While other South Asian nations experience delays, Bangladesh receives $4.7 billion from the IMF.

 

The International Monetary Fund (IMF) has approved $4.7 billion in loans for Bangladesh, which will begin disbursing them immediately. This makes Bangladesh the first of three South Asian nations that applied for these loans last year in the midst of economic difficulties to receive them.

The loans are a win for Prime Minister Sheikh Hasina ahead of a general election early next year and will help the nation, which has seen its foreign exchange reserves decrease, the taka currency depreciates, and its current account deficit sharply widen.

The IMF's extended credit facility and related arrangements will grant Bangladesh access to approximately $3.3 billion, with an initial payment of approximately $476 million. Additionally, the IMF executive board approved approximately $1.4 billion for climate investments for Bangladesh, the first Asian nation to access the newly established Resilience and Sustainability Facility.

The loans, according to the IMF, will "promote the authorities' reform agenda while protecting macroeconomic stability and rebuilding buffers."

Building climate resilience, strengthening Bangladesh's financial sector, expanding fiscal and governance reforms, and creating fiscal space to allow for greater spending on social and developmental programs are all part of the agenda.

Antoinette M. Sayeh, the deputy managing director of the International Monetary Fund, stated in a statement, "Since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards."

Sayeh continued, "However, the Covid-19 pandemic and Russia's war in Ukraine following this interrupted this long period of robust economic performance."

"Macroeconomic management in Bangladesh has been challenging due to multiple shocks."

In an effort to increase its foreign exchange reserves, the nation also requested $2 billion from the World Bank and the Asian Development Bank last year.

Sri Lanka and Pakistan, Bangladesh's regional counterparts, are experiencing significantly worse economic conditions but have not received final IMF loan approval.

In the most recent fiscal year, which ended on June 30, Bangladesh's current account deficit reached a record $18.7 billion because garment exports were unable to offset an increase in energy costs. At the end of the current fiscal year, the Bangladeshi central bank anticipates that the deficit will be approximately $6.8 billion.

In recent months, as it approached the IMF, the government also increased the prices of energy and fuel. It made the second such announcement this month, a 5% increase in retail power prices starting on Wednesday.