For the past 5 years, the government has been giving incentives to increase remittances or expatriate income through legal or banking channels. The International Monetary Fund (IMF) advised the government not to give this incentive.
The IMF said, ‘Recent exchange rate reforms have provided such incentives – (to attract remittance flows through legal channels) that are unnecessary. The authorities are therefore encouraged to bring down this subsidy below 2 per cent and phase it out altogether.’
The IMF staff report published yesterday (Tuesday) informed about this recommendation. Apart from this, the formation of asset management companies in the private sector has also been recommended to reduce defaulted loans.
Earlier on Monday night, the IMF approved the third tranche of a $4.7 billion loan for Bangladesh. It is reported by the international credit organization.
The government announced a 2 percent incentive on remittances in August 2019 to encourage expatriates to send remittances through legal or banking channels. It was later increased to 2.5 percent in January 2022.
The IMF says the government introduced the incentive before the IMF-supported (loan) program, so there was no violation of the Consistent Performance Criterion (PC) in the case of multiple currency practices (MCP or international transactions in different currencies). However, the new IEMF guidelines on MCP came into force in February this year.
It is in view of this that the IMF has given such advice on the incentive of remittances.