The ongoing loan agreement between Bangladesh and the International Monetary Fund (IMF) is facing significant delays, with the country’s interim government expressing growing reluctance to implement the stringent conditions set by the IMF. The government has emphasized that while it acknowledges the need for financial assistance, many of the IMF’s requirements clash with the nation’s interests, and as a result, the implementation of these conditions will not jeopardize the welfare of the people.
Government Reluctance: Bangladesh’s interim government expresses growing reluctance to implement several of the IMF’s stringent conditions, citing potential harm to the country’s interests and welfare.
Key IMF Conditions: The IMF’s conditions include increasing electricity prices, raising the dollar exchange rate, and enhancing tax collection, each of which could worsen inflation and financial pressure on citizens.
Delays in Loan Installments: The IMF has postponed the loan installments three times due to delays in fulfilling conditions. The fourth and fifth installments are now expected to be released together in June 2025, pending progress review.
Inflation Concerns: Experts suggest that the IMF’s measures could further inflate the cost of living. The government has voiced concerns about the impact on purchasing power and economic stability.
Dollar Price Controversy: One of the most contentious conditions is a proposed increase in the value of the taka against the dollar. While the IMF claims it will boost exports and remittances, Bangladesh Bank warns that it will worsen inflation, increase the cost of imports, and harm consumers.
Electricity Price Hike Rejected: The government has also resisted a proposed increase in electricity prices, citing the negative impact it would have on industries and overall inflation.
Tax Collection Challenges: The IMF’s demand to increase tax collection faces resistance, with the government opting to focus on bringing eligible taxpayers into the net rather than imposing additional burdens on citizens. As a result, the IMF has postponed the loan installments three times, causing a delay in the overall pace of the program. Key conditions tied to the loan waiver include increases in the price of electricity, a hike in the dollar exchange rate, and enhanced tax collection measures-each of which could further exacerbate inflation and strain the public.
With inflation already impacting citizens, experts believe that these measures should be adjusted or implemented more gradually, rather than strictly following IMF demands. The IMF’s conditions have been a contentious issue, particularly as they have the potential to increase financial pressure on the population.
According to sources, the fourth and fifth loan installments are now expected to be released together in June, pending a review of progress. An IMF mission is scheduled to visit Bangladesh on April 6 to evaluate the status of the conditions and the government’s commitment to implementing them.
The mission will also provide feedback on the expected future course of action.
Bangladesh initially sought IMF assistance in August 2022 to mitigate the global economic crisis’s impact. This move is often referred to as a “bailout” in international economic terms. After extensive negotiations, Bangladesh agreed to the IMF’s tough conditions, leading to the signing of the loan agreement on January 30, 2023. In return, the country received an initial disbursement of $476.3 million in February 2023, followed by additional tranches in December 2023 ($681 million) and June 2024 ($1.15 billion), totaling $2.31 billion.
The IMF had intended to release the fourth tranche of the loan last December, but political instability following the resignation of Bangladesh’s central bank governor, Abdur Rouf Talukder, complicated the process. Talukder, a key figure in enforcing the IMF’s terms, has reportedly gone into hiding, further delaying the implementation of the agreement’s conditions. Consequently, the expected loan installment releases have been repeatedly postponed, first to February, then March, and now with the fourth and fifth installments slated for June.
Despite these delays, the interim government remains hesitant to fully withdraw from the loan agreement. Analysts suggest that the government recognizes the importance of maintaining relations with the IMF, as the global financial body’s involvement makes it easier for Bangladesh to secure loans from other international organizations. While the initial loan was taken to address a dire dollar crisis, that issue has subsided, prompting less urgency for further IMF aid.
On the other hand, the IMF, which has seen reduced demand for its loans globally due to the tough conditions it imposes, is reportedly willing to relax some of its demands to keep Bangladesh in the program. Both sides have agreed to postpone the loan until June, when the IMF’s executive board will evaluate the situation.
As the IMF mission prepares to visit Dhaka, the focus remains on balancing the economic needs of the country with the requirements set by the international lender. The coming months will be crucial in determining whether a compromise can be reached or if further delays will strain Bangladesh’s relations with the IMF.
The ongoing loan agreement between the International Monetary Fund (IMF) and Bangladesh is facing significant hurdles, as the current government shows growing reluctance to implement several of the IMF’s conditions. While the previous government had made strides in meeting the IMF’s demands, the interim administration is questioning the potential negative impacts of certain measures on the country’s economy.
One of the most contentious conditions is the IMF’s recommendation to further reduce the value of the Bangladeshi taka against the US dollar. According to the IMF, the current exchange rate is undervalued and needs to rise to benefit the nation’s economy. They argue that a higher dollar price would boost export income, encourage remittance flows, and stimulate investment. Additionally, it would reduce the tendency for individuals and businesses to hoard dollars in anticipation of a further increase in the exchange rate, thus improving the overall dollar flow in the market.
However, Bangladesh Bank and other economic experts have voiced concerns about the potential fallout from such a move. They argue that devaluing the taka would lead to a depreciation in the national currency, raising the cost of imports and exacerbating inflationary pressures. This would, in turn, decrease consumers’ purchasing power, increase the cost of domestically produced goods, and negatively affect the general population’s living standards. Moreover, such a policy would further strain the country’s foreign exchange reserves and increase the burden of foreign debt.
Under the current government, the dollar price was increased in two phases, reaching Tk 122 taka, up from Tk118 taka during the previous administration. Despite this increase, dollars are available at this rate in banks, which was not the case before. As a result, the government remains cautious about further price hikes, particularly as it seeks to maintain economic stability.
Another key condition set by the IMF is an increase in electricity prices, which would help reduce government subsidies in the energy sector. However, the government has made it clear that raising electricity prices at this time is not feasible. Officials argue that such a move would raise industrial costs, leading to higher product prices and, consequently, increased inflation. Given the current economic climate, the government believes that such an increase would place undue pressure on the economy and the public.
A third major IMF condition is the need to enhance tax collection. While the IMF suggests broadening the tax base, the government has expressed its reluctance to impose additional tax burdens on the public. Instead, the government plans to focus on improving tax compliance and bringing eligible individuals into the tax net, with specific strategies expected to be outlined in the upcoming budget.
Despite the government’s hesitance to fully comply with these conditions, both sides are still engaged in discussions. Sources suggest that the fourth and fifth installments of the IMF loan are scheduled to be released together in June, with more than $1.2 billion expected. However, the final amount will depend on the outcomes of the ongoing negotiations between the Bangladeshi government and the IMF. As the IMF mission continues to evaluate Bangladesh’s economic progress, the government faces a delicate balancing act-seeking to meet international financial requirements without undermining the stability and welfare of its citizens. The coming months will be crucial in determining whether both parties can reach a mutually beneficial compromise.
Government’s Strategic Approach: Despite resistance to some conditions, the government acknowledges the importance of maintaining relations with the IMF for future loan access and financial stability.
Economic Stability at Stake: The ongoing discussions will be critical in determining whether a compromise can be reached without jeopardizing Bangladesh’s economic well-being.
