The International monetary Fund (IMF) also suggested Bangladesh deposit in its treasury an amount equivalent to stalled interest payments against the US$11.38-billion borrowing from Russia-a measure that may lower the country's forex reserves further.
Officials say two instalments of interest payments have been halted since last fiscal following payment restrictions to Moscow for USD sanctions in retaliation for Russia's Ukraine war.
The visiting IMF delegation offered the suggestions when they met the Economic Relations Division (ERD) on Monday at the ERD office, discussing a wide range of financial and economic issues. ERD Secretary Sharifa Khan attended the meeting.
They suggested the ERD take steps to release the huge unutilised foreign aid in the pipeline, one official said. According to the ERD, the foreign assistance in the pipeline was recorded at around US$48.46 billion as of last FY2022.
The official said the IMF team also wanted to know about Bangladesh government's requirement of budgetary support from other multilateral and bilateral development partners in addition to the proposed IMF loan.
They also enquired about the debt-repayment strengths of Bangladesh in the future days.
And ERD briefed the IMF team on Bangladesh's total debt, its repayment capacity, debt sustainability, future target of foreign aid and the like.
Officials attending the meeting told the FE that since the repayment to Russia against the borrowings for the Rooppur nuclear power plant (RNPP) project had been put on hold for the US sanctions on Moscow and on the payments gateway, the IMF suggested that Bangladesh keep smooth repayment facilities available in its account.
Bangladesh couldn't pay two interest installments on the disbursed loan amount against the US$11.38 billion worth of Russia-confirmed loan.
The government in July 2016 signed the loan deal with Russia with maturity in 30 years with a grace period of 10 years.
According to the agreement, the interest rate on the loan is LIBOR plus 1.75 per cent. However, the interest rate now could exceed 4.0 per cent in any case of LIBOR-rate fluctuations.
The principal amount of the loan will have to be repaid after June 2027 as the 10-year grace period will end by then.
Currently, Bangladesh government repays interest on the disbursed amount against the $11.38 billion worth of confirmed credit.
As such, the IMF advises the ERD to deposit the funds equivalent to the due repayment amount into a account at the central bank or at Sonali Bank, from where the government usually repays debts to the overseas lenders.
"Bangladesh government is ready to repay the Russian loan when the payment channel will open," the Fund executives were told.
"The government is also working to find out ways of the repayment of the Russian loan for the Rooppur power-plant project if the two sides agree," the official said.
Meanwhile, the delegation in another meeting on the day inquired about the reforms carried out to make Bangladesh's investment climate friendlier to attract more investments.
The delegation, which is now scrutinising financial health of the country before deciding on a budget- support loan talked to officials of the Bangladesh Investment Development Authority (BIDA) at its office.
Also, the IMF officials wanted to know what other reform measures are underway and the future reform plans, sources said.
A senior BIDA official, who was present at the meeting, told the FE in the recent years BIDA had conducted some "important" reforms to make doing business easier in Bangladesh.
The IMF team has been apprised about the BDIA activities, he said.
At the meeting, he said, the IMF team was informed about the success stories of the Bangladesh Export Processing Zone Authority (BEPZA). Also the investment situation in economic zones has been described.
Sources said the now-defunct ease-of-doing-business index of the World Bank came into discussion at the meeting. The BIDA officials informed the IMF team that the authority has been preparing a similar index to keep tally what has been done so far and what more need to be done in the future to make investment attractive in Bangladesh.
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