The International Monetary Fund (IMF) approved a credit facility of $4.7 billion for Bangladesh, which is expected to help maintain the macroeconomic stability of the country, the Dhaka Chamber of Commerce and Industry (DCCI) said on Wednesday.
DCCI President Barrister Md Sameer Sattar said the approval of this loan on the part of IMF is a sign of Bangladesh’s creditworthiness and economic strength, and it is a sigh of relief when there is a shortage of foreign exchange, read a DCCI press release.
The credit facility was approved on January 30, under the Extended Credit Facility (ECF), Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) arrangements. It will be disbursed under a 42-month programme.
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Barrister Sattar said, “It is noticed that IMF’s loan to Bangladesh is tied with some institutional and policy reform conditions. This includes reforms in the financial sector, policy framework, energy sector, public finance, local revenue generation, and investment to climate resilience.”
However, he hailed the timely decision of the IMF, as this credit facility will assist Bangladesh in facing the current economic challenges in a structured manner.
DCCI president further said, “As an immediate impact, the loan would stand as a relief due to the increase in our reserve. The loan will give the Government an option to consider withdrawing some rigid import conditions, ie, the conditions for opening LCs.
“The loan will surely provide a relief to the businesses, considering the upcoming month of Ramadan and the growing need for essential commodities.”
Sattar believes that the government has, meanwhile, endorsed and implemented some of the key reforms. For example, he said that Bangladesh Bank has already taken some commendable initiatives to strengthen the financial sector.
“This can be seen from the recent Monetary Policy Statement (MPS), which addressed that good governance between banks and financial institutions needs to be improved,” he added.
The MPS has also relaxed the cap on the interest rate of lending and borrowing, and is gradually moving towards a market-based, flexible and unified exchange rate regime.
Recently, the new Income Tax Act has been approved (at the Cabinet level) which aims at increasing the tax net, which will mobilise domestic revenue collection. The new Income Tax Act emphasises automation which resultantly will attract foreign investment.
Barrister Sattar further suggests that the government should take immediate steps to reduce budget deficits and increase the tax-GDP ratio to cope with the challenges in the near future. However, there are other reforms which are being considered by the government.
Barrister Sattar urges that the government should continue to uphold the spirit of good governance and try to enforce the same across all major sectors.
He also urged the government to be mindful of any conditions of the loan so that Bangladesh can stay ahead in the performance markers set by the IMF.