International Monetary Fund (IMF) has approved immediate release of about US$136.6m as the third instalment under its extended credit facility (ECF) arrangement for Bangladesh.
With the disbursement of the instalment, the total amount disbursed would stand at about $409.7m.
The instalment was approved on Thursday, following completion the second review of Bangladesh’s economic programme under the three-year arrangement of $956m IMF’s executive board approved in April, 2012.
Bangladesh Bank Governor Dr Atirur Rahman said the third instalment will be credited on June 6. “This will certainly improve our creditworthiness and support the stable rating which we are getting from international rating agencies,” he told the Dhaka Tribune in an instant reaction to the IMF approval of the third tranche of the three-year credit line.
“Bangladesh’s programme under the Extended Credit Facility is broadly on track. Macroeconomic pressures have eased, with reserves rising and underlying inflation moderating, supported by restrained fiscal and monetary policies,” IMF’s deputy managing director and acting chair Naoyuki Shinohara said in a statement.
Notwithstanding the challenging global environment, he said exports have picked up and remittances remain strong. However, growth is slowing and could weaken further given downside risks.
“It will be important to maintain sound policy anchors and keep up the reform momentum,” he said. “Fiscal policy has remained on track, but tax collections need to be strengthened and the tax base broadened.”
Shinohara said continued policy discipline is also needed during the pre-election period. To further expand space for development spending, subsidy costs should be further reduced while protecting subsidies targeted at the poor.
He said public debt management needs to be strengthened through better monitoring and transparency and by taking full advantage of concessional borrowing opportunities, he added.
“Bangladesh Bank’s prudent monetary policy has helped bring down inflation, while rebuilding international reserves.
Going forward, greater exchange rate flexibility and stepped up sterilisation operations will be important to contain monetary growth.”
He said structural reforms have also moved forward while timely implementation of the new value added tax would help increase revenues and modernise the tax regime.
He noted that timely passage of the banking law amendments recently introduced in parliament will strengthen financial sector governance and keep risks in check, especially those arising from state-owned banks.
“Continued improvement in labour conditions in the garment sector, in coordination with international business and development partners, would be welcome.”
As brought out in the latest IMF Staff Report, the IMF said international reserves, by the program’s definition, stood at $14.5bn as of end-April 2013, almost doubling the equivalent import cover compared to late 2011.