The International Monetary Fund (IMF) has sought a report on implementation of the 16 conditions the multilateral lending agency tagged with releasing $1 billion credit to Bangladesh.

The IMF in a letter to Bangladesh has asked to know about the progress report within Monday, sources said.
The progress report was sought just few days before the global lender would place the Extended Credit Facility (ECF) loan proposal of the government to its board meeting on April 11.

“We have already sought every detail on the progress of the implementation of the conditions to concerned government agencies”, a top central bank official said.

He also said the progress in execution of conditionals including price hike of fuel oil would also be place at the board meeting.

The ECF fund will come in six tranches, of which the first $167 million installment will land by the end of current fiscal year if the board approves the proposal next week, finance ministry sources said.

Prime Minister’s energy adviser Tawfiq-E-Elahi Chowdhury told daily sun that the price hike of fuel oil, tagged with the release of the ECF fund, will also be placed at the board meeting of IMF next week.

Energy Division is likely to increase fuel oil prices again before the announcement of next budget in June, he said, adding that the process might begin from next month.

The 16 IMF conditions include containing budget deficit within five per cent of GDP, but a finance ministry report indicated that it may increase to 5.1 percent at the end of current fiscal.

Budget deficit may also widen due to drastic fall in receiving foreign assistance. In the original budget, the deficit was estimated at 5 percent of the GDP.

Meanwhile, different government agencies have already made various strides in implementing the conditions entwined with the IMF loan facilities. The draft value added tax law has already been approved by the cabinet and will be placed in the next session of parliament as a bill to meet the conditions.

Dr AB Mirza Azizul Islam, former adviser to a caretaker government, told daily sun that the ECF fund will help ease the foreign currency crisis of the government.

“We need foreign currency to strengthen local currency taka,” he said adding that the government should not take IMF loan accepting the painful conditions that may go against the interest of the country.

The list of IMF conditions also include demutualisation of Dhaka and Chittagong bourses by December.
The government will also have to introduce a system of automated taxpayer identification number and automatic price adjustments of domestic fuel oils with their international rates.

The Banking Companies Act (amendment) has to be placed in parliament by June to give Bangladesh Bank (BB) sole regulatory authority over the commercial banks, and to reduce the number of bank directors as per the conditions.

The IMF also asked the government to design a new set of regulations on loan classification and loan-loss provisioning by June 2014, following international best practices.

The IMF said a new organisational structure of the National Board of Revenue to support VAT collection has to be approved by the finance minister by September.

It also asked the central bank to issue another order by September to adjust the new amended banking law, setting a ceiling on commercial banks’ shareholdings in the stock market to 25 percent of their individual regulatory capital.

Cut in subsidy, rise in repo rate of Bangladesh Bank, withdrawal of cap on commercial banks’ lending rates, are the other conditions of the global lender.

The IMF’s $1 billion credit, which would be given to Bangladesh in three-year duration, is aimed to help Bangladesh tackle its balance of payments (BoP) problems. The country’s BoP is already under tremendous pressure.

The Daily Sun/Bangladesh/ 6th April 2012