The International Monetary Fund has asked the government to describe its plans to spend the fourth tranche of fund under the Extended Credit Facility ahead of the general elections.
A senior Finance Division official said a visiting IMF mission disclosed the matter in a meeting on Thursday with the officials of the division and Bangladesh Bank on reviewing the third tranche of the ECF fund.
The IMF mission specially emphasised on the financial statuses of the state owned commercial banks (SOCBs), he said.
The government expects to receive the fourth instalment of the IMF ECF fund in November as has been requested.
The official, who attended the meeting at the Secretariat, also said: “The Finance division will submit a report to the IMF this month about how the government will spend the fourth tranche of ECF fund and make sure that the fund will not be used for projects meant just to woo the public before the elections.”
The money from the ECF fund is generally used for improving the country’s balance of payment situation and the foreign exchange reserve.
The meeting observed that ordinary clients would not be interested to repay because the major state-owned banks had failed to recover the loans from the big defaulters such as Hall-Mark and Bismillah groups, despite directives from the government.
The big loan scams had created a financial pressure on those banks, which, the IMF feared, would give rise to instability in the country’s banking sector, meeting sources said.
The date of disbursement of the fourth tranche of the IMF fund is expected to be finalised today as the visiting mission wraps up its tour through a meeting with the finance minister. The meeting is also expected to review the progress in implementation of ECF conditions.
The IMF team has reportedly been by and large satisfied with the overall progress in terms of economic reform.
Finance Minister AMA Muhith is also likely to review the prescription that the IMF has placed for bringing the domestic price of fuel to levels at par with the global market by January that is, before the general elections.
The minister will also request the visiting IMF mission to raise the hard-term foreign loans to expedite the implementation of projects of public interest before the upcoming general elections, officials said.
During Thursday’s meeting the IMF mission said it would help meet capital deficit of the state-owned banks, although it did not give any definite timeframe.
The IMF recommended greater control over those banks by the banking division of the finance ministry and the central bank under the existing Bank Company Act.
The mission also categorically advised the central bank to reduce the non-performing loans of the state-owned banks.
The official, who attended Thursday’s meeting, also said the IMF mission had urged the banking division and the Bangladesh Bank to discuss execution of the conditions which had been given in the recent revised Memorandum of Understanding with the SOCBs, namely Sonali, Janata, Agrani and Rupali.
Deputy Division Chief of IMF’s Asia Pacific Department Cubero Rodigo came to Dhaka in the last week of September with a high-powered delegation and is expected to stay till October 8.
The IMF has already released three out of seven equal instalments of the ECF and their current mission is to review the economic situation of the country, based on which the fourth instalment will be decided. The latest one of $136m was disbursed on May 30.
