IMF loan, more to be known

As a loan providing agency IMF is probably the most unpopular one. Protest against IMF held in many countries. Many governments feel unwilling to go to IMF for money. Portuguese Nobel Laureate (1998) litterateur José Saramago said, “The three institutions that govern the world—the World Bank, the IMF and the World Trade Organisation (WTO)—none of these is democratic.” Joseph Stiglitz, 2001 Nobel Laureate in Economics, has been demanding for major reform of IMF for long days. Now Bangladesh is trying for availing loan of $ 450 crore from that very IMF but why?

Finance minister has said that money is required for completing ongoing projects. Padma Bridge has been completed but other projects are going on. However, he accepted that every loan has some conditions. What are those?

According to Finance ministry sources, a delegation led by Rahul Anand, divisional head of IMF Regional Office for Asia and the Pacific (OAP), visited Bangladesh from 12-21 July. After initial discussion, Bangladesh has officially applied for loan of $ 450 crore on 24th 4th July. Another delegation led by Surjit Bala, Executive Director of the South Asia region IMF will come to Dhaka to discuss the next step. The loan proposal will then be presented to the IMF headquarters in Washington for approval.

On the basis of initial discussion, the government will have to comply with the conditions laid by IMF which are:

Reducing subsidy in all sectors including power and fuel and it should be informed to IMF, B) Reducing default loan and reform total financial sector including banks, refixing rate of interest of 6 per cent and 9 per cent.

C) Reshuffling tax structure, d) Ensuring transparency in purchase for all projects including mega projects and e) Not imposing control on foreign currency market, particularly dollar is to be allowed to run in its own course.

However, these are not final. Terms and conditions may be finalised during the next visit.

However, IMF has not officially given any final decision but it is expected soon. The delegation wanted to know detailed information regarding the amount of subsidy given to power and fuel sector during last 10 years.

As per version of ministry of finance, to save the dwindling banking, industrial and trade and commerce sector government fixed rate of interest at 6 per cent and 9 per cent which is still continuing.

Besides this, Tk. 1.5 lakh crore was disbursed as incentive for several sectors of industry and agriculture. IMF wanted to know who received that incentive, how it was disbursed and how much it became effective and helpful during pandemic.

It is alleged that there is lack of transparency and accountability in implementing all types of projects. Particularly in mega projects major corruption has occurred in purchase and these projects have been over-valued.

These are to be removed to get IMF loan. Experts think that apart from global crisis, financial sector is suffering from lack of democratic good governance. Economists do not consider the matter well. Dr Jamaluddin Ahmed, former general secretary of Bangladesh Economics Association, thinks that in this sector, Bangladesh is in back-foot to some extent. Many countries are in similar situation but we have to be alert so that any agency or country or development partner can/take advantage of this situation– he added.

Moreover, for the first time Bangladesh has prayed for interest-free loan of US $ 1000 crore from World Bank which will help the gradually decreasing foreign currency reserve. On the other hand, due to unusual increase of import expenditure major deficit has appeared on balance of payment and current account. It is creating pressure on foreign currency reserves. Due to unusual fall in price of taka against dollar inflation has surpassed record of last eight years. Recession is apprehended in Europe and the United States. As a result export earning is feared to fall.

Government has already increased price of all sorts of fuel oil by one jump upto 51 per cent per litre on the ground of saving BPC from being bankrupt.

However, experts hold different view that this is simply a compliance with conditions lay down by IMF. Earlier, on 3rd November, 2021 price of diesel and kerosene was increased by 23 per cent to Tk 80.

Question has arisen that if BPC is really going to go be bankrupt where the country’s richest bank customer BPC’s thousands of crores of money has gone?

Bangladesh Economic Review, published by Finance Division on 9th June, informs that BPC earned profit of Tk 48,122 crore during February, 2014 to 23rd May, 2022.

A report of BPC on June 12 this year, the company has a total deposit of Tk 25,264 crore including Tk 11,156 crore and Tk 14,106 crore as long and short term deposits or FDR in various banks.

BPC gets huge profit from these deposits. So, BPC’s argument of being bankrupt is not acceptable. Then what is the reason behind sudden increase in price? Where is the benefit of common people? Will common people be repeatedly frustrated? Prior to this price of urea was increased Tk 6 (37 per cent) per kg, to Tk 22. Experts think that it was also a prescription of IMF.

Protesting the increase of fuel oil price left leaders alleged that the government has taken such steps to please the IMF, Workers’ Party President Rashed Khan Menon said, “The government has swallowed poison by accepting the conditions of the IMF in the name of deficit adjustment. This poison will now extend all over the body of economy, politics and society.” As an immediate impact of this decision bus and launch fares have already increased. Prices of all agricultural and industrial products are going up. Increase of train fare is also imminent.

Reportedly, government is looking for loan on easier terms from World Bank, JAICA, China and the United States. The next negotiation with IMF will be held in next month. We have to wait till then.

The writer is a former Commissioner of Taxes. He can be contacted at chinmayprasunbiswas@yahoo.com