The International Monetary Fund staff mission has been in the country for over a week now, holding a series of meetings with the officials of Bangladesh Bank, the Finance Ministry, NBR, etc. Their discussions, or most of their concern during these discussions, are said to have centred the rapidly depleting foreign exchange reserves, persistently high inflation, the overall state of the banking sector and poor revenue collection. During the meetings, the IMF mission, led by its chief Rahul Anand, also presented their own reports in which they highlighted the government's progress, or lack thereof in some cases, under the $4.7 billion loan programme it signed with the government, and overall economic development.

Reportedly the IMF team has been very interested to know the reasons behind Bangladesh's high inflation rate at a time when many countries around the world managed to bring down their price levels. In the first three months of the fiscal year, inflation averaged 9.75 percent, according to data from the Bangladesh Bureau of Statistics (BBS). Specifically, the IMF was interested to know why the central bank was reluctant to use the policy instrument at its disposal, i.e. the interest rate, to try and rein in inflation. Interestingly, a few hours after the meeting with the IMF mission, the central bank hiked the policy rate by 75 basis points to 7.25 percent.

The IMF mission also probed the reasons behind Bangladesh's failure to maintain the stipulated minimum under its forex reserves, which was $24.46 billion on June 30 - a mandatory requirement to get the second tranche of the loan authorised. It was missed by a large margin. The IMF also raised concerns over Bangladesh's high rate of default loans. At the end of June, the banking sector's default loans hit a record Tk 156,039 crore, which is 10.11 percent of total credits disbursed.

The IMF also asked about the government's failure to collect a minimum of Tk 345,630 crore in tax in fiscal 2022-23. This was one of the six quantitative targets set for the first half of 2023 by the IMF for the authorisation of the second instalment. Bangladesh has failed to meet two of the six quantitative targets: a minimum net international reserves of $24.46 billion as of June 30 and a minimum tax collection of Tk 345,630 crore in the 2022-23.

The Finance Ministry officials also suggested reworking some of the targets set for December and June next year that were agreed with the IMF staff mission last year before the loan was approved by the lender's board.

One of the targets proposed for revision is the minimum net international reserves. Bangladesh needs to have at least $26.81 billion in net international reserves by the end of the year, as per the conditions agreed earlier. The changes would have to be approved by the lender's governing board.

Had the government met all six conditions, the second tranche of the $4.7 billion would have been released in November. Now the matter of authorising the fund's disbursement will go to the IMF board, which will consider whether the explanations given by the government for the inability to meet the two conditions are rational or not. If the board is satisfied, the second instalment of about $448 million will be approved. Now we need to keep our fingers crossed.