Government's commitment to fulfilling 38 conditions to get IMF loan
Samakal reporter
Published: 05 Feb 23 . 00:00 | Update: 05 Feb 23. 05:44. Print version
Bangladesh has promised to fulfill 38 conditions in order to get a loan from the International Monetary Fund or IMF. The Institution released the first installment of 476.627 million dollars of the total 4.7 billion dollar loan last Thursday. The remaining amount will be disbursed in six equal installments till 2026. However, the IMF will verify the progress of compliance before releasing each tranche.
On behalf of Bangladesh, Finance Minister AHM Mustafa Kamal and Governor Abdur Rauf Talukdar have promised to fulfill these conditions in writing. The progress of implementation of conditions will be reviewed by the agency before releasing of each installment. This information is known from the documents released by the IMF after the first installment of the loan was waived.
Although these reform activities are ongoing till 2026, some work has to be done on an urgent basis. within a year. First among these conditions is the initiative to increase the tax-GDP ratio. By June, the government has to ensure that the tax-GDP ratio is raised to zero.5 percent, which is to be achieved by the next financial year 2023-24. At the same time, a risk management unit should be set up in the customs and VAT wing of the National Board of Revenue by next December.
In addition to increasing the government's revenue, the IMF also has conditions to reduce domestic borrowing. The IMF said plans to reduce borrowing from savings bonds to one-fourth by December. Before the end of this year, the price of petroleum products should be coordinated with the international market. This proposal is mainly to reduce the subsidy in the energy sector. The reason for this suggestion is to increase expenditure on priority sectors.
By next July, Bangladesh Bank will have to move to the interest corridor system. An interest rate corridor is a mechanism through which the interest rate ceiling can be gradually lifted and the central bank's policy rate can be made operationally. Similarly, by June the calculation of foreign reserves should be started in the IMF system. During the same period, the exchange rate of foreign currency should be based on the market. The Bangladesh Bureau of Statistics has to release the GDP figures on a quarterly basis by next December.
The IMF has asked Bangladesh Bank to go under risk-based supervision by June this year. At the same time, the amendment of the Bank Company Act should be confirmed by next September. Apart from this, the banks have to publish their annual financial stability report by June.
Conditions for 2024 to 2026: Formulate medium-term revenue strategy by June 2024. Apart from this, strategies should be taken to comply with the tax regulations by December. Tax exemptions should start reducing. A list of bad assets of banks should be disclosed. The amended Bankruptcy Act and the Financial Debt Courts Act are to be introduced in Parliament. Apart from this, government-owned companies, government guarantees, and government revenue risks including PPP risks should be disclosed.
Tax exemptions should be reduced in 2025. Implementation of a medium-term revenue strategy as well as the implementation of a tax compliance plan. In addition to increasing the scope of social protection programs, the capacity of the distribution system should be increased. In addition to continuing initiatives to reduce non-performing loans and eliminate capital shortfalls in the banking sector, risk-based supervisory measures should be implemented.
With the presentation of the amended Transferable Deeds Act in Parliament, the trend of reducing borrowing from savings bonds to meet the budget deficit should be continued. Information about 50 government-owned companies should be disclosed. In addition to continuing the management-based changes in the policy interest rate of the central bank, the capacity of the organization to exercise its powers should be increased.
In 2026, tax exemptions should be reduced to 10.7 percent of GDP and additional tax collection initiatives should be implemented. Along with the implementation of the medium-term revenue strategy, the tax compliance plan should be implemented. The implementation of a time-based system in determining the price of fuel should be continued. The number of beneficiaries of social security programs should be increased.
Supervision should be increased by continuing initiatives to reduce non-performing loans and eliminate the capital deficit of the banking sector. The sector-wise strategy should be defined for the financial sector. The central bank's policy on interest rates should continue with operational changes. New policies need to be formulated for green bonds.
When asked about the conditions of the IMF, Prof. Mostafizur Rahman, an honorary fellow of the private research organization Center for Policy Dialogue (CPD), told Samakal that the reforms mentioned in the banking sector, including increasing the revenue, should have been implemented a long time ago. But since these issues have not been dealt with for a long time, there will be pressure on the economy if they are to be implemented now.
The government is interested in importing gas instead of searching for its own gas. Could not increase revenue collection. Therefore, due to the increase in the prices of these products in the international market, the prices have to be increased repeatedly in the country, which is increasing the suffering of the people.
Samakal reporter
Published: 05 Feb 23 . 00:00 | Update: 05 Feb 23. 05:44. Print version
Bangladesh has promised to fulfill 38 conditions in order to get a loan from the International Monetary Fund or IMF. The Institution released the first installment of 476.627 million dollars of the total 4.7 billion dollar loan last Thursday. The remaining amount will be disbursed in six equal installments till 2026. However, the IMF will verify the progress of compliance before releasing each tranche.
On behalf of Bangladesh, Finance Minister AHM Mustafa Kamal and Governor Abdur Rauf Talukdar have promised to fulfill these conditions in writing. The progress of implementation of conditions will be reviewed by the agency before releasing of each installment. This information is known from the documents released by the IMF after the first installment of the loan was waived.
Although these reform activities are ongoing till 2026, some work has to be done on an urgent basis. within a year. First among these conditions is the initiative to increase the tax-GDP ratio. By June, the government has to ensure that the tax-GDP ratio is raised to zero.5 percent, which is to be achieved by the next financial year 2023-24. At the same time, a risk management unit should be set up in the customs and VAT wing of the National Board of Revenue by next December.
In addition to increasing the government's revenue, the IMF also has conditions to reduce domestic borrowing. The IMF said plans to reduce borrowing from savings bonds to one-fourth by December. Before the end of this year, the price of petroleum products should be coordinated with the international market. This proposal is mainly to reduce the subsidy in the energy sector. The reason for this suggestion is to increase expenditure on priority sectors.
By next July, Bangladesh Bank will have to move to the interest corridor system. An interest rate corridor is a mechanism through which the interest rate ceiling can be gradually lifted and the central bank's policy rate can be made operationally. Similarly, by June the calculation of foreign reserves should be started in the IMF system. During the same period, the exchange rate of foreign currency should be based on the market. The Bangladesh Bureau of Statistics has to release the GDP figures on a quarterly basis by next December.
The IMF has asked Bangladesh Bank to go under risk-based supervision by June this year. At the same time, the amendment of the Bank Company Act should be confirmed by next September. Apart from this, the banks have to publish their annual financial stability report by June.
Conditions for 2024 to 2026: Formulate medium-term revenue strategy by June 2024. Apart from this, strategies should be taken to comply with the tax regulations by December. Tax exemptions should start reducing. A list of bad assets of banks should be disclosed. The amended Bankruptcy Act and the Financial Debt Courts Act are to be introduced in Parliament. Apart from this, government-owned companies, government guarantees, and government revenue risks including PPP risks should be disclosed.
Tax exemptions should be reduced in 2025. Implementation of a medium-term revenue strategy as well as the implementation of a tax compliance plan. In addition to increasing the scope of social protection programs, the capacity of the distribution system should be increased. In addition to continuing initiatives to reduce non-performing loans and eliminate capital shortfalls in the banking sector, risk-based supervisory measures should be implemented.
With the presentation of the amended Transferable Deeds Act in Parliament, the trend of reducing borrowing from savings bonds to meet the budget deficit should be continued. Information about 50 government-owned companies should be disclosed. In addition to continuing the management-based changes in the policy interest rate of the central bank, the capacity of the organization to exercise its powers should be increased.
In 2026, tax exemptions should be reduced to 10.7 percent of GDP and additional tax collection initiatives should be implemented. Along with the implementation of the medium-term revenue strategy, the tax compliance plan should be implemented. The implementation of a time-based system in determining the price of fuel should be continued. The number of beneficiaries of social security programs should be increased.
Supervision should be increased by continuing initiatives to reduce non-performing loans and eliminate the capital deficit of the banking sector. The sector-wise strategy should be defined for the financial sector. The central bank's policy on interest rates should continue with operational changes. New policies need to be formulated for green bonds.
When asked about the conditions of the IMF, Prof. Mostafizur Rahman, an honorary fellow of the private research organization Center for Policy Dialogue (CPD), told Samakal that the reforms mentioned in the banking sector, including increasing the revenue, should have been implemented a long time ago. But since these issues have not been dealt with for a long time, there will be pressure on the economy if they are to be implemented now.
The government is interested in importing gas instead of searching for its own gas. Could not increase revenue collection. Therefore, due to the increase in the prices of these products in the international market, the prices have to be increased repeatedly in the country, which is increasing the suffering of the people.
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