Bangladesh to receive $1.3 billion from IMF as reform deal reached

DHAKA: The International Monetary Fund (IMF) is set to release $1.3 billion to Bangladesh in June, after completing a fourth review of its $4.7-billion loan programme and a key breakthrough in talks on exchange rate reforms, the finance ministry said.

The funds, covering both the fourth and fifth tranches, had been held up as the IMF pressed for greater exchange rate flexibility, particularly the adoption of a crawling peg mechanism.

The fourth review in Dhaka in April was followed by further discussions during the Bank-Fund Spring Meetings in Washington DC that month, focused on critical reforms in revenue management, fiscal policy, and the foreign exchange regime.

“After carefully reviewing all the issues … both parties have agreed on the revenue management, currency exchange rate and other reform frameworks,” the finance ministry said in a statement on Wednesday.

With completion of a staff-level agreement on the fourth review, the IMF is expected to release $1.3 billion set for the fourth and fifth installments together by June, it added.

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The government has also dissolved the National Board of Revenue (NBR), replacing it with two divisions under the finance ministry, to meet a key IMF condition.

One division will handle tax policy with the other managing tax collection and administration, aiming to enhance efficiency, transparency, and accountability, the government said.

In addition to the IMF funds, the government expects budget support of $2 billion from development partners, the finance ministry added.

These bodies include the World Bank, the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), Japan, and the OPEC Fund for International Development, it added.

Bangladesh turned to the IMF in 2023 for the $4.7-billion bailout as its foreign reserves were pressured by a global surge in commodity prices triggered by Russia’s invasion of Ukraine, straining its ability to pay for key imports of fuel and gas.

The South Asian nation previously received $2.3 billion across the first three tranches.

An interim government led by Nobel Peace laureate Muhammad Yunus took office in August after the ouster of former prime minister Sheikh Hasina following deadly protests.