Bangladesh also discussing budget size with IMF, says Advisor Salehuddin

The advisor says the global lender prioritises domestic revenue mobilisation

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Discussions between the interim government and the International Monetary Fund (IMF) delegation visiting Dhaka include the budget deficit and its size, Finance Advisor Salehuddin Ahmed has said.

Speaking at the Secretariat on Sunday, he explained that the IMF would carry out the review and release two tranches at once.

“We will present how we plan to increase the tax-GDP ratio and improve tax collection,” said the advisor.

“The IMF’s main focus is revenue generation,” he added. “Apart from that, we are also discussing what the size of the budget will be, how large the deficit—these are also on the table.”

Bangladesh approached the IMF for support in 2022 amid economic strain.

Following extended negotiations, the global lender approved a loan package of $4.7 billion in early 2023.

The loan programme came with reform conditions, particularly in the financial sector and domestic fiscal management.

The tranches are being disbursed in phases, contingent on the progress made in fulfilling those conditions.

So far, Bangladesh has received around $2.21 billion in three instalments.

The fourth instalment, worth $645 million, was originally scheduled to be released following a review in February.

That meeting, however, did not take place, delaying the approval of the tranche in the process.

The IMF’s 11-strong team is currently in Dhaka to assess progress on conditions attached to the fourth and fifth tranches of the loan.

The IMF team is scheduled to hold a series of meetings with heads of different departments until Apr 17.

When asked how confident the government is about receiving the next disbursements, Salehuddin said: “The IMF board meeting is expected in May or June. Their recommendations will be based on this review.”

He added, “Discussions will include Bangladesh Bank’s loan resolution efforts or a new law to recover defaulted loans, along with exchange rate policy and foreign currency reserves.

“The [National Board of Revenue] will also outline its strategy to raise the tax-GDP ratio.”

On the government’s position on a “single” value-added tax (VAT) rate, the advisor said: “We will strive for it, but achieving a single rate immediately won't be possible.”