The loans are a win for Prime Minister Sheikh Hasina ahead of a general election early next year and will help the country, which has seen a sharp widening of its current account deficit, depreciation of the Taka currency and a decline in its foreign exchange reserves.
Bangladesh will get about US$3.3 billion under the IMF’s extended credit facility and related arrangements, with an immediate disbursement of about US$476 million. The IMF executive board also approved about US$1.4 billion under its newly created Resilience and Sustainability Facility for climate investments for Bangladesh, the first Asian country to access it.
The IMF said the loans will “protect macroeconomic stability and rebuild buffers, while helping to advance the authorities’ reform agenda”. The agenda includes creating fiscal space to enable greater social and developmental spending, strengthening Bangladesh’s financial sector, boosting fiscal and governance reforms and building climate resilience.
“Multiple shocks have made macroeconomic management challenging in Bangladesh.” The country last year also sought US$2 billion from the World Bank and the Asian Development Bank amid efforts to bolster its foreign exchange reserves.
Bangladesh’s regional counterparts, Sri Lanka and Pakistan, are doing much worse economically but have not been able to get final approval for IMF loans.
Bangladesh’s current account deficit hit a record US$18.7 billion in the last financial year, which ended on June 30, as exports of garments failed to offset a surge in energy costs. The Bangladesh central bank expects the deficit to fall to about US$6.8 billion at the end of the current fiscal year.
The government has also raised fuel, retail power and energy prices in recent months as it approached the IMF.
Source: Daily News
