Bangladesh, IMF meet again as loan decision pushed to May 23

The International Monetary Fund (IMF) has held another round of talks with Bangladesh, pushing the decision on the next loan disbursement to May 23 in the board meeting of the global lender.

The virtual meeting began at 6pm on Monday and lasted for an hour and 10 minutes.

Bangladesh Bank chief Ahsan H Mansur, Deputy Governor Habibur Rahman, and Finance Secretary Khairuzzaman Mozumder took part in the discussion for Bangladesh.

The governor declined to comment on the content of the meeting.

Central Bank spokesperson Arief Hossain Khan, however, confirmed that the meeting took place.

“A virtual meeting was held with the IMF. The governor participated in it,” he told bdnews24.com.

A senior official, who asked not to be named, said Bangladesh Bank reiterated that it was not yet ready to float the exchange rate fully.

“It was also conveyed that raising tax rates and cutting subsidies to zero is not feasible at this stage,” he added. “Bangladesh will implement both issues in phases and requested reasonable time to do so.

“This was presented with logical arguments.”

According to him, Bangladesh informed the IMF that it would not shift its stance on these two matters.

The next disbursement now depends entirely on the IMF board’s decision, which is due on May 23 in Washington.

To release the fourth and fifth instalments together, the global lender has laid out several conditions.

These include tightening monetary policy, fully market-based exchange rates, and achieving net reserve targets.

The reserve target has already been met. On Sunday, Bangladesh Bank reported gross reserves at $27.35 billion, with $21.97 billion calculated under the IMF's Balance of Payments and International Investment Position Manual, known as the BPM6 method.

The IMF has now placed the highest priority on making the exchange rate entirely market-driven, increasing tax rates and reducing subsidies.

It is on these fronts that Bangladesh has raised strong objections.

Another senior official at the central bank said an analysis of macroeconomic indicators has led to the conclusion that the economy is currently not in a position to absorb the pressure of meeting these two demands.

Finance Advisor Salehuddin Ahmed has also voiced opposition to a fully market-based exchange rate.

After returning from talks with the IMF in the United States on Apr 29, Salehuddin said: “They want us to completely open the foreign exchange market. We said that’s not possible.

“If we do, it’ll shoot to Tk 280 like Pakistan or Tk 400 like Sri Lanka—we can’t let that happen.”

“Since the [interim] government came to power, we haven’t received any new funds from the IMF,” he added. “We've remained stable without their support. So, they can’t just force their conditions on us.”

If an agreement is reached, Bangladesh may receive the next two instalments at a time in June.

A recent IMF delegation wrapped up its Dhaka visit without a decision after reviewing the current loan programme.

Before disbursing each tranche, the IMF evaluates how the previous funds were used and adjusts conditions if it deems necessary.

When approving the third instalment, the IMF relaxed the reserve requirement.

The loan programme with the IMF began on Jan 30, 2023, and since then, Bangladesh has received several tranches.

The first instalment, amounting to $470.63 million, was released on Feb 2, 2023, while the second tranche of $681.10 million was received in December of the same year.

In June 2024, the third instalment brought in $1.15 billion.

So far, Bangladesh has received $2.31 billion from the IMF, with $2.39 billion still pending.