IMF Loan: Bangladesh may get next tranche in June

Bangladesh could receive a $1.3 billion tranche from its loan programme with the International Monetary Fund by June if the new government moves ahead with reforms to make the dollar exchange rate more market-based, strengthen revenue collection, reduce subsidies, and address weaknesses in the banking sector.

A three-member high-level IMF delegation, led by Krishna Srinivasan, director of the Asia and Pacific Department, is scheduled to arrive in Dhaka on March 23 for a two-day visit to resume talks on the $5.5 billion loan programme, which stalled in November last year.

The team will meet Prime Minister Tarique Rahman, Finance and Planning Minister Amir Khosru Mahmud Chowdhury, and Bangladesh Bank Governor Md Mostaqur Rahman to discuss the programme and the government’s reform priorities.

Finance ministry officials said the IMF would seek clarity from the highest level of government on the new administration’s commitment to the programme. Further discussions are expected on the sidelines of the IMF–World Bank Spring Meetings in April.

Following those talks, a regular IMF mission may visit Dhaka to proceed with the process for releasing the next $1.3 billion tranche, the officials said.

Approved in January 2023, the IMF programme was initially worth $4.7 billion and was designed to be disbursed in seven instalments following periodic reviews.

The then Awami League government sought IMF support in 2022 as foreign exchange reserves came under pressure amid the fallout from the Russia–Ukraine war. By June last year, Bangladesh had received $3.65 billion in five tranches.

The Washington-based lender later expanded the programme to $5.5 billion in May last year following a request from the interim government.

However, after the interim administration took office in August 2024, efforts to unlock further tranches slowed amid disagreements over reform conditions.

Two instalments were eventually released together in June last year, but no further disbursement followed the fifth review in November. The IMF then said the next tranche would be decided only after discussions with the new government formed after the February 12 general election, which brought the BNP to power.

“The new administration’s full ownership of the programme will be critical, supported by early and active engagement with staff and efforts to secure stakeholder buy-in,” the IMF said in a report released in January.

The report, issued after a board meeting reviewing Bangladesh’s economic situation and progress under the programme, said performance under the fifth review had been uneven.

“Government revenue collection fell significantly short of the quantitative performance criterion. The high-level reform strategy for bank restructuring remains pending, and foreign exchange intervention practices have not been consistently aligned with understandings under the programme,” it said.

The IMF noted that the primary deficit target had been met, but largely through substantial cuts in capital and social spending.

“Programme conditions on foreign reserve accumulation, reduction of payment arrears, and limits on quasi-fiscal lending were met,” the report added.

It also said maintaining tight monetary policy and consistently implementing the new exchange rate regime would be necessary to address near-term macroeconomic vulnerabilities, including high inflation and low foreign exchange reserves.

Contacted, Finance and Planning Minister Amir Khosru Mahmud Chowdhury told The Daily Star that Bangladesh had already met many IMF conditions, though “a few issues remain”.

He said the final decision would depend on the upcoming discussions with the visiting IMF delegation.

Asked whether the new government might revise programme targets, he said, “Let’s see how it goes. They are coming, and much will depend on the discussions. We have our own priorities and policy issues. How we pursue our own economic policy is also important. Ultimately, the decision will be taken through the talks.”

Responding to suggestions from economists about continuing the programme, the minister said the government would weigh its own priorities.

“As I said, it all depends on the discussions. We also have to serve our own purposes. The IMF’s money is fine, but many issues are tied to it. We must take decisions based on our own economic policies and priorities.”

“We have our own economic approach, and that must be upheld,” he added.

Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), said completing the IMF programme was “extremely important” for Bangladesh.

He said last year’s suspension of talks partly reflected the IMF’s preference to engage with an elected government, along with concerns over the slow pace of reforms, particularly in revenue collection.

“In some areas we have fallen behind. In taxation, we have even gone backwards,” Raihan, also a professor at Dhaka University, told The Daily Star.

He said the programme should be viewed as an opportunity to advance reforms in key sectors. Failure in the negotiations could have “negative spillover effects”, as other development partners closely monitor IMF assessments when deciding on financial support.

“If the IMF’s evaluation is weak or negative, it becomes difficult for international agencies to convince their boards to justify funding or additional support for Bangladesh,” he said.

Raihan also warned that the global economic environment could put renewed pressure on Bangladesh’s balance of payments, particularly amid the ongoing US–Israel war on Iran.

Higher oil prices, disruptions in export markets, or a fall in remittances linked to the conflict could strain the country’s foreign exchange reserves, he said.

In such a scenario, the remaining IMF funds could play a supportive role for Bangladesh, Raihan said, urging the new government to engage actively with the lender and present a realistic assessment of what the interim administration achieved over its 18-month tenure and how current reform plans align with IMF conditions.