Govt to get $987m IMF loan on tough conditionsShakhawat Hossain
The International Monetary Fund has approved a $987 million loan in seven instalments to Bangladesh after the government committed to fulfill dozens of conditions in next three years.
The IMF board in a meeting in Washington on Wednesday nodded the three-year credit programme under the Extended Credit Facility as the present government desperately sought the fund to ease the growing pressure on the country’s balance of payments.
Finance minister AMA Muhith welcomed the IMF decision as ‘good news’.
But economists termed it ‘bad news’ as it would enable the IMF to dictate the country’s policies. Besides, they said, the conditions attached to the loan were difficult which would put an additional burden on the people.
The IMF board that disbursed the first chunk of the $141 million loan on the same day, wanted implementation of at least 16 conditions immediately and by certain deadlines in the current year.
The conditions include further price hike of power and fuel oils, limiting the amount of subsidy to fuel oils and electricity to Tk 150 billion in the current fiscal and introduction of automatic fuel oil price adjustment.
Besides, the government has to lift the cap on the commercial banks’ lending rates, impose a ban on substituting shortfalls in externally-funded annual development programme projects with taka funding, carrying out an external audit on Bangladesh Bank and introduction of new BB regulations on loan classification and loan-loss provisioning.
The IMF also wanted withdrawal of tax exemption facilities, introduction of a new value added tax law, issuance of automate taxpayer identification number, limiting shareholdings by a commercial bank to 25 per cent in stock market and demutualisation of the Dhaka and Chittagong stock exchanges.
Finance minister AMA Muhith told New Age that the conditions attached to the loan agreements were furnished by the government in line with its sixth five-year plan and measures taken in the past three budgets.
He said the IMF had only set the deadlines for each of the conditions.
The finance minister said he was happy with the positive development as the government was eagerly waiting for the loans. ‘The loan will help us to ease the pressure on balance of payments,’ he said.
Economist Anu Muhammad said it was a ‘bad day’ for the country.
‘The present government and its finance minister have allowed the IMF to impose an unnecessary burden of loans on the nation,’ he said.
Anu Muhammad said it was a lame excuse that deals for foreign funds were signed to ease pressure on the balance of payments. He said that the government should check corruption and flight of capital to save hard-earned foreign exchange.
Bangladesh Institute of Development Studies executive director MK Mujeri said that although the amount of loans was small it would help the government to ease growing pressure on the balance of payments.
The government is facing challenges on the economic front due to ballooning subsidy payment and higher bank borrowing amid falling foreign aids. Prevailing high inflation and signs of slowdown in exports caused further worries against a gloomy economic outlook worldwide.
The BIDS DG observed that the conditions attached the agreement were ‘very difficult’.
‘There is doubt whether the government would be able to fulfill the conditions,’ he said.
Failure to meet even a single condition may cost the government an entire instalment. The IMF did not disburse the $75 million last instalment of the Poverty Reduction Growth Facility in 2005.
The PRGF was the first loan agreement under which IMF was supposed to give $467 million in loan in six instalments to the country.
After expiry of the PRGF in 2007, the IMF tried to persuade the government to sign a loan agreement, but without success. Finance adviser Mirza Azizul Islam of the military- backed caretaker administration had refused to sign the IMF loan deal.
Mirza Azizul Islam had observed that the IMF loan would not benefit the government much.
Disbursement of loan in instalments is not good. A loan can be useful for the government if it is disbursed in a single chunk, he added.
IMF resident representative Eteri Kvintradze said the loan carried a zero interest with five years of grace period. Bangladesh has to return the loan in 10 years, she told reporters Thursday at her office at Bangladesh Bank.
Finance ministry official said an IMF team was expected to arrive in the capital on April 14 to discuss issues related to the upcoming budget.
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