For new loan, IMF may seek deadline for fixing weak banks

The International Monetary Fund (IMF) is likely to seek time-bound measures to resolve problems in vulnerable banks and set specific targets and deadlines for domestic revenue collection as conditions for a new loan programme, according to government officials.

The possible conditions will be discussed when a Bangladesh delegation led by the finance minister meets senior IMF officials in Bangkok later this week on the sidelines of the IMF-World Bank Annual Meetings, scheduled for October 12-17, finance ministry officials confirmed to The Daily Star on condition of anonymity.

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The delegation is set to leave for Bangkok today, with Dhaka seeking to finalise a new loan programme by January next year.

The team will hold separate meetings with Nigel Clarke, the IMF’s deputy managing director, and Krishna Srinivasan, director of the lender’s Asia and Pacific Department.

Discussions will focus on economic reforms, structural adjustment conditions and the timeline for finalising the proposed financial package, according to officials.

An IMF mission is likely to visit Dhaka later this month to work out the details of the proposed programme following the Bangkok meetings.

A loan proposal generally takes at least two months to reach the IMF’s executive board for approval after a staff-level mission completes its on-the-ground assessment, officials said.

CONDITIONS EXPECTED

On the banking front, the IMF is likely to seek clear deadlines for resolving problems at vulnerable banks, reducing high non-performing loans (NPLs) and recapitalising lenders, including state-owned commercial banks, according to sources.

A finance ministry official, seeking anonymity, said the government would prepare an action plan with specific implementation deadlines, which would then be finalised through mutual agreement with the IMF.

The lender is also expected to press for subsidy rationalisation in the power, gas and agriculture sectors.

On revenue mobilisation, the IMF is expected to seek specific collection targets and deadlines for meeting them, alongside measures to bring more people and businesses into the tax net, sources said.

LOAN TALKS GATHER PACE AS GOVT NEEDS $4b

Amid mounting economic uncertainty stemming from the ongoing conflict in the Middle East, Bangladesh plans to seek around $4 billion in budget support from multilateral and bilateral lenders in the current fiscal year, 2026-27.

The country also faces higher import costs for energy and fertiliser due to the crisis.

Bangladesh would need an additional $1.82 billion for liquefied natural gas (LNG) imports, around $70 million for fertiliser and $2.21 billion for oil between March and September, said Prof Rashed Al Mahmud Titumir, the prime minister’s adviser on finance and planning.

He made the remarks at a high-level conference titled ‘An Asia for Everyone: Public Services, Social Protection and the Promise of Shared Prosperity’ at Chulalongkorn University in Bangkok on Friday, according to a UNB report.

He said the international community must take responsibility for the economic costs borne by developing countries through no fault of their own.

Preliminary discussions with key development partners, including the World Bank and the Asian Development Bank, have already begun.

However, prospects for securing support from these lenders will depend heavily on progress towards a new IMF programme, according to sources familiar with the matter.

The government decided in May to exit its existing IMF programme, eight months before its scheduled expiry, and seek a fresh arrangement.

The $4.7 billion programme was signed by the previous Awami League government in January 2023 and later increased to $5.5 billion by the interim government.

Bangladesh has received $3.8 billion in five tranches, while the sixth tranche was delayed after the IMF suspended talks in November last year and decided to resume discussions with the new government following the election.

In a June 3 statement, Ivo Krznar, the IMF mission chief for Bangladesh, said the government applied for a fresh package.

“The authorities’ request for a successor arrangement provides an opportunity for the Fund and the authorities to agree on a potential programme that both reflects the current challenges and incorporates the new authorities’ objectives and priorities,” reads the statement.

Any new arrangement would need to address Bangladesh’s balance-of-payments needs and be backed by strong policy commitments and a credible reform agenda, subject to the IMF’s policies and executive board approval, the statement said.

After the government sought a new programme, an IMF fact-finding mission visited Dhaka in July. The two sides have also held several virtual meetings over the past two months to review updated economic and financial data supplied by Bangladeshi authorities.

Besides the IMF officials, the Bangladeshi delegation is scheduled to meet representatives of Fitch Ratings and JPMorgan, as well as Liao Min, China’s vice finance minister, and officials of China Exim Bank. The team is also set to meet Makhtar Diop, managing director of the International Finance Corporation (IFC).