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IMF conditions to be synced with WB, ADB
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for implementing those has already begun, according to finance ministry officials.
The IMF’s loan will also require prior actions, which are yet to be set.
“If two donors do the same work, then it is a waste of time,” said Zahid Hussain, a former lead economist of the WB’s Dhaka office.
Besides, donor aid coordination would bring synergy.
“With the loan programmes, you want to add two and two and get five. If both donors work on the same set of problems, you would be adding zero to two and getting just the two,” he added.
The WB has set forth 12 conditions for its loan, $500 million of which is expected this fiscal year.
The conditions include getting the cabinet to approve the National Tariff Policy, rolling out the automated challan system for deducting income tax at-source in all tax zones by fiscal 2023-24 and full implementation of the e-Government Procurement system.
Expanding cash transfer programmes this fiscal year by more than five times, allowing private sector players in power transmission projects and ensuring competitive bidding and the use of the National Household Database for beneficiary identification by major social protection programmes are other conditions.
The WB has also given special emphasis to improving the banking sector’s health.
The prior actions for the ADB funding include introducing sharia-compliant treasury instruments, shutting down the loss-making sugar mills under the Bangladesh Sugar and Food Industries Corporation, passing the new Income Tax Code in the parliament by this year, mandatory returns submission for those whose annual expenditure exceeds Tk 4 lakh.
The ADB has also asked for addressing new and emerging issues like base erosion and profit shifting by global internet-based entities, transfer pricing and derivative transactions in the capital market.
Information exchange between the National Board of Revenue’s VAT and Income Tax divisions, the introduction of VAT audits and the adoption of a risk-based audit manual have been stipulated.
The Manila-based multilateral lender has called for the merging of the annual development programme and non-development programme budgets from the next fiscal year, banning line ministries from asking for allocation increases during the fiscal year and steps to strengthen the quality of projects at entry and improve project readiness.
While the IMF has not set the conditions yet, the ten-member staff mission has given an idea of what those could be and there appears to be some duplication with the other two lenders’ prior actions.
One of the conditions would be timebound targets for foreign exchange reserves, revenue and social spending, which comprise safety net schemes, health and education sectors.
The amended Bank Company Act and VAT laws must be passed and a time-bound action plan for their implementation is likely to be another condition.
Tax exemptions must be narrowed down and an energy pricing formula devised that links the local prices to the ebbs and flows of the global market.
True market-based exchange rate and partial withdrawal of the interest rate cap would be other prior actions.
“This will create scope for bringing down inflation and have a positive impact on our foreign exchange supply,” Hussain said, adding that the existing multiple exchange rate system that gives the veneer of a floating exchange rate has hurt the remittance inflows.
Introducing a carbon tax would be another notable condition put forward by the IMF.
The ten-member mission, which will wrap up its tour on November 9 with an audience with Finance Minister AHM Mustafa Kamal, will finalise the conditions after their return to Washington DC.
If the government is on board with the prior actions, Kamal will send a confirmation letter. After that, the loan proposal will be placed before the IMF board, which could be in early January.
The corrective actions should be taken regardless of whether the loans would be approved or not as the sums are not significant given the degree of strain on the balance of payment and foreign currency reserves.
The financial assistance from the multilateral lenders amounts to $6.8 billion over three years.
This fiscal year alone, the Bangladesh Bank has supplied more than $4.5 billion to the market to support the exchange rate, while the import bill averages $6 billion a month.
Still, the prior actions inform of the seriousness of the government.
“The common people are suffering. We are under macroeconomic stress and it is intensifying. It is showing no sign of abating, be it in the balance of payment, inflation or reserve. We have to acknowledge this problem and find a solution now -- before we are in a crisis like Sri Lanka,” Hussain added.

Teen stabbed to death in Bogura
OUR CORRESPONDENT, Bogura
A 17-year-old boy was stabbed to death in Godarpara area of Bogura on Friday night.
Nineth-grader Rabiul Islam Robin was the son of Nowshad Ali, a shop keeper at Godarpara Bazar and studied at the Technical Training Centre (TTC), Bogura.
Robin came under attacked by some local goons with whom had a feud.
The attackers stabbed him around 9:00pm, said police, adding that he died at a hospital at 10:30pm.
Robin’s relatives and locals blocked the Bogura-Naogaon regional highway from 2:30pm to 4:00pm yesterday protesting the murder. Noor-e-Alam Siddiqui, officer-in-charge of Bogura Sadar Police Station, said, “Robin’s father, a grocer, filed a murder case against three named and five to six unnamed people yesterday.
“We have already identified the suspects and are conducting drives to arrest them,” said the OC.
When asked about the motive, the OC said that the suspects used to take groceries from the shop of Robin’s father without paying and there was a feud over it.