Dhaka, Jan 31 (EFE).– The International Monetary Fund (IMF) has approved a $4.7 billion loan package for Bangladesh amid a worrying state of the country’s economy.
The approval for the 42-month borrowing package came in the IMF Executive Board meeting in Washington on Monday.
Bangladesh would get $3.3 billion under the Extended Credit Facility and the Extended Fund Facility arrangements.
The IMF Executive Board also approved $1.4 billion under the newly created Resilience and Sustainability Facility for Bangladesh, making it the first Asian country to access the fund.
The IMF approval enabled an immediate disbursement of about $476 million.
“The 42-month program will help preserve macroeconomic stability, protect the vulnerable, and foster inclusive and green growth,” an IMF statement said.
“Reforms will focus on creating fiscal space to enable greater social and developmental spending; strengthening the financial sector; modernizing policy frameworks and building climate resilience.”
Bangladesh Finance Minister AHM Mustafa Kamal welcomed the IMF package.
“This loan approval also proves that the fundamental areas of our macroeconomic system are standing on a solid foundation and are better than many other countries,” said Kamal in a statement.
“Many doubted that the IMF might not give us this loan. They thought the fundamental areas of our macroeconomies were weak, so the IMF would refrain from lending,” he said.
Bangladesh has been facing multiple economic challenges in recent months. Inflation reached 7.48 percent in July and 7.56 percent in June, marking a nine-year high.
The authorities raised the fuel price by almost 51 percent in August, which further drove inflation to 9.52 percent that month.
The inflation remained consistently high at 9.10 percent in September, 8.91 percent in October, 8.85 in November, and 8.71 in December, according to the Bangladesh Bureau of Statistics.
The Bangladesh government increased the average retail electricity price by five percent on Jan.12 and the retail price for piped gas for industrial use and power production by up to 179 on Jan.18, raising fears about a further increase in inflation.
The IMF said 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, depreciation of the taka, and a decline in foreign exchange reserves.
“The authorities have taken on a comprehensive set of measures to deal with these latest economic disruptions,” said the global lender.
The country is currently facing a severe dollar crisis, with the country’s foreign exchange reserves dropping to $33.748 billion in December 2022 from $46.154 billion in December 2021.
After the IMF executive board meeting, acting IMF Chair Antoinette M. Sayeh, who visited Bangladesh earlier this month and met with government officials, including Prime Minister Sheikh Hasina, emphasized the reform agenda.
“While confronting challenges resulting from the global headwinds, the authorities need to accelerate their ambitious reform agenda to achieve a more resilient, inclusive, and sustainable growth,” she said. EFE