The International Monetary Fund (IMF) may postpone the release of the second installment of an extended credit facility (EFC) to Bangladesh as the government is yet to meet some of the conditions tagged with the loan.

The global lender approved $987 million ECF on some conditions including the demutualisation of Dhaka and Chittagong stock exchanges by December 2012.

The government received the first tranche amounting to $141 million in April this year. The rest of the money was said to be given in six equal installments upon showing solid progress in fulfilling some prescribed reform measures.

In the second tranche, the government was expecting to receive $141 million this month.

“The release of the second tranche of has become uncertain as both sides have failed to reach a consensus on some issues including amendment to the VAT law, Banking Company Act, banks’ stock market exposure and the guarantee ceiling,” a top official of the finance ministry said.

He also said the officials of finance ministry and Bangladesh Bank (BB) are continuing their discussions with the resident officials of IMF on the issues, but no significant progress was taking place.

Sources said the concerned officials of Bangladesh Bank became frustrated as the finance ministry did not meet some conditions it earlier agreed to fulfill to get the second installment of the loan.

Sources in the Finance Division said that IMF’s resident representative Dr Eteri Kvintradze visited the ministry and the banking division on October 22 to learn about the progress in fulfilling of the conditions.

Later, the IMF representative has sent her observation to the IMF headquarters.

The report was set to be placed at the board meeting of the IMF scheduled to be held on October 30. However, the meeting did not take place, another official of the finance ministry said.

A visiting IMF team in September expressed dissatisfaction over the delay in reviewing the VAT law and Banking Company Act.

The finance ministry earlier decided to set banks’ stock market exposure set at 40 percent of the paid-up capital, which the IMF recommended setting at 25 percent, sources said.

The ECF agreement also stipulated that the government under no circumstances can issue sovereign guarantee and take non-concessional loans exceeding $1.0 billion by December next.

But the government has already crossed the limit.

Former adviser to a caretaker government Dr Mirza Azizul Islam told daily sun that the release of the second tranche of ECF fund might be suspended as the government failed to meet the conditions set by IMF.

News: The Daily Sun/Bangladesh/12-Nov-12