Business & Economy

Bangladesh seeks first IMF loan in a decade amid crisis

Dhaka, Jul 27 (EFE).- The government of Bangladesh, which has imposed measure to limit the use of fuel amid record inflation, confirmed on Wednesday that it had sought a loan from the International Monetary Fund, although adding that it would be accepted only if the conditions were favorable.

Finance Minister AHM Mustafa Kamal said in a virtual press conference after a cabinet meeting that authorities had on Sunday sent a letter to the IMF seeking negotiations for a loan.

However, he clarified that the letter had not specified an amount, adding that if Dhaka reveals its demand and “everyone comes to know, the burden of the loan will be high.”

“We will stay alert so that no terms and conditions go against us. We did not say (the) amount. We will see their conditions first. If they positively benefit us, we will consider it,” the minister said.

Local media outlets have suggested that Dhaka could seek $4.5 billion from the Fund.

The Asian country could try to secure the amount under IMF schemes such as the newly launched Resilience and Sustainability Trust Fund, which offers long-term funding to low-income and vulnerable middle-income countries.

This is the first time in a decade that Bangladesh has sought an IMF loan, after securing $987 million from the entity in 2012.

The request comes at a time when the national economy has come under pressure, with the country registering 7.56 percent inflation in June according to the Bangladesh Bureau of Statistics, much higher than the 5.64 percent recorded in the same month last year and the highest since 2014.

The high inflation and sustained devaluation of the taka compared to the United States dollar, with the local currency losing 7 percent of its value within 2022, has come on the back of the foreign exchange reserves dropping to a 21-month low of $39.77 billion in July this year.

Earlier this month, Bangladesh approved the temporary closure of all diesel-run power plants and keeping all petrol stations shut for one day every week, apart from imposing hours-long power cuts.

The measures came at a time when the long queues at fuel stations and daily power cuts in nearby Sri Lanka have grabbed headlines as the country passes through a severe economic and institutional crisis.

Some Bangladeshi economists have warned that an IMF loan may not drastically improve the country’s economic situation, and that major steps were needed to deal with serious issues affecting the economy.

“There are clear cases of governance failure in our economy. The loan will function if we can address this deficit. Accountability and transparency are needed for economic policy,” Rashed Al Mahmud Titumir, chairman of the department of development studies at the Dhaka University, told EFE.

“Unless cause and effects are addressed, the result won’t come and the loan will grow,” he said. EFE


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