Recently International Monetary Fund mission arrived in Dhaka on a 15 days tour. First the mission gave its prescriptions to the national board of revenue and thrash out the conditions for the $4.5 billion loan.
The mission directly called for bringing dawn present tax exemption which include total relief from taxes, what is surprising, the government has no knowledge how much the state coffer losses for this act of generosity. Of course, according to estimate of” Policy Research Institute of Bangladesh 40,000 crores is lost every year. At present time the amount could easily be more than TK 60,000 crores.
The I.M.F team also stressed serious importance on the autonomy of Bangladesh which should be ensured in the bank Company Act. The team also stressed on the importance for a monetary policy statement every six months and latest every quarter. The team also wanted to know the steps taken to reduce inflation which is presently as high as 9.5 percent. The economic situation that is prevailing at present in our economy is one in which usually a country look to the I.M.F for balancing payment support. As our import payment has become much higher than export income in the financial year 2021-22 negative trade balanced reached over U$D 33 billion.
On the other hand, in the current fiscal year’s remittance flow is negative. It amounted to U$D 18.7 billion in Fy 22 As a result forex reserves have decreased down from U$D 41.8 billion in the financial year 22. As per I.M.F estimation the actual reserve is only U$D 27.4 billion which is only enough for about three months import payment.
Economically Bangladesh is passing a very difficult period with abnormally high inflation, fuel and food crisis along with depleting forex reserves which weakened the macro-economic stability. World-wide pandemic and on-going war between Russia and Ukraine seriously affected economies all over the world both developed, developing and under developed economies. Of course, scale of impact depends on the inherent strength of each economy.
So far Bangladesh terribly failed to deliver satisfactory economic results as of June 2022, the amount of defaulted loans stood at Tk 1.25 lakh crores which is 9 percent of the total loans so far disbursed. The above information was given not other than Bangladesh Bank. The mobilization of resources domestically is so slow that the tax G.D.P ratio presently is only 7.6 percent. On the other hand, these problems became more intolerable because of unbelievable increase in the price of almost all commodities which compelled the people to live a miserable life beyond imagination.
As I.M.F loans are traditionally full of conditionalities, though Bangladesh has taken loans from I.M.F in the past, of course I.M.F wants to make sure that loan is used in such away so that the concerned country is able to repay the loans. Now Bangladesh requested I.M.F for U$D 4.5 billion. I.M.F sent a team of experts to Bangladesh after through study in Bangladesh. I.M.F team asked the Bangladesh government to take some measures. The measures include reform and improved governance of financial sector, modernization of revenue administration and expansion of tax net and increment of tax-G.D.P ratio, Implementation of vat law, bringing down interest rate on saving certificates to a reasonable level etc.
The fact is that, Bangladesh govt has always been showing an unwillingness to take initiatives for any reforms whatsoever on its own. whatever reforms took place so far in Bangladesh, it is done at the instructions of the donors. While negotiating with I.M.F, Bangladesh should present its own plan on the area, where it’s people’s interests lie. As for example any reduction in the rate of interest of saving certificates will adversely effect a group of people whose only source of income is interests from savings. The subsidies presently given to our agricultural farmers may be opposed I.M.F delegations but it is very important for our food security.
However, it is the largest amount of loan Bangladesh is seeking to take form I.M.F. As the size of our economy has grown, so have our needs. The nature of crisis also has tremendously changed.
Presently visiting team of I.M.F put questions on all the present indexes and the team openly expressed its opinion that the way Bangladesh calculates its foreign exchange reserves is not proper. According to the opinion of I.M.F team if any party fails to deposit instalment of loan within three months it will be a defaulter. But in Bangladesh six months have been decided to deposit the instalment. I.M.F delegation said Bangladesh does not follow international standard while determining G.D.P and inflation rate of the economy. But all the countries of South Asia follow the above methods, so there is a big question regarding Bangladesh’s G.D.P and inflation.