Bangladesh is on track to meet all 12 conditions set by the International Monetary Fund (IMF) to qualify for the fourth tranche of a $4.7 billion loan program, just short of the revenue collection target.

This comes as an IMF mission, led by mission chief Chris Papadakis, will visit Bangladesh from December 3 to 17 to review the country’s performance and compliance with structural reform conditions.

The team will meet Finance Adviser Salehuddin Ahmed on December 3, Finance Ministry officials told The Daily Star.

During their stay, the IMF team will also hold meetings with officials from Bangladesh Bank, Ministry of Finance, Ministry of Power and Energy, National Board of Revenue and Bangladesh Bureau of Statistics.

There are seven performance criteria for which the IMF has set specific floor or ceiling figures to be achieved by June 2024.

These conditions include net international reserves, budget deficit, accumulation of outstanding payments, reserve money, tax revenue, priority social spending and capital investment made by the government.

According to a finance department official, the government has fulfilled six of these conditions but failed to meet the revenue collection target.

According to the IMF target, the government was supposed to collect Tk 394,530 crore in taxes in June.

Data from the finance department showed that the government collected Tk 369,209 crore in June, which means it was Tk 25,321 crore short of the IMF target.

Another important condition set by the IMF was to increase the country’s net international reserves, which was met after the IMF lowered the necessary threshold in May this year at the request of the then government.

The original target was $20.11 billion as of June 30. However, the IMF lowered it to $14.79 billion later in May. As of June 30, Bangladesh had $16.7 billion in net international reserves.

Bangladesh failed to meet this target for each previous installment of the loan package.

The IMF’s loan program contains two types of conditions: seven linked to performance criteria and the remaining related to structural benchmarks.

Officials said Bangladesh was scheduled to meet five structural reform conditions out of 27 by June.

The IMF team will assess whether Bangladesh met these five conditions and will also review other structural reform conditions to be met at various times from September this year to December next year.

One of the structural reform conditions was the publication of an updated medium-term debt management strategy covering FY25 to FY27. The Ministry of Finance has already published it.

According to the publication, it is crucial for Bangladesh to gradually move towards a unified debt management framework to improve the country’s public debt management.

“Under this framework, all aspects of public debt management, from issuance of government securities to supervision of national savings certificates and external borrowing, among others, should be carried out under the finance department through an autonomous unit,” it said.

Capacity development of the debt management unit in this regard will help ensure better implementation of the debt strategy and maintain public debt on a sustainable path, it added.

A finance ministry official said the report was formulated at the end of the previous government’s term. The interim government or the next elected government may introduce changes.

Finance Ministry officials said other macroeconomic challenges, including inflation, subsidy cuts and revenue collection reforms, would be discussed during the IMF team’s visit.

The interim government will also share updates on steps taken to generate authentic statistics.

The total backlog of government subsidy in the power, fertilizer and energy sectors stood at around Tk 60,000 crore at the end of June. Discussions with the IMF mission will prioritize how subsidies in these sectors can be reduced, according to the officials.

In addition to the ongoing $4.7 billion program, the government has already sought another $3 billion loan from the IMF.

A Bangladesh Bank official said this will be discussed in detail with the visiting IMF mission. However, in order to use that loan, the government will have to meet additional conditions set by the IMF.

Zahid Hussain, a former chief economist at the World Bank’s Dhaka office, said the IMF’s top management is open to providing additional loans.

“But special conditions must be met by the government,” he said.

These conditions could relate to the banking sector, tax policy, subsidy cuts, exchange rate management and more, he added.

Hussain said it is still unclear whether the new loan will be part of the existing loan package or offered in a different form.

Faced with mounting pressure on its foreign exchange reserves, Bangladesh sought IMF support by the end of 2022. The multilateral lender approved $4.7 billion in January 2023. Of that, the government has already received $2.3 billion in three tranches.