Finance Minister Amir Khosru Mahmud Chowdhury has acknowledged that a new agreement with the International Monetary Fund will come with conditions, after the BNP government scrapped the loan programme agreed during the previous Awami League administration to prop up foreign currency reserves, calling its terms “unacceptable”.
He has also assured that the conditions under a new programme “will be met”, just 11 days after saying that the BNP government did not want to “depend” on IMF financing tied to conditions.
Bangladesh entered the previous IMF loan deal to tackle a shortage of foreign currency reserves.
Speaking after a meeting with IMF Deputy Managing Director Nigel Clarke on Thursday on the sidelines of the IMF and World Bank Group Annual Meetings in Bangkok, Khosru was asked about discussions over implementing reforms under a new programme.
“There will, of course, be conditions. The conditions will be met. There are also some issues that both sides will have to resolve through mutual understanding. Those are not a problem,” he said.
“So far, when it comes to our partnership — not only the one with the IMF, but also with the World Bank and all other multilateral bodies — we will all work together. We will work through partnership, and it will move forward smoothly.”
The minister also outlined some of the IMF’s analysis on Bangladesh’s economy.
“They have some observations on certain issues. We agree with most of those observations. Many relate to the banking sector and the tax-to-GDP ratio. It is only natural for them to have observations; we have observations of our own as well.
“So, those observations are not a problem. Many of the issues raised have already been resolved. We will discuss the rest.”
Eight days before the IMF and World Bank Group Annual Meetings, Khosru had struck a markedly different tone at an event in Dhaka on Oct 4.
“Forget about the IMF giving us money or the World Bank giving us money. I have cancelled the IMF agreement, as you have seen. Their conditions are not ‘acceptable’ to us,” he said at the time.
The finance minister had also said Bangladesh would no longer “accept” any IMF conditions.
IMF loans typically come with a range of conditions, with reforms to the revenue and banking sectors forming a major part of them. The lender also pushes for cuts to energy subsidies and a shift towards market-based pricing, as well as moves away from tax exemptions and towards widening taxation.
The organisation had also raised questions about how the government would finance higher salaries for public servants.
At the Oct 4 event, Khosru had said: “By cancelling the IMF loan agreement, we have taken an initiative to be self-sufficient. Bangladesh’s economy will reach $1 trillion by 2034 without assistance from donor agencies.”
About 10 days after those remarks, however, the finance minister’s comments in Bangkok signalled a shift from his previous position.
Although discussions with the World Bank and IMF have taken place there, Khosru said the process would continue.
“The discussions will continue from here for a few months. It is a process. So, the issues will be resolved through these discussions.
“I hope our programmes with the IMF, the World Bank and other multilateral bodies will proceed on the right track and progress well. We will be able to work together in partnership.”
Khosru also claimed that the IMF was “satisfied” with Bangladesh’s “progress” despite turbulence in the global economy following the BNP’s first budget since returning to power after 19 years.
“They believe Bangladesh has made good progress since this budget. Particularly given the current circumstances — the global situation, the economy we inherited, the wars around the world and the ongoing conflict in West Asia — they are ‘satisfied’ with Bangladesh’s progress so far,” he said.
The IMF had previously raised questions over the “credibility” of Bangladesh’s strategy for implementing reforms.
Addressing the issue, Khosru said: “If there were no credible strategy, the discussions would not have come this far. The talks have progressed this far precisely because there is a credible strategy.
“And looking ahead, through partnership, as partners, we have come together to advance Bangladesh’s economy.”