-Reuters File photo

WASHINGTON: The International Monetary Fund on Thursday said Bangladesh was making progress with reforms under an IMF loan program and may be eligible for the second aid payment.

An IMF mission to Dhaka met with senior Bangladeshi officials in the first review of the country's performance under a $987 million Extended Credit Facility granted in April.

Bangladesh's performance under the loan program so far has been generally sound, said IMF mission leader David Cowen.

“Quantitative targets are broadly on track, with all performance criteria met at end-June 2012, the first test date under the ECF,” he said in a statement.

Under the three-year loan deal, Bangladesh has pledged wide-reaching structural reforms to get its economy back on track and ease long-term poverty.

Bangladesh received some $141 million in an initial disbursement in April.

Cowen noted progress on structural measures as well as commitments by the government on several measures, including containing the budget deficit to 4.5 per cent of gross domestic product in fiscal 2013.

The government also pledged to boost efforts to curb subsidy costs, particularly through a fuel price adjustment formula, and to take steps to lessen the negative impact on the most vulnerable.

The IMF Executive Board is expected to complete its review in January, which would make the second disbursement of some $141 million available to Bangladesh.

The government sought the IMF aid after rising global oil prices delivered a double whammy, spurring inflation and taking scarce foreign currency out of the country.

Under the IMF agreement, the government must hike prices of oil, power and fertilizer to bolster the country's shaky balance of payments. But poor farmers have relied on deep subsidies for decades.

“Despite global headwinds, Bangladesh's economy performed well in FY12, with preliminary estimates pegging growth at 6.3 per cent,” Cowen said.

The IMF projects GDP growth of about 6 per cent in the current fiscal year, citing external uncertainties and the broader global slowdown.

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