Bangladesh is receiving US$1.3 billion from the International Monetary Fund in its lending programme's latest two tranches trapped in unmet reform-related conditions as the IMF board finally nods the payout, sources said.

Finance Division officials in Dhaka said the executive board of the Washington-based Fund cleared the credit release as the deadlock over the two instalments of the $4.7 billion worth of lending package was over.

The approval follows a staff-level agreement reached in mid-May for the fourth review of the credit programme. The IMF staff and the Bangladesh authorities had reached staff-level agreement for the third review in December last year.

However, citing Bangladesh's repeated failure in fulfilling prerequisites, the IMF board held back approval for the loan's fifth and fourth tranches expected to be available in February and May respectively.

Two unmet tags, which stood as big barriers to approval for both the loan tranches, were enhancing revenue mobilisation and ensuring exchange-rate flexibility.

The dispute over the release of the loan tranches deepened after the country's revenue board had declined to set a larger revenue target for the forthcoming fiscal year 2025-26. Also, the central bank showed unwillingness to make exchange rate flexible as suggested by the IMF.

In the first week of April, an IMF team, led by Chris Papageorgiou, the agency's Mission Chief for Bangladesh, visited Dhaka for the fourth review of the credit programme.

However, after ten days of reviewing the progresses made under loan programme, the IMF team on April 17 announced that the staff-level agreement with Bangladesh authority had been delayed due to the existence of some differences over the exchange- rate flexibility and higher revenue-generation target.

"Discussions are continuing with the objective of reaching a staff-level agreement in the near term -- including during the April 2025 IMF-World Bank Spring Meetings in Washington, DC -- to pave the way for completion of the combined third and fourth programme's review," Mr Papageorgiou said at a press conference in Dhaka.

Later, the two sides discussed the issue in Washington on the sidelines of the Spring Meetings. However, a consensus eluded the parties. Back to Dhaka, a Bangladeshi team, led by central bank governor Dr Ahsan H Mansur, continued discussion virtually with IMF officials in Washington.

After series of parleys the central bank governor in mid-May agreed to go for market-driven exchange rate to remove roadblock to IMF loan payout worth $1.3 billion.

Thereafter, the IMF on May 14 announced reaching staff-level agreement with the Bangladeshi authorities and said the "agreement is subject to approval by the Executive Board of the International Monetary Fund, contingent on the completion of prior actions related to tax-revenue mobilisation and full implementation of exchange-rate reforms".

The Fund granted the $4.7 billion loan to Bangladesh in January 2023 to help support the country's sluggish economy and slim foreign-exchange reserves. The loan was scheduled to be given in seven instalments by May 2026.

Until now, the country has received $2.295 billion under this loan programme.