IMF
IMF-Bangladesh Bank meeting prioritizes unified exchange rate and competitive lending rate
A visiting delegation of the International Monetary Fund (IMF) on Tuesday met with the Bangladesh Bank (BB) Governor and discussed updated financial factors along with the progress of reform in the sectors.
A five-member delegation headed by Rahul Anand, IMF Bangladesh Mission Chief, started meeting with the BB officials in the morning on Tuesday, which ended at 3.0 pm.
Md Mezbaul Haque, executive director, and BB spokesperson told reporters that the IMF team discussed updated information on various economic factors with the several departments of BB including the progress in the use of the IMF's loan.
He also said that the visit was a routine process of the IMF's work and the BB participated in the meeting on behalf of the state.
Sources close to the meeting said among the issues prioritized in the discussion are efforts to unify multiple exchange rates, making lending interest rates market-oriented, and the process of calculating foreign reserves under the IMF definition.
During its (IMF) April 25 to May 2 visit the mission will hold meetings with the officials of the Ministry of Finance's Finance Division, Financial Institutions Division, Economic Relations Division (ERD), Bangladesh Bank, and National Board of Revenue (NBR), sources said.
Bangladesh applied to the IMF for a loan to stabilize the economy amid dwindling forex reserves and agreed to pursue reforms on certain issues.
Read more: Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson 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 reducing subsidies by raising the price of power and gas, and fuel.
The foreign exchange crisis in Bangladesh eased after the global lender released the first installment of a $4.7 billion loan. After then, World Bank and Japan International Cooperative Agency
The IMF approved about $3.3 billion for Bangladesh under the Extended Credit Facility ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility.
Read more: BB set to announce new monetary policy
IMF team due in Dhaka on April 25 to discuss 2nd tranche of $4.7b loan
A team of the International Monetary Fund (IMF) is due to arrive in Dhaka on April 25 to discuss the progress in the use of the first tranche of its US$4.7 billion loan programme for Bangladesh and the release of the second installment.
The Ministry of Finance sources told UNB on Wednesday that during its April 25 to May 2 visit the mission will hold meetings with the officials of the Ministry of Finance's Finance Division, Financial Institutions Division, Economic Relations Division (ERD), Bangladesh Bank, and National Board of Revenue (NBR).
IMF Asia and Pacific Division Head Rahul Anand will lead the team comprising three to four members, the ministry sources said speaking on condition of anonymity.
Read More: World Bank spring meeting begins in Washington today, announcement on $50bn allocation to face global crisis likely
Bangladesh received the first tranche of US$476.2 million of the $4.7 billion loan approved by the IMF on January 30.
The entire amount of the loan will be paid in seven installments in three and a half years until 2026. As such there are six more installments left.
A senior official of the ministry said the IMF usually reviews various aspects of compliance before disbursing each tranche. Accordingly, an IMF team will come next September to review the fulfillment of loan conditions before disbursing the second tranche.
Read More: Following IMF advice BBS to calculate inflation on a new base year from March
Usually before each budget announcement, an IMF mission comes to Dhaka to discuss budget assistance. Now that the loan programme is going on with them, besides the budget assistance, the issues of fulfilling the loan conditions will also come up for discussion, said the sources.
World Bank spring meeting begins in Washington today, announcement on $50bn allocation to face global crisis likely
The spring meeting of the World Bank Group and the International Monetary Fund (IMF) begins today (April 10, 2023) in Washington DC, USA.
This meeting is likely to announce an allocation of USD $50 billion from the organisations to face the global crisis.
The seven-day meeting will continue till April 16 at the headquarters of the IMF and the World Bank Group in Washington.
Read More: Bangladesh's GDP growth expected to pick up to 6.2% in FY2024: World Bank
According to the Ministry of Finance, a delegation of six members is participating in the spring meeting led by the Governor of Bangladesh Bank, Abdur Rouf Talukder.
Along with the governor, Bangladesh Bank Chief Economist Habibur Rahman, Finance Secretary Fatima Yasmin and Additional Secretary of Finance Department Rehana Parveen and two officials from the Economic Relations Department (ERD) are participating in the meeting.
Apart from this, three more officials from the Bangladesh Embassy in the United States are expected to join the meeting along with the Bangladesh team.
Read More: World Bank agrees to finance for development of metro rail-centric communication
Generally, such meetings are led by the finance minister. However, Finance Minister AHM Mustafa Kamal is not joining the meetings this time.
At this meeting of the World Bank Group, the International Bank for Reconstruction and Development (IBRD), a subsidiary of the organization, may announce an additional financing of $50 billion to deal with the global crisis.
Being a member of IBRD, Bangladesh will also get the benefit of this financing, the finance ministry sources said.
Read More: New World Bank leadership must put Climate Action as top priority: V20
The World Bank's spring meeting will be chaired by President of France Emmanuel Macron, and Prime Minister of Barbados Mia Amor Mottley. They will be joined by world leaders, academics, development experts and climate experts.
Besides, finance ministers, central bank governors of 189 World Bank member countries will participate.
Following IMF advice BBS to calculate inflation on a new base year from March
Bangladesh Bureau of Statistics (BBS) is making radical changes in the inflation calculation considering the present financial situation and the IMF suggestions.
The inflation will be calculated for the base year 2021–22 instead of the existing base year of 2005-06, which will be more accurate as lifestyle and consumer behaviors made a big change in the present time, the BBS sources said.
According to the BBS, in the new base year, the changes in consumption patterns of people during the last one and a half decade have been prioritized. For example, in the base year 2005-06, inflation was calculated using only 426 goods and services. About 300 more products and services are increasing in the new base year.
There will be a total of 722 products and services as new, which will be calculated by taking 100 points and the contribution of these products to inflation.
In this case, the contribution of rice will be 13. The remaining 721 products and services contributed 87. For the first time, the contribution of non-food products and services is crossing 50 percent. This means people spend more on consuming other goods and services than buying food, BBS official said.
Read more: Bangladesh Bank unveils cautionary monetary policy to curb inflation and exchange rate
Former chairman of NBR Dr. Muhammad Abdul Mazid told UNB that a new base year is definitely needed. But the list of food products should be changed drastically.
“Around 80 percent of the current diet is carbohydrate-based foods. Food products should be listed with nutritional values rather than calories. This needs to be openly discussed with all stakeholders,” he said.
Inflation has been high in the last six months due to Covid-19 pandemic and the Ukraine-Russia war. Since then, economists are arguing that the current system does not capture the correct picture of inflation.
They believed that the inflation is actually higher.
Meanwhile, the government has committed to the International Monetary Fund (IMF) to change the base year in inflation calculations.
According to this reform proposal, the BBS will calculate inflation from the new base year and method from next July. As a result, the BBS officials expect that the consumption and consumption trends of people will be illustrated more clearly.
In addition, officials believe that long-held doubts among many economists about inflation calculations will be diminished, the BBS official said.
The BBS has already been changed to a base year and the list of goods and services has made finalized. The pilot program for calculating inflation in the new base year will begin next month.
Pakistan set for tax hikes in return for massive IMF bailout
Cash-strapped Pakistan will impose new taxes of 170 billion rupees this month in a bid for massive bailout, officials and analysts said Monday, even as they warned the new taxes could accelerate the country's spiraling inflation.
The dire outlook from economists and political analysts comes after the International Monetary Fund delayed the release of a crucial $1.1 billion portion of a 2019 deal worth $6 billion, on hold since December over Pakistan's failure to meet the terms. The latest round of the talks between Pakistan and the IMF concluded Friday with the fund recommending steps including imposing new taxes.
“The imposition of more taxes means tough days are ahead for the majority of the people in Pakistan who are already facing higher food and energy costs, but there is no other way out if Pakistan needs the IMF loans, and Pakistan desperately needs it," said Ehtisham-ul-Haq, a veteran economist.
The stalemate in talks between IMF and Pakistan was seen as a blow to the government of Prime Minister Shahbaz Sharif, who is struggling to avoid a default amid a worsening economic crisis and a surge in militant violence. Pakistan already is struggling with the recovery from record-breaking floods, which killed 1,739 people in summer 2022 and destroyed 2 million homes.
In January, dozens of countries and international institutions at a U.N.-backed conference in Geneva pledged more than $9 billion to help Pakistan recover and rebuild from devastating summer floods, but economists and Pakistani officials say those funds will be given for the projects, and not in cash.
Also Read: Pakistani Foreign Minister Bilawal Bhutto in Moscow on official visit
Since then, Pakistani Finance Minister Ishaq Dar has said that his experts were preparing to impose additional taxes and slash subsidies on electricity, gas and more to meet the deal’s terms.
Haq, the economist, said Pakistan's inflation rate of 26% will jump to 40% after the imposition of new taxes. But, he said in an interview, “life will become more difficult for the common man if Pakistan fails to revive the IMF bailout without any further delay."
Officials say several friendly countries like China, Saudi Arabia and the United Arab Emirates had assured Sharif's government that they will financially help Islamabad — but they too wanted Pakistan to complete the 2019 IMF program.
Imtiaz Gul, a senior Pakistani political analyst, said Sharif's government is likely to raise taxes on those who are already paying taxes.
“There is a need to broaden the tax base," he said, but raising taxes "will trigger an increase in the prices of all essential items."
The government insists that it will impose new taxes in such a way that poor people are not affected. The new taxes will be imposed on those who can afford to pay additional taxes to save the economy, the government said.
Pakistan's foreign exchange reserves have fallen to slightly over $2 billion. That’s enough only to pay for imports for 10 days. Officials say Pakistan's talks with IMF will resume virtually later Monday or Tuesday. Sharif last week warned that Pakistan would have difficulty complying with the IMF’s conditions.
Sharif's predecessor, Imran Khan — now the opposition leader since his ouster through April's no-confidence in Parliament — has been warning that Pakistan could face a Sri Lanka-like situation because of the deepening economic crisis. He has publicly warned that Pakistan could be blackmailed by the world community over the country's nuclear program if Pakistan defaults in the near future.
Khan insists his government was ousted under a U.S. plot, a charge Washington denies.
IMF loan program can be touchstone of financial sector reforms
The government’s successful negotiation of a $4.7 billion, approved at the Executive Council of the International Monetary Fund (IMF), will raise confidence in the macroeconomy amid a volatile foreign exchange market, analysts said.
They said that the IMF loan program can help bring stability to the macroeconomic situation in two ways- increasing the US dollar supply and igniting a process of reform in the financial sector.
Economist and adviser to the last caretaker government Dr ABM Mirza Azizul Islam told UNB that the IMF loan works as a standard for the economic strength of a country. Other international financial organisations would be encouraged to provide loans and in other financial dealings with Bangladesh now.
He said that the loan will contribute to a stable exchange rate by strengthening the foreign exchange reserve for the short term.
Besides, the IMF loan will work as a remedy while inward remittance flow and repatriation of export income have slightly decreased, Mirza Aziz said.
The government will be implementing reforms in the financial sector as per the advice of the IMF, which will bring good results in the long run for the macroeconomy, he pointed out.
Read more: $4.5 billion loan: IMF reaches preliminary agreement with Bangladesh
Many countries are seeking IMF’s loan support to face the foreign exchange crisis due to the fall of global economic growth. Bangladesh’s process for securing the loan has been much smoother than some other countries, which is a good endorsement of Bangladesh’s macroeconomic stability.
Economist and former Governor of Bangladesh Bank (BB) Dr Atiur Rahman told UNB that the IMF board decision indicates strong confidence in Bangladesh's macroeconomic management and willingness to undertake necessary reforms for inclusive and sustainable growth.
Besides budget support, the approval of a new loan of $1.4 billion from the Resilience and Sustainable Fund (RSF) also demonstrates the IMF's recognition of Bangladesh's capacity to address climate change challenges, he said.
“The loan, of course, is focused on addressing high inflation and falling foreign exchange reserves. Indeed, Bangladesh, though not in the same club as Sri Lanka and Pakistan, has still made this pre-emptive move of asking for long term low-cost funding support from the IMF, to avoid future pressures on its macroeconomic indicators that have already been affected to some extent by the ongoing global economic crisis,” he added.
Dr Atiur said the state-of-the-art technical knowledge of IMF experts in Bangladesh will certainly benefit from this program in undertaking necessary reforms in the financial sector for raising revenue and foreign exchange reserve, improving governance of the banking sector to reduce non-performing assets, and targeting better social protection for the extreme poor.
These reforms are, however, already in place as a part of the indigenous development strategy of Bangladesh. The program will only further consolidate their implementation process, he said.
Read more: Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson
"Other development partners like the World Bank, ADB, and JICA will be encouraged to come forward with additional support for infrastructural development in Bangladesh. FDI will also flow at a faster pace to take advantage of the conducive investment environment in Bangladesh which will be further strengthened by the presence of the IMF program," said Dr Atiur, also a professor of economics at Dhaka University.
The IMF said that the loan will help stabilise Bangladesh's macroeconomy, implement the necessary reforms to build capacity for social and development spending, strengthen the financial sector, modernise policy frameworks, and address climate change.
Bangladesh likely to get back the money borrowed by Sri Lanka: FM
Bangladesh is expected to get back the money borrowed by Sri Lanka by September this year as the country's economic situation is improving.
"Sri Lanka is gradually doing better. They are recovering slowly. We have given them time till September (to repay the loan)," Foreign Minister Dr AK Abdul Momen told reporters at state guesthouse Padma on Sunday (February 05, 2023) afternoon, hoping for repayment by Sri Lanka within the timeframe.
The Foreign Minister, who returned home Sunday from Sri Lanka, said the new government in Sri Lanka is running the country “pretty well”.
The Sri Lankan government hopes that they will recover from the problem and the International Monetary Fund (IMF) is coming up for support, Momen said.
Also read: FM likely to visit New Delhi March 1-2
Sri Lankan President Ranil Wickremesinghe has conveyed Sri Lanka's gratitude to the Bangladesh government and Prime Minister Sheikh Hasina for the timely assistance as the country battles to rebuild its economy.
“I must say they are very grateful to us,” said Foreign Minister Momen.Foreign Minister Momen visited Sri Lanka as a guest for the country's 75th Independence Day celebrations, for which the guest list was filled up mostly by neighbouring countries at foreign minister-level.
Sri Lanka and the International Monetary Fund (IMF) recently reached a staff-level agreement on a 48-month, $2.9 billion Extended Fund Facility which will also help it secure short-term funds from other donors.
Bangladesh Bank earlier granted Sri Lanka six more months to repay the $200 million loan after the Island nation requested to extend the repayment period due to its prolonged economic crisis.
Read More: Sri Lanka thanks Bangladesh for timely assistance on road to recovery
In a friendly gesture, Bangladesh had extended the loan to cash-strapped Sri Lanka under a currency swap arrangement in 2021.
Sri Lanka and the International Monetary Fund (IMF) recently reached a staff-level agreement on a 48-month, $2.9 billion Extended Fund Facility which will also help it secure short-term funds from other donors.
Bangladesh Bank earlier granted Sri Lanka six more months to repay the $200 million loan after the Island nation requested to extend the repayment period due to its prolonged economic crisis.
In a friendly gesture, Bangladesh had extended the loan to cash-strapped Sri Lanka under a currency swap arrangement in 2021.
Also read: FM Momen to join Sri Lanka's 75th Independence Day celebrations in Colombo
Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson
Bangladesh received $476 million as the first instalment of a $4.7 billion loan from the International Monetary Fund (IMF) on Thursday.
Bangladesh Bank (BB) received this amount three days after approval of the IMF loan, said Mezbaul Haque, executive director and spokesman of BB.
He confirmed to UNB that releasing of the first instalment from the IMF has strengthened Bangladesh's foreign exchange reserves as it reached $33.69 billion on Thursday.
Bangladesh will get about $3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility (RSF).
With the approval of a $1.4 billion loan under the Resilience and Sustainability Facility (RSF), Bangladesh became the first country in Asia to receive a loan from the fund created for low and middle-income countries that are at risk due to climate change.
Bangladesh will get the loan through seven instalments and have to pay the loan at 2 percent interest rate
Bangladesh formally requested the IMF for $4.5 billion loan assistance in July 2022. Then the IMF assured that the global lender was ready to discuss the issue.
The IMF discussed with Finance minister AHM Mustafa Kamal and Bangladesh Bank Governor Abdur Rouf Taluktherin on the sidelines of the board meeting in July last year.
As per the discussion an IMF team led by Rahul Anand visited Dhaka from October 26 to November 9, 2022 to discuss the IMF's support for Bangladesh.
Later, Antoinette Monsio Sayeh, Deputy Managing Director (DMD), visited Bangladesh from January 14-18 this year and praised the economic development and social progress of Bangladesh.
Read more:IMF now expects world economy to grow 2.9% in 2023
Power tariff further raised at both bulk and retail levels, effective from tomorrow
Electricity tariff was raised in Bangladesh at both retail and bulk levels, with effect from tomorrow (February 1).
The Power Division — through administrative order and in two separate gazette notifications — raised the tariff.
According to the new order, the retail tariff was raised at different levels of consumers. The tariff was raised for lower-level consumers by an average 5 percent to Tk 4.14 per unit (each kilowatt hour) from Tk 3.94 per unit. Bulk tariff was raised by 8.06 percent to Tk 6.70 from Tk 6.20 per unit.
Enhancement in bulk tariff means, the distribution companies will purchase electricity by an increased rate of Tk 0.50 per unit from Bangladesh Power Development Board (BPDB) while enhancement in retail tariff means, consumers will have to pay enhanced rate for using electricity.
Read more: BPDB submits retail power tariff adjustment proposal seeking a 19.44 percent hike
Earlier on January 13, the government raised the electricity tariff by 5 percent at the retail level with effect from January 1.
At that time, the average tariff for all consumers went up by Tk 0.36 to Tk 7.49 from Tk 7.13.
On November 21, the bulk power tariff was hiked by 20 percent to Tk 6.20 per kilowatt hour by Bangladesh Energy Regulatory Commission (BERC) with effect from December 1.
The government recently amended the BERC Act empowering the Power Division to raise power, gas and petroleum fuel by administrative power any time it wants.
Read more: CPD raises question about power tariff enhancement proposal
Applying that amended Act, the new gazette notification was issued on January 30 to raise the electricity tariff at bulk and retail levels, bypassing the authorities of the energy regulator.
Meanwhile, energy experts believe the tariff enhancement decision came in compliance with the conditions of the International Monetary Fund (IMF) that recently approved $4.5 billion in loan to Bangladesh.
IMF now expects world economy to grow 2.9% in 2023
The outlook for the global economy is growing slightly brighter as China eases its zero-COVID policies and the world shows surprising resilience in the face of high inflation, elevated interest rates and Russia's ongoing war against Ukraine.
That's the view of the International Monetary Fund, which now expects the world economy to grow 2.9% this year. That forecast is better than the 2.7% expansion for 2023 that the IMF predicted in October, though down from the estimated 3.4% growth in 2022.
The IMF, a 190-country lending organization, foresees inflation easing this year, a result of aggressive interest rate hikes by the Federal Reserve and other major central banks. Those rate hikes are expected to slow the consumer demand that has driven prices higher. Globally, the IMF expects consumer inflation to decelerate from 8.8% last year to 6.6% in 2023 and 4.3% in 2024.
A big factor in the upgrade to global growth was China’s decision late last year to lift anti-virus controls that had kept millions of people at home. The IMF said China’s “recent reopening has paved the way for a faster-than-expected recovery.’’
Read more: UN forecasts fall in global economic growth to 1.9% in 2023
The IMF now expects China's economy — the world’s second-biggest, after the United States — to grow 5.2% this year, up from its October forecast of 4.4%. Beijing's economy eked out growth of just 3% in 2022 — the first year in more than 40, the IMF noted, that China has expanded more slowly than the world as a whole. But the end of virus restrictions is expected to revive economic activity in 2023.
The IMF's 2023 growth outlook improved for the United States (forecast to grow 1.4%) as well as for the 19 countries that share the euro currency (0.7%). Europe, though suffering from energy shortages and higher prices resulting from Russia's invasion of Ukraine, proved “more resilient than expected,’’ the IMF said. The European economy benefited from a warmer-than-expected winter, which held down demand for natural gas,
Russia's economy, hit by sanctions after its invasion of Ukraine, has proved sturdier than expected, too: The IMF's forecast foresees Russia registering 0.3% growth this year. That would mark an improvement from a contraction of 2.2% in 2022. And it's well above the 2.3% contraction for 2023 that the IMF had forecast for Russia in October.
The United Kingdom is a striking exception to the IMF's brighter outlook for 2023. It has forecast that the British economy will shrink 0.6% in 2023; in October, the IMF had expected growth of 0.3%. Higher interest rates and tighter government budgets are squeezing the British economy.
Read More: Global economic growth will slow down in 2023, but will pick up in 2024: IMF chief
“These figures confirm we are not immune to the pressures hitting nearly all advanced economies,’’ Chancellor of the Exchequer Jeremy Hunt said in response to the IMF forecast. “Short-term challenges should not obscure our long-term prospects — the U.K. outperformed many forecasts last year, and if we stick to our plan to halve inflation, the U.K. is still predicted to grow faster than Germany and Japan over the coming years.”
The IMF noted that the world economy still faces serous risks. They include the possibility that Russia's war against Ukraine war will escalate, that China will suffer a sharp increase in COVID cases and that high interest rates will cause a financial crisis in debt-laden countries.
The global outlook has been shrouded in uncertainty since the coronavirus pandemic struck in early 2020. Forecasters have been repeatedly confounded by events: A severe if brief recession in early 2020; an expectedly strong recovery triggered by vast government stimulus aid; then a surge in inflation, worsened when Russia's invasion of Ukraine nearly a year ago disrupted world trade in energy and food.
Three weeks ago, the IMF’s sister agency, the World Bank, issued a more downbeat outlook for the global economy. The World Bank slashed its forecast for international growth this year by nearly half — to 1.7% — and warned that the global economy would come “perilously close’’ to recession.
Read More: IMF expected to approve Bangladesh’s $4.5 billion loan package on Monday