Bangladesh eyes $3bn in loan support from IMF, development partners by June

The finance ministry has said there is a strong possibility that the International Monetary Fund (IMF) will disburse the fourth and fifth tranches of its loan to Bangladesh by June, adding that the country is likely to receive $3 billion in total loan support from international development partners.

In a statement issued on Wednesday, the ministry said that these funds, allocated as budget support, would help strengthen Bangladesh’s foreign currency reserves and stabilise the exchange rate.

The update follows remarks made just two weeks ago by Finance Advisor Salehuddin Ahmed, who told reporters after returning from Washington that Bangladesh’s economic recovery was strong enough that the remaining IMF loan tranches were “not urgently needed”.

Among the IMF’s key policy recommendations tied to the loan are reforms in revenue administration, particularly the NBR, and a market-based exchange rate regime.

While Bangladesh has agreed to pursue institutional reforms, the finance advisor had earlier expressed reservations about fully floating the currency.

According to Bangladesh Bank, as of the end of April, the country's gross foreign exchange reserves stood at $27.42 billion, while reserves measured using the BPM6 methodology stood at $22.04 billion.

On the same day, Bangladesh Bank Governor Ahsan H Mansur announced the central bank’s decision to move toward a market-based exchange rate for the dollar.

“The IMF's fourth review has been successfully completed. Following a decision after the third review, it was agreed that the fourth and fifth tranches would be released together, pending additional review of key reforms in revenue management and exchange rate policy,” the finance ministry said.

“In line with that decision, detailed discussions were held during the fourth review in Dhaka in April, followed by continued engagement at the World Bank–IMF Spring Meetings in Washington, DC, later that month.”

The ministry added that both parties have reached consensus on revenue reforms, foreign exchange measures, and other structural policy changes after carefully evaluating macroeconomic stability. With a staff-level agreement now in place, Bangladesh expects the IMF to disburse $1.3 billion covering both the fourth and fifth tranches by June.

In addition to the IMF support, Bangladesh also expects to receive around $2 billion in budget assistance from other development partners, including the World Bank, Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Japan, and the OPEC Fund for International Development.

While these loans do come with reform conditions, the finance ministry said that all decisions were being taken with Bangladesh’s socio-economic context in mind.

“The inflow of these funds will further strengthen foreign exchange reserves and help maintain stability in the exchange rate,” the ministry said.

“The reform programmes being undertaken in exchange for budget support are designed solely by the Government of Bangladesh based on national interests, with technical assistance from development partners limited to an advisory role.”