Finance Minister’s volte face

Jehangir Hussain

Jehangir Hussain 

On Wednesday, July 28 finance minister A H M Mustafa Kamal, admitted that the government sought loans from the International Monetary Fund (IMF), in a volte face over what he had stated a week back that no loans would be taken from the IMF immediately.

‘If I expose my need, the lender will impose higher cost and conditions,’ he said in defence of his volte face.

He also said that he had denied the need for any loan a week ago due to tactical reasons.

At a news briefing, he changed his stand when reporters asked if the country's economic condition deteriorated within a week, compelling the government to change its stance.

He was holding the news briefing after a virtual meeting of the Cabinet Committee on Government Purchase.

The question became obvious, following media reports that the Ministry of Finance had in a letter requested the IMF on Sunday, seeking $4.5 billion in loans.

Replying to a query, the finance minister said, ‘We need to manage situations by showing less eagerness, to gain in bargain for borrowing with better terms and conditions.’

He said that Bangladesh gets foreign exchange through remittance sent by Bangladeshis working abroad and from business people.

‘The situation has not deteriorated until now and we will be able to provide loans to others,’ he added.

He also said that in its letter to the IMF, the finance ministry did not mention how much money Bangladesh needed.

‘We will first see what conditions they try to impose. If they impose fewer conditions and charge lower interest rate, we might consider borrowing,’ he said.

Replying to a question about the international media terming the loan-seekers as ‘bankrupt’, he said, ‘It's a lie.’

‘If it’s true, why the IMF and the World Bank provide loans to these countries? Are they throwing away money? That can't happen,’ he said.

The finance minister said that the lenders are interested to provide loans to Bangladesh as it’s a good borrower.

‘They have full confidence on us, because it’s very urgent for us to repay,’ he said.

About the price of dollar, he said, that some people were deliberately trying to make the dollar market volatile on the pretext of imports.

He said that the government machinery was under instruction to control them.

As dollar price depends on demand and supply, if the demand is high and the supply is low, its price would obviously go up, he quipped.

He expressed the hope that remittance inflow would increase significantly, as more Bangladeshi workers had gone abroad in the current year.

Regarding the IMF's condition to lift the cap on loan and deposit interest rates, he said that Bangladesh economy was in a ‘good’ shape due to it.

If the domestic lending rates of six per cent and nine per cent were not in place, the lending rate would have jumped to 20 to 22 per cent for which no business entity would have survived during the pandemic, he said.

It would also increase unemployment and all economic indicators would hover in the negative territories, he said.

Imposing the cap was a good decision of the government, he said, adding ‘I would say it again that our banking sector is stable due to the lending rates of six per cent and nine per cent.’  

The finance minister claimed that the state-owned banks are no more seeking refinancing. ‘We have already stopped providing refinancing to them, he said.

And the private sector banks have become sustainable overcoming their liquidity crisis, said the finance minister.

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