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The government is expecting at least $5.65 billion in budget support this fiscal year from the World Bank, the International Monetary Fund (IMF), and the Asian Development Bank (ADB) to expedite reforms.
Of the expected funds, the IMF is likely to provide $3 billion, the World Bank $1.5 billion and the ADB $1.15 billion.
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Around $3 billion of the funds could come by December for stronger support to ensure good governance in banking and other sectors, according to officials at the finance ministry, Bangladesh Bank and the three development partners.
The global and regional lenders may impose several conditions for the loans, including some on revenue, public expenditure, and dissemination of data, finance ministry officials said.
A high-powered government delegation led by Finance Adviser Salehuddin Ahmed will visit the US from October 21-29 to attend the World Bank-IMF Annual Meetings.
They will sit with World Bank and IMF officials on the sidelines of the main event to discuss the fresh financings, their modalities, and reform conditions.
High-ranking officials of the World Bank and the IMF have assured the government of providing necessary funds to boost the depleting foreign currency reserves after the interim government took charge in August.
The IMF is likely to approve $3 billion in fresh loans under a separate programme, in addition to the $4.7 billion in funds approved in January last year, under which Bangladesh has got $2.3 billion in three tranches so far.
The IMF may disburse the fresh funds in multiple tranches as well. However, the modality of the loans will be finalised during talks in Washington this month.
A finance ministry official said they are hopeful about getting more than $1 billion under the two IMF programmes this year, subject to the IMF board’s approval in December.
An IMF team is likely to visit Dhaka in November to set the reform conditions for the fresh funds and also review the existing loan programme.
The World Bank is expected to clear $1.5 billion in fresh funds in the ongoing fiscal year, including $1 billion under two programmes by December.
A finance ministry official said the World Bank will provide $750 million to strengthen economic governance and reform programmes.
Another $250 million will be provided for capacity building of the finance ministry, Bangladesh Bank, National Board of Revenue (NBR), and Bangladesh Bureau of Statistics (BBS), said the official.
From the ADB, the government expects $1.15 billion by the end of this fiscal year. The funds will include $650 million expected by December for a programme to strengthen economic management and governance.
The interim government also sought $1 billion from the ADB for the banking sector and another $1 billion for the energy sector.
Out of these, there has been significant progress in getting the $1 billion for the banking sector. The ADB could provide $500 million of the funds by June next year.
The Bangladesh delegation will also hold talks with officials of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) and International Finance Corporation (IFC), and the US Treasury Department during the WB-IMF Annual Meetings.
IFC in 2022 proposed to issue Taka-denominated bonds worth $4 billion among local investors, either through public issuance or private placement, to lend the proceeds to projects in Bangladesh.
There has not been much progress regarding the proposal, but recently the member of the World Bank Group has shown renewed interest in the matter.
MIGA has offered Bangladesh Bank $1 billion in guarantee facilities for international trade to reduce import costs.
MIGA and IFC’s proposals will be discussed further during the Bangladesh delegation’s visit to Washington, a central bank official said.
POSSIBLE CONDITIONS
Officials said the conditions for the fresh World Bank and IMF loans may include the separation of tax policy from revenue collection administration. The lenders have been raising the issue for a long time, but it could not be realised due to a lack of interest from NBR officials.
The lenders may also want the existing multiple VAT rates replaced with a uniform rate, and the introduction of a modern electronic VAT system to increase revenues and improve compliance.
The World Bank recommended these reforms in its latest development update for Bangladesh last week.
It suggested enhancing efficiency in expenditure by aligning national savings certificate interest payments with market rates and controlling subsidy spending.
The report recommended implementing market-based tariffs in the power sector and transitioning from fertiliser subsidies to a voucher-based programme. It suggested replacing emergency procurement with competitive bidding to reduce generation costs.
A finance ministry official said the lenders may impose a condition under which the BBS will have autonomy and publish data independently.
Currently, BBS sends data to government high-ups for approval before publication.
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