Bangladesh minister says IMF has cleared second tranche of $4.7bn loans

The International Monetary Fund has approved the second tranche of $4.7 billion loans to Bangladesh in its board meeting after reviewing reforms initiated under the programme.

Bangladesh will receive $682 million in this instalment, Finance Minister AHM Mustafa Kamal said on Tuesday night.

Bangladesh applied to the IMF for a loan to stabilise the economy amid dwindling forex reserves and global economic headwinds.

The country agreed to pursue reforms on certain issues under the loan programme.

Before and after receiving the first $476.2 million tranche in February, Bangladesh took several steps to reform the structure of its financial sector and its policies, including raising the price of power and gas and cutting subsidies at their recommendation.

It has continued the reforms after the initial round of funds came in.

In October, Bangladesh reached a staff-level agreement with an IMF team who came to the country to review the use of funds released in the first tranche of the loan agreement.

The decision paved the way for the release of the funds in the second tranche of the loan agreement.

Of the six conditions set out by the IMF for the loan, Bangladesh has been able to fulfil four.

The IMF was not adding any further conditions to the second tranche, officials said.

These conditions included a single exchange rate based on the market, modernisation of monetary policy, information disclosure on risk-based assets, IMF measures on the foreign exchange accounts and raising them to a certain level, and market-based tax revenue collection and interest rates.

Bangladesh was unable to meet the conditions on reserves and revenue collection.

IMF team lead Rahul Anand said during the agreement that Bangladesh had followed through on the conditions imposed on the loan, but saw difficulties ahead because of the current economic climate.

“The authorities have made substantial progress on structural reforms under the IMF-supported program, but challenges remain. Continued global financial tightening, coupled with existing vulnerabilities, is making macroeconomic management challenging, putting pressures on the Taka and FX reserves,” he said.