Bangladesh Bank (BB) and the National Board of Revenue (NBR) could not fulfill the conditions set by the IMF for the $4.7 billion budget support package.
The central bank of Bangladesh provided an explanation to the IMF Review Mission during their meeting, outlining the reasons behind the failure to meet the reserve conditions.
The pre-scheduled meeting with the central bank started on Wednesday morning. The central bank team is led by the Governor, Abdur Rouf Talukder.
However, it remains uncertain whether the IMF found the explanation satisfactory or not, as the details of the reason provided and the IMF's level of satisfaction have not been disclosed.
Regarding the meeting Bangladesh Bank spokesperson Md Mezbaul Haque said: “At the meeting, Bangladesh Bank notified the IMF of the reform initiatives that had been undertaken in accordance with the loan conditions.”
“They have even been given an explanation for why certain conditions haven't been met,” he informed.
According to sources, the country could not fulfill two of the IMF conditions.
The Ministry of Finance has sent a letter to explain why Bangladesh has been unable to meet these two conditions. During today's meeting, Bangladesh Bank discussed the reasons behind their failure to maintain the required reserves.
One of the crucial conditions that had been agreed upon for the implementation of the second installment of the IMF's $4.7 billion budget support package, scheduled for December, was to have a minimum of $25.32 billion in net international reserves by September 30th. In July, this target was set at $24.46 billion.
However, as per Bangladesh Bank's data as of Tuesday, October 3, the reserves stood at $26.93 billion, whereas according to the IMF's recommended formula called the Balance of Payments and International Investment Position Manual (BPM6), the reserves were calculated at $21.03 billion.
That means Bangladesh Bank failed to meet this IMF condition completely.
A Bangladesh Bank official, speaking to Dhaka Tribune, mentioned that when it comes to meeting the IMF's requirements, the central bank has made satisfactory progress thus far. They have successfully met several of the IMF's conditions, and some conditions are currently in the process of being implemented.
The official further explained that by June, Bangladesh Bank had already fulfilled certain conditions, including the establishment of the corridor system for determining interest rates and the publication of the reserve report in accordance with IMF BPM6 guidelines.
Apart from this, Bangladesh Bank was also required to introduce a market-determined exchange rate of the currency and finalize the risk-based supervisory action plan as well as publish the financial stability report of the banks.
Apart from the Net International Reserve (NIR), Bangladesh has failed to meet the other condition, which is to achieve the target of minimum revenue collection.
Last fiscal year, the National Board of Revenue (NBR) collected Tk14,000 crore less than the revenue target set by the IMF. For this, NBR has to collect 0.5% additional revenue in proportion to GDP in the current financial year.
As per the IMF's conditions, the NBR will have to collect around Tk25,000 crore more revenue than its target in FY24.
The review team of the International Monetary Fund (IMF) led by its senior economist in the Asia Pacific Department Rahul Anand will evaluate the success and failures in achieving the targets and set new ones for December and June 2024.
However, the review mission will hold a series of meetings with officials of more than a dozen ministries and government divisions until October 19. The team is supposed to report to IMF's Regional Executive Director Krishnamurthy, who will visit Dhaka on October 18 and seek an appointment with Prime Minister Sheikh Hasina.
