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IMF Approves $689m for Bangladesh in Second Tranche of $4.7bn Loan

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In a significant development, the International Monetary Fund (IMF) has given the green light for the disbursement of $689 million in the second tranche of a $4.7 billion loan package earmarked for Bangladesh. This announcement comes after Finance Minister AHM Mustafa Kamal confirmed the approval, which was granted during a recent meeting of the multilateral lender’s board.

Officials from the Bangladesh Bank and the finance ministry anticipate that the second instalment will be made available on Wednesday. The approval follows the completion of the first review by the IMF Executive Board, covering the Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Bangladesh’s Resilience and Sustainability Facility (RSF) arrangements.

With this approval, the total disbursements under the ECF/EFF amount to approximately $936.6 million, while disbursements under the RSF reach around $221.5 million. Additionally, the Executive Board concluded the 2023 Article IV consultation with Bangladesh.

The approval addresses a period of uncertainty arising from Bangladesh’s non-compliance with specific IMF directives tied to the loan. These directives included measures such as increasing foreign exchange reserves, a 0.5% uptick in the tax-GDP ratio by June, and the adoption of a formula-based price adjustment mechanism for fuel oils by December. However, these actions were not implemented within the stipulated timeframe.

Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh, acknowledged the government’s effective communication with the IMF regarding the challenges faced in meeting these requirements. However, he expressed concerns about the difficulty in securing the third instalment of the loan in June, emphasizing the need for the government to enact specific policies to avoid the IMF withholding the loan, especially after the elections.

The IMF had previously approved the first tranche of the loan package on January 30, with Bangladesh receiving $447.8 million on February 2. The entire $4.7 billion IMF loan is set to be released to Bangladesh in seven instalments over three and a half years, concluding in 2026.

Zahid Hussain, former lead economist of the World Bank’s Dhaka office, noted that the IMF recognized the challenges posed by the conditions related to foreign exchange reserves, leading to revisions. While acknowledging the satisfaction of IMF staff with the government’s steps to increase revenue collection in the budget, he refrained from commenting on the possibility of receiving the third instalment, citing potential changes in the loan agreement.

In October, an IMF delegation visited Bangladesh for a two-week review of the loan program, providing a positive assessment at the staff level. After concluding the review, the mission stated that the IMF staff and Bangladesh authorities had reached a staff-level agreement on the policies required to complete the first review. The IMF staff commended the progress in reform implementation and the authorities’ continued commitment to decisive policy actions amid a challenging economic environment.

Among the IMF conditions, six quantitative targets were set for the first half of 2023. Notably, one of the unmet preconditions was the maintenance of a minimum net international reserve (NIR) of $24.46 billion by the end of June. The NIR target was missed by approximately $3 billion, attributed to the government dipping into reserves to cover essential imports of fuel, fertilizer, and foodstuff. Similarly, the minimum tax revenue target was not achieved, with the government falling short by Tk17,946 crore, collecting Tk3,27,664 crore against the goal of Tk3,45,630 crore in tax revenue for FY23, as per a Finance Division report.

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Top Bank Executives Ordered to Address Currency Exchange Scandal

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The Bangladesh Bank has issued orders to the top executives of nine commercial banks, instructing them to transfer officials allegedly involved in foreign currency exchange irregularities at Hazrat Shahjalal International Airport. In a Thursday meeting, Deputy Governor Kazi Sayedur Rahman cautioned CEOs against the recurrence of such incidents, urging heightened oversight and security measures at airport booths.

Bangladeshi expatriate workers and travelers typically convert foreign currencies to Taka at bank booths and money exchangers upon returning to Bangladesh. However, some officials were found to be involved in exchanging foreign currencies directly without issuing proper vouchers or with fake vouchers, a practice considered money laundering.

The implicated banks include state-run Sonali, Janata, Agrani, and Probashi Kallyan, along with five private banks: Pubali, Jamuna, City, Mutual Trust, and Standard. The Anti-Corruption Commission (ACC) verified the allegations following a formal complaint, conducting a raid and investigation at Shahjalal Airport on Monday.

ACC officials discovered that foreign currency arriving at Shahjalal Airport, meant to be deposited through the banking channel, was being manipulated by unscrupulous officials. Some were purchasing dollars and selling them in the open market without proper documentation, and in certain cases, currencies were being smuggled abroad.

In-bound passengers frequently exchange US dollars, euros, riyals, ringgits, pounds, and dinars at the airport, according to ACC officials. The central bank’s directive aims to curb malpractices and ensure the proper handling of foreign currency transactions at the airport.

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Cenbank Grants Approval to 8 Additional CA Firms for Auditing

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Following a thorough assessment of appeals from various audit firms in alignment with the enlistment policy, Bangladesh Bank (BB) has opted to augment the existing roster by incorporating eight additional chartered accountant (CA) firms.

With this recent inclusion, a total of 39 audit firms now meet the criteria for auditing banks and finance companies, according to a circular issued by BB today.

This circular has been disseminated by Bangladesh Bank, exercising its authority as stipulated under section-39(1) of the Bank Company Act, 1991 (Amended up to 2023) and section-37(1) of the Finance Company Act, 2023.

As per the circular, a single firm is permitted to audit a maximum of six banks and finance companies within a financial year.

The enlisted audit firms (Chartered Accountants) are: Qasem & Co; Wahab & Co; ACNABIN; Ahmed Zaker & Co; Ahsan Manzur & Co; Anil Salam Idris & Co; Arun & Company; Aziz Halim Khair Choudhury; Basu Banerjee Nath & Co; Chowdhury Bhattacharjee & Co; Das Chowdhury Dutta & Co; Dewan Nazrul Islam & Co; G Kibria & Co; Hoda Vasi Chowdhury & Co; Hoque Bhattacharjee Das & Co; Howladar Yunus & Co; Hussain Farhad & Co; Islam Aftab Kamrul & Co; Islam Jahid & Co; K M Alam & Co; Kazi Zahir Khan & Co; Khan Wahab Shafique Rahman & Co; M J Abedin & Co; M M Rahman & Co; M Z Islam & Co; MABS & J Partners; Mahamud Sabuj & Co; Mahfel Huq & Co; Malek Siddiqui Wali; Masih Muhith Haque & Co; MRH Dey & Co; Nurul Faruk Hasan & Co; Pinaki & Company; Rahman Rahman Huq (KPMG); S. K. Barua & Co; Shafiq Basak & Co; Snehasish Mahmud & Co; Syful Shamsul Alam & Co; Zoha Zaman Kabir Rashid & Co.

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Cenbank Unveils Roadmap to Slash Default Loans Below 8% by 2026

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The Bangladesh Bank has unveiled a roadmap aiming to reduce default loans to below 8% by June 2026. As of September last year, default loans in the banking sector amounted to Tk1.55 lakh crore, approximately 10% of the total outstanding, according to Bangladesh Bank data.

he new roadmap is in line with the International Monetary Fund (IMF) conditions as part of a $4.7 billion loan package. It emphasizes the pivotal role of shareholder directors and managing directors in the recovery process. Furthermore, the central bank has modified the loan write-off policy, allowing banks to write off loans in two years instead of the previous three, potentially reducing default loans by 2.76%, equivalent to Tk43,300 crore.

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