Dhaka, Oct 9 (EFE).- Bangladesh reached a preliminary agreement on Wednesday with the International Monetary Fund (IMF) to access a $4.5 billion credit plan to deal with the country’s financial crisis.
Bangladesh and the IMF team have reached “a staff-level agreement” to support the authorities’ economic policies under a new plan for a 42-month credit of about $3.2 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).
Another $1.3 billion will be provided under the Resilience and Sustainability Facility (RSF), according to a report by the IMF.
The agreement, which needs to be approved by the IMF’s executive board, was finalized at the end of a two-week visit by a technical delegation of the financial institution to Dhaka, in which they discussed the terms of the loan and the country’s financial situation.
“Bangladesh’s robust economic recovery from the pandemic has been interrupted by Russia’s war in Ukraine, leading to a sharp widening of the current account deficit, rapid decline of foreign exchange reserves, rising inflation and slowing growth,” said IMF mission head Rahul Anand.
Against this backdrop, the authorities have come up with a program, “supported by the IMF,” with which they look to reduce vulnerabilities and boost robust growth by increasing social investment, he said.
The terms and implications of the loan were among the main concerns of Prime Minister Sheikh Hasina’s administration, as Bangladesh grapples with high inflation and soaring fuel prices.
Inflation in the Asian country has remained high in recent months, reaching 7.48 percent in July and 7.56 percent in June, marking a nine-year high.
The authorities raised the price of fuel by almost 51 percent in August, which further drove inflation to 9.52 percent that month, 9.10 percent in September and 8.91 percent in October.
Land Transport Minister Obaidul Quader, addressing the media Wednesday, said the government will take IMF credit, but not at the cost of accepting conditions that worsens the country’s situation.
“We are aware of IMF condition given in past. We will not accept any condition that hurts the interest of our country,” he said without giving details about the plan.
According to the IMF, the government of Bangladesh has designed a program that will create additional fiscal space, rationalize expenditures, and mitigate the impact on vulnerable populations, among other things.
Bangladesh also hopes to adjust its monetary policy to better manage inflation, and to allow greater exchange-rate flexibility to cushion the impact of global instability. EFE