IMF team visits Dhaka today for new loan talks

A high-level delegation from the International Monetary Fund (IMF) is scheduled to arrive in Dhaka today for a five-day mission to review Bangladesh’s economic reforms and lay the groundwork for a new loan programme targeted to begin next January.
Led by IMF Mission Chief for Bangladesh Ivo Krznar, the delegation will stay until 16 July. 
During the visit, officials will hold a series of meetings with policymakers from the Ministry of Finance, Bangladesh Bank, the National Board of Revenue (NBR), and other key government agencies to assess recent economic developments and the progress of ongoing reform measures.
The mission is expected to evaluate the interim government’s recent policy overhauls and discuss the framework for a new three-year IMF programme to replace the existing US$5.5 billion lending arrangement.
According to officials, detailed negotiations on the reform package and the size of the proposed loan are expected to begin in late October or November. 
Subject to satisfactory progress on reforms, the programme could be placed before the IMF Executive Board for approval in January next year.
On the first day of the visit, the IMF delegation will hold two key meetings with the Finance Division. The first will focus on revenue policy, the national budget and the government’s domestic and external financing plans.
The second meeting will centre on the proposed Ninth National Pay Scale and the fiscal implications of raising salaries and allowances for government employees.
The current budget estimates that implementing the new pay scale will require around Tk44,000 crore this fiscal year, while full implementation would raise the annual cost to more than Tk1.06 lakh crore.
The IMF is expected to seek clarification on how the government plans to finance the additional expenditure amid a widening revenue shortfall, persistent inflation and vulnerabilities in the banking sector.
The discussions will also cover banking sector restructuring, revenue administration reforms and the broader economic reform agenda underpinning the proposed lending programme.
The IMF has proposed several macroeconomic benchmarks for the new programme, including raising Bangladesh’s tax-to-GDP ratio to 9.2% and keeping the budget deficit below 4% of GDP. 
Under the previous programme, the budget deficit ceiling was set at 5% of GDP, although the actual deficit generally remained below 4%.
Earlier this year, the IMF agreed in principle to Bangladesh’s request for a new lending arrangement to replace the current programme, subject to the completion of policy discussions and approval by the IMF Executive Board.
“Any new arrangement would need to be based on Bangladesh’s balance-of-payments needs and strong policy commitments anchored by a credible reform agenda, and would be subject to the IMF’s policies and Executive Board approval,” Krznar said in a statement last month.
He added that IMF staff were working closely with the Bangladeshi authorities to assess policy priorities and reform plans, while the upcoming mission would evaluate the country’s recent economic performance, outlook and remaining reform challenges.
The IMF initially approved a $4.5 billion package for Bangladesh in January 2023 under the Extended Credit Facility (ECF), Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). 
The package was later increased by $800 million, taking total support to $5.5 billion.
Bangladesh has so far received $3.6 billion in five instalments. 
However, the release of the sixth tranche, part of the remaining $1.3 billion, has been on hold since November last year, making the proposed new programme crucial for securing future external financing and supporting the country’s reform agenda.