Bangladesh is going to receive credit facility up to 3.468 billion SDR or around $4.5 billion from the International Monetary Fund (IMF) over the next four years.
“We’re going to get the loan from IMF in the same way that we’ve approached earlier. There were apprehensions that we may not avail it due to conditions. But, finally we’re getting it under such conditions which we also feel should be fulfilled,” he said.
The Finance Minister said this while addressing a press conference after holding a meeting with the visiting IMF Mission at his secretariat office today.
Bangladesh Bank Governor Abdur Rouf Talukder and Finance Division Senior Secretary Fatima Yasmin were present, among others, at the press conference.
He informed that the international financing agency would provide the $4.5 billion loan to Bangladesh in three categories. The IMF will provide 822.82 million SDR under Extended Credit Facility (ECF) which would be entirely interest free, he added.
The IMF will provide another 1,645.64 million SDR to Bangladesh under Extended Fund Facility (EFF) with an interest rate of floating SDRi+1 percent while another 1.0 billion SDR under its Resilience and Sustainability Facility (RSF) with an interest rate of floating SDRi+0.75 percent, said the finance minister.
The loan will be available in seven installments while the interest rate would be floating as the average interest rate would be 2.2 percent on the overall loan amount as per the SDR interest rate.
The Finance Minister said the IMF Board would finalize all the formalities of the loan procedure over the next three months.
The first installment of the loan worth 352.35 million SDR or around $447.48 million will be available in February next year while the next six equal installments would be 519 million SDR or around $659.18 million each.
The Finance Minister said the four main objectives of the IMF credit facility are stabilizing the external sector of the economy, giving a strong foundation to the economy centering smooth LDC graduation in 2026, strengthening the financial sector and attaining higher growth through facing global climate change related risks and becoming a higher mid-income country within the stipulated timeframe.
Mentioning that the apprehension over the availability of the IMF loan is now ever, Kamal said many had voiced their concerns over the availability of the loan due to conditions. “But, fortunately they didn’t give us any such (tough) condition …we’ll get the loan in the same way we’ve sought it earlier,” he added.
Asked about the major conditions of the IMF loan, he said that the IMF had suggested the government to increase revenue mobilization, which the government has been pursuing over the years like installments of the EFD machines to boost VAT collection.
Besides, he said the global financing agency has also suggested the government to form asset management companies to speedily dispose of the Non Performing Loans (NPLs).
Replying to another question, he said had there been no cap on the interest rate, then the economy of the country would have been affected largely including the small, medium and large enterprises.
When asked about the projections of IMF over Bangladesh, the Finance Minister said the IMF expects that Bangladesh would successfully graduate from the LDCs by 2026 while the country would become a higher mid income country by 2031.
Turning to the issue of tax exemptions, he said that the government would continue this especially on the essential items, otherwise the countrymen would suffer. “We won’t withdraw tax exemptions on some areas for the sake of the citizens of the country,” he said.
When his attention was drawn over the current inflationary situation, Kamal said Bangladesh is also witnessing a bit high trend like elsewhere of the world while the situation is almost the same across the globe. “We’re much better now compared to our neighbors,”
About the foreign currency reserve, the Finance Minister said although the reserve fell below $35 billion, but Bangladesh is still in a better position compared to the other countries including the neighbors.
He said when the Awami League government assumed office back in 2009, the reserve was only $7.1 billion then it shoot up to $48 billion at one point due to the various steps of the government. “But, unfortunately due to global conditions, reserve is declining . . . hopefully the reserve will increase again,” he added.
Agreeing that the government’s format of calculating the reserve is different with that of IMF, he said the government would show the reserve either including or excluding its investments in other funds. “We’ll disclose it and nothing in this regard will be kept secret,” he said.
Bangladesh Bank Governor Abdur Rouf Talukder informed that the grace period of the ECF credit would be five and a half year with a repayment period of 10 years.
On the other hand, the grace period of the EFF credit would be three and a half year with a repayment period of 10 years while the grace period of RSF credit would be 10 years with a repayment period of 20 years.
He said that the conditions of the credit facility includes various reform agendas that the Finance Minister had announced in the budget over the last few years alongside the commitments of the Prime Minister in various forums including in COP. “We’ve come up with the reform issues as a package where the IMF will provide necessary support to implement those,”
Replying to a question, Rouf said that the IMF Mission raised the issue of subsidy in fertilizer. “But, we told them that agriculture is our main product where we’ll continue subsidy . . . then they didn’t raise any more question,”
Regarding energy, he said that the IMF has suggested the government to adjust energy price in line with the international market. “IMF has suggested us to adjust energy price periodically . . . but, there is no proposal from them to raise energy price right at the moment,” he added.
About the forex reserve, the central bank governor said that the IMF has recommended the government to show the net reserve amount instead of gross amount. “We can also show it separately, we’re always open and we maintain it in a very transparent manner. There is nothing to hide,” he added.
Rouf told another questioner that there is now no problem in sending remittance from abroad.