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IMF releases $98.5m loan

STAFF CORRESPONDENT
The Executive Board of International Monetary Fund (IMF) Wednesday approved $98.5 million as loan for the Poverty Reduction and Growth Facility (PRGF) and Trade Integration Mechanism (TIM).
The IMF this time is giving $ 72.5 million as the fourth tranche of the PRGF loan and $26 million as the second instalment of TIM credit.
Approval of the fourth instalment of the PRGF loan came six months behind scheduled due to the delay in Rupali Bank's privatisation process.
The IMF at a press release yesterday said its Executive Board decided to extend the current PRGF arrangement to December 31, 2006
so that the remaining reviews and all disbursements under the arrangement could be complete.
IMF Managing Director Rodrigo de Rato said Bangladesh maintained macroeconomic stability and advanced the structural reform agenda. The economic policies have also been broadly consistent with IMF advice, but the pace of the reforms has been slower than envisaged due to difficult political environment, he added.
Rato, however, has asked the government to prioritise reform of tax administration, divest nationalised commercial banks (NCBs) and liberalise the investment regime including reforming trade, energy sector and state-owned enterprises to secure adequate supply of power
and ensure fiscal sustainability.
"The weak performance of energy sector state-owned enterprises (SOEs) continues to impede economic growth and pose fiscal risks. The government's latest decision to adjust domestic fuel prices was appropriate and further adjustments may be necessary."
"A tight monetary policy stance is important to ensure price stability and orderly exchange market conditions," Rato said.
Improving competitiveness and the investment climate remains a critical challenge, especially after the elimination of Multi-Fibre Agreement (MFA) quotas, he said.
The export competitiveness will
be boosted if the government eases restrictions on foreign direct investment in the readymade garment sector, reduces the number of trade-related quantitative restrictions on imports and takes further measures to address the infrastructural bottlenecks.
About the NCB reforms, Rato referred to the issuance of an information memorandum regarding the divestment of Rupali Bank in May and said the bank is expected to be divested by the year-end.
The PRGF loan of about $ 507.7 million scheduled to be disbursed in three years' time was approved by the IMF on June 23, 2003. It was set to be disbursed in seven instalments. A newly created loan facility called TIM worth about $78 million was approved by the Executive Board on July 28, 2004. It was planned to be disbursed in three instalments.