitical tensions and supply-chain disruption, external financing pressures, weak domestic revenue mobilisation, banking-sector vulnerabilities, and investment and productivity constraints.
According to officials concerned, once next week’s visit of the IMF team is over, they will submit their findings to the Fund headquarters in Washington, DC, for next course of action.
“If found favourable, another IMF team will visit Dhaka for negotiating the new credit programme after the next Annual Meetings of the IMF and the World Bank Group (WBG) scheduled for October 12-18,” says one official.
The finance officials are expecting to secure between $4.0 billion and $4.5 billion under the new lending package to attain macroeconomic stability.
The previous credit programme of $5.5 billion has been scrapped by the newly elected government after it found carrying forward many reform programmes negotiated by previous Awami League government not feasible.
Under the previous lending package, the IMF totally released $3.595 billion.
syful-islam@outlook.com