By BenarNews staff on Jan 30, 2023 05:40 pm
The International Monetary Fund announced it officially awarded a two-part loan totaling about U.S. $4.7 billion to Bangladesh on Monday to help preserve economic stability and strengthen the nation’s resistance to climate change.
The IMF preliminarily announced the loan in November 2022, agreeing to provide Bangladesh with about $3.3 billion under its Extended Credit Facility through a 42-month arrangement.
The rest of the loan is under the world lending agency’s Resilience and Sustainability Facility, which provides longer-term financing. IMF announced Bangladesh is the first Asian country to benefit from RSF, which was created to “provide policy support and affordable longer-term financing to strengthen members’ resilience and sustainability, and contribute to prospective balance of payments stability.”
“Since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards. However, the COVID-19 pandemic and subsequent Russia’s war in Ukraine interrupted this long period of robust economic performance,” Antoinette M. Sayeh, IMF deputy managing director, said in a statement announcing the loan.
“Multiple shocks have made macroeconomic management challenging in Bangladesh.”
The statement noted that Bangladesh officials, facing global headwinds, need to “accelerate their ambitious reform agenda to achieve a more resilient, inclusive and sustainable growth.
“In this regard, substantial investment in human capital and infrastructure will be needed to achieve Bangladesh’s aspiration to reach upper-middle income status by 2031 and meet the Sustainable and Development Goals.”
An IMF spokesperson declined to comment about potential conditions attached to the loan.
Meanwhile, Rahul Anand, IMF’s mission chief to Bangladesh, issued a fact sheet including frequently asked questions about the program tied to the loan.
“The IMF-supported program aims to support government’s plans to preserve macro stability and foster growth. The authorities and IMF staff have worked closely to come up with a program that is most relevant to the country’s economic and development priorities,” the fact sheet said.
“The authorities laid out the reform agenda and the program will support their efforts in addressing the longstanding structural issues of mobilizing revenue, scaling up social spending, modernizing the monetary policy framework, strengthening the financial sector and building climate resilience.”
It listed three steps the program focuses on to protect the poor.
The first calls for raising progressive taxes to increase spending on health care, education and clean water. The second calls for protecting and increasing social spending while the third calls for expanding “well-targeted” social spending to provide economic opportunities for disadvantaged groups.
Loan confirmed
Bangladesh Finance Minister A.H.M. Mustafa Kamal confirmed the loan, The Business Standard reported. “We are certainly grateful to the IMF for this loan. Special thanks and appreciation to the team that visited Bangladesh on this loan, including IMF Deputy Managing Director Antoinette Monsio Sayeh and Head of Mission Rahul Anand,” he said.
In November when discussions about the loan went public, Abdur Rouf Talukder, governor of Bangladesh’s central bank, said the country’s foreign exchange reserves stood at $34.3 billion, down from an all-time high of $48.06 billion in August 2021, and $46.49 billion a year previously, according to the Reuters news agency.
Bangladesh, a $416 billion economy, requested an IMF loan in July 2022, because “the heat of the global economy has affected us to some extent,” Kamal said at the time, referring to spiraling food and oil prices following Russia’s invasion of Ukraine in February.
A month later, Bangladesh hiked fuel prices by 50 percent, and diesel by 42.5 percent. In September, the country’s inflation rate hit 9.1 percent, up from 5.59 percent a year previously, according to figures from Bangladesh Bank, the central bank.