Loan
IMF team due in Dhaka on April 25 to discuss 2nd tranche of $4.7b loan
A team of the International Monetary Fund (IMF) is due to arrive in Dhaka on April 25 to discuss the progress in the use of the first tranche of its US$4.7 billion loan programme for Bangladesh and the release of the second installment.
The Ministry of Finance sources told UNB on Wednesday that during its April 25 to May 2 visit the mission will hold meetings with the officials of the Ministry of Finance's Finance Division, Financial Institutions Division, Economic Relations Division (ERD), Bangladesh Bank, and National Board of Revenue (NBR).
IMF Asia and Pacific Division Head Rahul Anand will lead the team comprising three to four members, the ministry sources said speaking on condition of anonymity.
Read More: World Bank spring meeting begins in Washington today, announcement on $50bn allocation to face global crisis likely
Bangladesh received the first tranche of US$476.2 million of the $4.7 billion loan approved by the IMF on January 30.
The entire amount of the loan will be paid in seven installments in three and a half years until 2026. As such there are six more installments left.
A senior official of the ministry said the IMF usually reviews various aspects of compliance before disbursing each tranche. Accordingly, an IMF team will come next September to review the fulfillment of loan conditions before disbursing the second tranche.
Read More: Following IMF advice BBS to calculate inflation on a new base year from March
Usually before each budget announcement, an IMF mission comes to Dhaka to discuss budget assistance. Now that the loan programme is going on with them, besides the budget assistance, the issues of fulfilling the loan conditions will also come up for discussion, said the sources.
Bangabazar traders want interest-free loans to survive in business
The affected traders of the Bangabazar fire incident have sought interest-free loans to survive in the business and for repayment of their bank liabilities.
In addition, they called on the government to develop infrastructures for business operations again at the same place.
The traders of Bangabazar Market made the demand while talking to reporters in front of the damaged market on Wednesday (April 05, 2023).
Read More: MCCI to stand beside businesses that suffered loss in Bangabazar fire
On Monday a devastating fire gutted around 5,000 small shops in Bangabazar and its nearby markets.
Standing in front of his burnt shop, businessman Daud Mia told UNB that he took a loan of Tk 15 lakh from the bank a few days ago giving his home as collateral.
“The goods of my three shops were burnt in the fire along with other goods, I am now destitute. There is no arrangement to pay the installments. So, I am asking the government for an interest-free loan to repay the bank loan,” he said as he sobbed.
Read More: Bangabazar Market manifests govt’s irresponsibility: Fakhrul
The businessmen urged the government to allow setting up shops in the same place again so that the traders who have clothes in their warehouse can sell them.
Authorities say an assessment is being done to determine the losses from the fire, apparently to devise a way for supporting the affected businessmen.
Repayment of Padma Bridge loan starts with Tk 316.91 crore given to govt
The repayment of the loan taken for construction of Padma Bridge started with Tk 316.91 crore paid to the government in the first two installments on Wednesday.
Prime Minister Sheikh Hasina received a cheque of Tk 316,90,97,049 as the first and second installments of the loan.
Road Transport and Bridge Minister Obaidul Quader handed over the cheque to the premier at her official residence Ganabhaban.
The loan was taken from Bangladesh Bank at a low interest rate under an agreement signed between the Finance Division and the Bangladesh Bridge Authority.
Speaking on the occasion, the prime minister said the country will continue to march ahead overcoming any barrier and disaster.
“Bangladesh will continue to march forward, maintaining the current pace of its development journey, no matter how many obstacles come,“ she said.
The PM sought cooperation from the whole nation to face any disaster, accident, the brunt of the war or inflation as the people in cities and villages did during the construction of the Padma Bridge.
"I believe we can move forward overcoming any hurdle if the people stand beside us. Construction of the Padma Bridge with the own finance is the best example of it," she said.
She said the government had to overcome a strong obstacle nationally and internationally during the construction of the iconic bridge.
PM Hasina said she didn’t get support from a number of people regarding the construction of the country’s longest bridge with own finance. It was said that it would never be possible, she said.
She said different heads of the state and government during talks told her that it would be a tough work since the World Bank withdrew its finance from the project. But only Malaysia supported with then Malaysian Prime Minister Najib Abdul Razak saying that it would be possible with own finance, she noted.
Describing the Padma Bridge as the sign of the country’s pride, she said Bangladesh has been able to show its capacity to the world with the construction of the bridge with own finance.
“I think it’s not only a bridge, but also a symbol of pride and capacity of the Bengali nation,” she said, adding that the trial run of train through the Padma Bridge also started from Tuesday last.
On June 25, 2022, the prime minister opened the country’s largest bridge – 6.15-km Padma Bridge- over the mighty Padma River.
The 6.15-km bridge connected directly the country’s 21 south and south-western districts with the capital, and it is expected to accelerate the GDP growth by 1.23 per cent and make an outstanding contribution to socio-economic development by alleviating poverty.
The total allocation was Tk 30,193.39 crore, but the allocation for the main bridge was Tk 12,133.39 crore (including Tk 1,000 crore for installation of 400-kv electricity transmission line and gas line).
Besides, the Tk 9,400 crore was allocated for river training works, Tk 1,907.68 crore for approach roads (including two toll plazas, construction of two buildings for police stations and three service areas), Tk 1,515 crore for the rehabilitation of the displaced people (caused by the project) and Tk 2698.73 crore for land acquisition.
The Padma Bridge is expected to last more than 100 years, but its construction cost will be recovered in the next 35 years.
PM’s Principal Secretary M Tofazzel Hossain Miah conducted the cheque handing-over event, while former Cabinet Secretary and Bridge Division Secretary Khandker Anwarul Islam spoke on the occasion.
Governor of Bangladesh Bank Abdur Rouf Talukder, Finance Senior Secretary Fatima Yasmin, Bridge Division Secretary Md. Monjur Hossain were present at the event.
17 banks facing severe liquidity crunch after violating lending limits
Despite Bangladesh Bank’s initiatives to promote good governance in the banking sector, 17 banks have recently violated their loan disbursement limits, and are now embroiled in a severe liquidity crisis.
Having been over-aggressive in providing loans, they are now unable to recover the loans and attract new deposits as desired, according to a latest internal report of the central bank seen by UNB.
The banks should not sanction any new loans until they restore the ratio of their loans to deposits in accordance with limits set by Bangladesh Bank, which regulates the financial sector.
Also Read: Banks' assets will decrease by 40% if international reporting standards followed: FRC Chairman
Conventional banks can provide loans of up to Tk 87 for every Tk 100 in deposits, while Shariah-based banks can give loans of up to Tk 92 against every Tk 100 in deposits, according to the rules of Bangladesh Bank. This is called Advance Deposit Ratio (ADR) or loan-deposit ratio limit in banking terms.
According to the central bank report covering January 1-26 of this year, 17 banks violated the limits set for them on lending order due to lack of discipline. As a result, the concerned banks have been plunged into an extreme liquidity crisis, making it difficult for them to sanction new loans. Some of them are even unable to pay depositors in some cases.
Experts fear that the existing situation has created additional risks for depositors. According to them, irregularities, corruption and ‘ghost loans’ - loans to firms that turn out to be non-existent -are behind the collapse of the banking system’s loan disbursement process.
Also Read: Prime Bank receives $50m from IFC to support trade, forex liquidity needs in Bangladesh
“In the banking sector, there have been allegations of giving large amounts of ghost loans in recent times. If this continues, the sector will be at risk,” said Dr ABM Mirza Azizul Islam, economist and adviser on finance to the last caretaker government.
Mirza Azizul told UNB, "Lending beyond the limit against deposits disrupts the credit system."
Besides, the debt collection situation of the banks is not satisfactory now. In such a situation, if the non-performing loans increase further with additional loans, then there is a danger for the bank and its depositors will suffer, he added.
He suggested the intervention of the central bank in these banks immediately.
Also Read: BB signs deal with 32 banks to accelerate disbursement of green fund
According to the Bangladesh Bank report, the ADR of National Bank Ltd stood at 98.23 while that of AB Bank was 96.64 in its conventional stream and 103.45 in its Shariah stream.
State-owned Basic Bank’s ADR stood at 91.17, One Bank’s was 89, and multinational National Bank of Pakistan’s was 87.52. Widespread irregularities and corruption have already been reported in these banks.
Apart from this, Community Bank's ADR was 88.28, NRB Bank’s at 88.05 and IFIC Bank's ADR was 87.48, the report states.
Shariah-based Exim Bank's ADR stood at 100.28, Standard Bank's at 96.28, Premier Bank's Islamic Window 155.09 and Bangladesh Commerce Bank's Islamic Window's ADR was 133.26.
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Apart from this, the ADRs of five other Shariah-based banks ranged between 93.01 to 104.54.
A managing director (MD) of a private bank told UNB that the lending limit has undoubtedly been set by Bangladesh Bank based on adequate research and global best practices. No bank should have to cross the limit.
“These violations are creating risk in the banking sector. Depositors in particular will be at greater risk. Already some banks and non-bank financial institutions are not able to return money to depositors,” he said, maintaining anonymity.
The central bank has also extended the period of ADR adjustment five times to allow the banks to bring their lending practices in line with the limits.
Read More: BB disburses Tk 4000 crore as liquidity support to 5 Islami banks
However, many banks could not coordinate this. In such a situation, Bangladesh Bank even increased the required ADR to improve the overall liquidity situation of the banking sector to maintain the pace in credit flow to the private sector.
The executive director and spokesperson of Bangladesh Bank, Md Mezbaul Haque, told UNB that although some banks may at times find themselves in violation of the ADR set for them, the central bank would under normal circumstances give them time to get themselves back within the limit.
“But if they stay outside the limit for long, then they must be warned and action would be taken accordingly,” Mezbaul said.
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IMF loan program can be touchstone of financial sector reforms
The government’s successful negotiation of a $4.7 billion, approved at the Executive Council of the International Monetary Fund (IMF), will raise confidence in the macroeconomy amid a volatile foreign exchange market, analysts said.
They said that the IMF loan program can help bring stability to the macroeconomic situation in two ways- increasing the US dollar supply and igniting a process of reform in the financial sector.
Economist and adviser to the last caretaker government Dr ABM Mirza Azizul Islam told UNB that the IMF loan works as a standard for the economic strength of a country. Other international financial organisations would be encouraged to provide loans and in other financial dealings with Bangladesh now.
He said that the loan will contribute to a stable exchange rate by strengthening the foreign exchange reserve for the short term.
Besides, the IMF loan will work as a remedy while inward remittance flow and repatriation of export income have slightly decreased, Mirza Aziz said.
The government will be implementing reforms in the financial sector as per the advice of the IMF, which will bring good results in the long run for the macroeconomy, he pointed out.
Read more: $4.5 billion loan: IMF reaches preliminary agreement with Bangladesh
Many countries are seeking IMF’s loan support to face the foreign exchange crisis due to the fall of global economic growth. Bangladesh’s process for securing the loan has been much smoother than some other countries, which is a good endorsement of Bangladesh’s macroeconomic stability.
Economist and former Governor of Bangladesh Bank (BB) Dr Atiur Rahman told UNB that the IMF board decision indicates strong confidence in Bangladesh's macroeconomic management and willingness to undertake necessary reforms for inclusive and sustainable growth.
Besides budget support, the approval of a new loan of $1.4 billion from the Resilience and Sustainable Fund (RSF) also demonstrates the IMF's recognition of Bangladesh's capacity to address climate change challenges, he said.
“The loan, of course, is focused on addressing high inflation and falling foreign exchange reserves. Indeed, Bangladesh, though not in the same club as Sri Lanka and Pakistan, has still made this pre-emptive move of asking for long term low-cost funding support from the IMF, to avoid future pressures on its macroeconomic indicators that have already been affected to some extent by the ongoing global economic crisis,” he added.
Dr Atiur said the state-of-the-art technical knowledge of IMF experts in Bangladesh will certainly benefit from this program in undertaking necessary reforms in the financial sector for raising revenue and foreign exchange reserve, improving governance of the banking sector to reduce non-performing assets, and targeting better social protection for the extreme poor.
These reforms are, however, already in place as a part of the indigenous development strategy of Bangladesh. The program will only further consolidate their implementation process, he said.
Read more: Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson
"Other development partners like the World Bank, ADB, and JICA will be encouraged to come forward with additional support for infrastructural development in Bangladesh. FDI will also flow at a faster pace to take advantage of the conducive investment environment in Bangladesh which will be further strengthened by the presence of the IMF program," said Dr Atiur, also a professor of economics at Dhaka University.
The IMF said that the loan will help stabilise Bangladesh's macroeconomy, implement the necessary reforms to build capacity for social and development spending, strengthen the financial sector, modernise policy frameworks, and address climate change.
Bangladesh likely to get back the money borrowed by Sri Lanka: FM
Bangladesh is expected to get back the money borrowed by Sri Lanka by September this year as the country's economic situation is improving.
"Sri Lanka is gradually doing better. They are recovering slowly. We have given them time till September (to repay the loan)," Foreign Minister Dr AK Abdul Momen told reporters at state guesthouse Padma on Sunday (February 05, 2023) afternoon, hoping for repayment by Sri Lanka within the timeframe.
The Foreign Minister, who returned home Sunday from Sri Lanka, said the new government in Sri Lanka is running the country “pretty well”.
The Sri Lankan government hopes that they will recover from the problem and the International Monetary Fund (IMF) is coming up for support, Momen said.
Also read: FM likely to visit New Delhi March 1-2
Sri Lankan President Ranil Wickremesinghe has conveyed Sri Lanka's gratitude to the Bangladesh government and Prime Minister Sheikh Hasina for the timely assistance as the country battles to rebuild its economy.
“I must say they are very grateful to us,” said Foreign Minister Momen.Foreign Minister Momen visited Sri Lanka as a guest for the country's 75th Independence Day celebrations, for which the guest list was filled up mostly by neighbouring countries at foreign minister-level.
Sri Lanka and the International Monetary Fund (IMF) recently reached a staff-level agreement on a 48-month, $2.9 billion Extended Fund Facility which will also help it secure short-term funds from other donors.
Bangladesh Bank earlier granted Sri Lanka six more months to repay the $200 million loan after the Island nation requested to extend the repayment period due to its prolonged economic crisis.
Read More: Sri Lanka thanks Bangladesh for timely assistance on road to recovery
In a friendly gesture, Bangladesh had extended the loan to cash-strapped Sri Lanka under a currency swap arrangement in 2021.
Sri Lanka and the International Monetary Fund (IMF) recently reached a staff-level agreement on a 48-month, $2.9 billion Extended Fund Facility which will also help it secure short-term funds from other donors.
Bangladesh Bank earlier granted Sri Lanka six more months to repay the $200 million loan after the Island nation requested to extend the repayment period due to its prolonged economic crisis.
In a friendly gesture, Bangladesh had extended the loan to cash-strapped Sri Lanka under a currency swap arrangement in 2021.
Also read: FM Momen to join Sri Lanka's 75th Independence Day celebrations in Colombo
Bangladesh receives 1st instalment of IMF’s $4.7 billion loan: BB spokesperson
Bangladesh received $476 million as the first instalment of a $4.7 billion loan from the International Monetary Fund (IMF) on Thursday.
Bangladesh Bank (BB) received this amount three days after approval of the IMF loan, said Mezbaul Haque, executive director and spokesman of BB.
He confirmed to UNB that releasing of the first instalment from the IMF has strengthened Bangladesh's foreign exchange reserves as it reached $33.69 billion on Thursday.
Bangladesh will get about $3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility (RSF).
With the approval of a $1.4 billion loan under the Resilience and Sustainability Facility (RSF), Bangladesh became the first country in Asia to receive a loan from the fund created for low and middle-income countries that are at risk due to climate change.
Bangladesh will get the loan through seven instalments and have to pay the loan at 2 percent interest rate
Bangladesh formally requested the IMF for $4.5 billion loan assistance in July 2022. Then the IMF assured that the global lender was ready to discuss the issue.
The IMF discussed with Finance minister AHM Mustafa Kamal and Bangladesh Bank Governor Abdur Rouf Taluktherin on the sidelines of the board meeting in July last year.
As per the discussion an IMF team led by Rahul Anand visited Dhaka from October 26 to November 9, 2022 to discuss the IMF's support for Bangladesh.
Later, Antoinette Monsio Sayeh, Deputy Managing Director (DMD), visited Bangladesh from January 14-18 this year and praised the economic development and social progress of Bangladesh.
Read more:IMF now expects world economy to grow 2.9% in 2023
Govt may provide loans for producing eco-friendly bricks: Environment Minister
The government of Bangladesh has taken a decision to provide bank loans on easy terms to those involved in producing environment-friendly bricks, Environment, Forest and Climate Change Minister Shahab Uddin said today (January 25, 2023).
The environment minister said this while talking to reporters after a meeting with deputy commissioners at Osmani Memorial Auditorium in Dhaka.
The meeting also discussed protecting forests and actions of DCs to combat climate change impacts, he said.
He also sought assistance from the DCs in stopping hill cutting, deforestation, establishment of illegal brick fields and soil cutting. The DCs were asked to take legal steps in this regard.
Read More: COP27: Bangladesh prioritises realisation of green climate fund, Environment Minister tells UNB
Replying to a question on any proposal coming from DCs, the minister said there are only 50 offices under the Department of Environment (DoE) in the 50 districts while the ministry has no office in the rest 14 districts.
He also assured of establishing offices in the 14 districts.
Besides, the DCs have been asked to stop operation of illegal brick kilns as the government has taken an initiative to use environment-friendly bricks for government structures by 2025.
“The more we can provide eco-friendly bricks, the more we can stop production of illegal brick kilns. If we are able to meet the demand with eco-friendly block bricks, the old illegal brick kilns can be stopped,” he said.
Read More: 2022 was fifth or sixth warmest on record as Earth heats up
Bangladesh to be first in Asia to receive loan from IMF’s ‘Resilience and Sustainability Fund’
Bangladesh is going to be the first country in Asia to receive loan from International Monetary Fund’s (IMF) ‘Resilience and Sustainability Fund’ (RSF).
The first country in the world to receive this IMF loan was Barbados, followed by Costa Rica and Rwanda. After that, there are five more countries on the list to receive loans from the RSF. Bangladesh is at the top of the list.
Read more: IMF Board could consider approving $4.5bn loan for Bangladesh on Jan 30
The IMF board approved the fund on April 13, 2022, and it became effective on May 1, 2022. The fund was created for low and middle-income countries that are at risk due to climate change.
According to the IMF, this fund is for countries with low incomes, high debt burdens, high costs to deal with climate change risks, and deficits in development spending.
Read more: IMF to support Bangladesh’s aspirations of becoming a higher-income country by 2041: DMD
The global lender says borrowing has increased in many low- and middle-income countries in the post Covid-19 period.
IMF to support Bangladesh’s aspirations of becoming a higher-income country by 2041: DMD
International Monetary Fund (IMF) has assured of continued support to Bangladesh’s aspirations to become a developed and higher-income country by 2041.
IMF Deputy Managing Director Antoinette Monsio Sayeh made the assurance during a meeting today (January 16, 2023) with Prime Minister Sheikh Hasina at the latter’s official residence Ganabhaban.
PM’s speechwriter Md Nazrul Islam briefed reporters after the meeting.
“Bangladesh aspires to become a developed, prosperous, and higher-income country by 2041. The IMF will continue to support this aspiration,” the IMF senior official was quoted as saying.
Read more: Bangladesh Bank expects first instalment of $4.5 b IMF loan to arrive by next month: Spokesman
She said the IMF has a long-standing partnership with Bangladesh. “The IMF cherishes this partnership. I have come here to strengthen the partnership further,” Sayeh was quoted.
She said the whole world is facing challenges due to the staggering impacts of the Covid-19 pandemic and the Russia-Ukraine war.
In this situation, emerging economies like Bangladesh are facing various problems, particularly inflation, price-hike of commodities and pressure on foreign exchange reserves, the IMF deputy managing director said.
The IMF will assist in Bangladesh’s efforts to face these problems, she assured.
Read more: IMF DMD arrives in Dhaka today to finalize $4.5 billion loan
The prime minister said the pace of the country’s progress has slowed down due to the Covid-19 pandemic, Russia-Ukraine war and resulting sanctions, counter-sanctions.
Bangladesh is also facing difficulties due to price hike of commodities, she said, adding that the government has widened the social safety net and expanded food programmes to support the lower income people.
Sheikh Hasina told the IMF official that her government has undertaken development programmes targeting poverty alleviation and food security.
She said Bangladesh is bringing fallow lands under cultivation to boost food production.
Read more: IMF’s DMD due in Dhaka on Jan 14 to finalise $4.5bn loan deal
Lower-income people are suffering due to high inflation even in many developed countries, she added.
‘SEEKING IMF ASSISTANCE NOT AS BAILOUT, BUT AS PRE-EMPTIVE MEASURE’
The PM said Bangladesh has sought assistance from the IMF as a pre-emptive measure. “We have sought assistance from the IMF not as a bailout, but as a pre-emptive measure.”
The IMF deputy managing director praised the socio-economic transformation under the leadership of Prime Minister Sheikh Hasina. She said Bangladesh has been maintaining some 6 percent GDP growth over the last decade.
Read More: IMF loan is like a character certificate: PM’s advisor Mashiur
Besides, women empowerment, girls’ education, community clinics and ICT came up for discussion during the meeting.
Finance Minister AHM Mustafa Kamal, PM’s International Relation Affairs Adviser Professor Dr. Gowher Rizvi, Principal Secretary M. Tofazzel Hossain Miah, Bangladesh Bank Governor Abdur Rouf Talukder, Senior Finance Secretary Fatima Yasmin and IMF Resident Representative in Dhaka Jayendu De were present at the meeting.
At the meeting, the IMF delegation handed over two photographs to the prime minister, which were taken when Bangladesh signed the IMF’s Articles of Agreement on August 17, 1972 to obtain its membership.
Read More: IMF acknowledges Bangladesh’s outstanding socioeconomic progress: Finance Minister