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IMF releases first tranche of $4.7b loan

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There was good news on the foreign reserves front in the past couple of days: the International Monetary Fund yesterday sent the first tranche of its $4.7 billion loan, while both export receipts and remittance inflows registered decent growth in January.

The Washington-based lender dispatched $476.27 million soon after its executive board approved the $4.7 million loan programme for Bangladesh on January 30.

“The disbursed amount has already been added to the country’s foreign exchange reserves that stand at $32.69 billion today, up from $32.19 billion on February 1,” said Md Mezbaul Haque, Bangladesh Bank spokesman, yesterday.

While the first instalment was released without the need for any prior action from the government, the successive instalments would not be released so easily.

The IMF has tagged three mandatory conditions — which are specific, measurable targets called quantitative performance criteria (QPC) — for the loan programme.

Those are: a minimum level of net international reserves and domestic revenue collection and a ceiling on the government’s budget deficit, The Daily Star has learnt from people involved in the negotiations with the IMF staff mission.

When authorising the first instalment, the IMF staff mission has set the targets for the QPCs for the second instalment of $704 million, scheduled for six months later.

If the government fails to meet the QPC targets, the IMF would not approve the second instalment.

And if the government meets the targets, the funds would be released and the IMF staff mission would then proceed to set the targets for the next instalment, which would also be about $704 million.

The process would repeat for the successive four instalments of $704 million, each scheduled every six months.

Closer to home, Pakistan’s $6 billion loan programme was stalled midway after the country failed to meet two of its six QPCs.

Meanwhile, in another stroke of good news, exports maintained their robust trend in January, fetching another $5.1 billion, up 5.89 percent year-on-year, according to data from the Export Promotion Bureau.

Remittance, another source of foreign currency, registered a 15.3 percent growth in January, according to data from the Bangladesh Bank.

Migrant workers sent home about $1.96 billion last month, the highest in five months.

The developments mean the deficit in the current account will narrow.

The current account was $5.3 billion in deficit in the first six months of the fiscal year.

Current account deficit is the shortfall between the money received by selling products to other countries and the money spent to buy goods and services from other nations.

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