Business & Economy

IMF agrees to release $681 million loan for Bangladesh

Dhaka, Dec 13 (EFE).- The International Monetary Fund (IMF) has agreed to disburse $681 million for Bangladesh in the second tranche of a $4.7 billion loan package as a much-needed economic relief for the South Asian country.

The decision was taken on Tuesday in Washington when the IMF Executive Board completed its first review of the 42-month credit facility approved in January this year.

The first tranche of $476 million was disbursed in February, immediately after the approval of the loan package.

“Bangladesh’s economy is navigating multi-faceted economic challenges. Despite a difficult external environment, program performance has been broadly on track, reflecting the authorities’ strong commitment,” IMF Deputy Managing Director Antoinette Sayeh said in a statement following Tuesday’s review.

“The fund-supported program is helping restore macroeconomic stability and protect the vulnerable, while accelerating macro-critical structural reforms to bolster growth potential and delivering on the climate agenda,” she said.

The IMF noted that to restore near-term macroeconomic stability, monetary policy should be further tightened, supported by neutral fiscal policy and greater exchange rate flexibility.

The global lender hoped that its program would lay the foundations to unlock Bangladesh’s growth potential, harness its demographic dividend, and support long-term inclusive and green growth.

Bangladesh has been facing multiple economic challenges in recent months.

Inflation has remained consistently high since the authorities raised the fuel price by almost 51 percent in August 2022.

The inflation rate in August 2023 was 9.92 percent, in September 9.63 percent, and in October 9.93 percent, according to the latest available data from the Bangladesh Bureau of Statistics.

The IMF said that Bangladesh’s robust economic recovery from the pandemic was interrupted by Russia’s war in Ukraine.

It has led to a sharp widening of Bangladesh’s current account deficit, a depreciation of the taka, and a decline in foreign exchange reserves.

The country is currently facing a severe dollar crisis, with foreign exchange reserves dropping to $24.89 billion in November 2023 from $46.154 billion in December 2021, according to central Bangladesh Bank data.

According to the balance of payments and international investment position manual, the country’s foreign exchange reserve was $19.3 billion at the end of November.

“Raising tax revenues and rationalizing expenditures will allow increasing social, developmental, and climate-related spending. Continued efforts to enhance public financial and investment management are needed to increase spending efficiency and mitigate fiscal risks,” said IMF acting chair Sayeh.

“Financial reforms should focus on addressing vulnerabilities in the financial sector, by strengthening banking regulation, supervision, and governance. Deepening capital markets will help mobilize financing to support growth objectives,” she said.

The positive IMF review has come as a relief for the ruling Bangladesh Awami League government, which is expected to take power for a fourth consecutive term after Jan. 7 general elections due to a boycott by most opposition groups over allegations of grave human rights violations. EFE

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