The Financial Express

Stress on BoP likely to continue

An IMF spokesperson tells media, hails Bangladesh's preemptive decision to seek loans

| Updated: August 21, 2022 21:10:12

- Picture used for illustrative purpose - Picture used for illustrative purpose

The ongoing pressure on Bangladesh's balance of payments (BoP) is likely to continue in the coming years due to uncertainties surrounding global developments, an IMF spokesperson warned on Tuesday.

He, however, hailed the pre-emptive decision taken by Bangladesh to seek loans from the International Monetary Fund (IMF).

He said Bangladesh is not in a crisis to seek bailout, but this is an opportune moment that the government has preemptively asked for the IMF's support to meet its large climate financing needs through the newly created RST.

The IMF-supported programme will help cushion the impact of the war in Ukraine on the economy, bolster external positions, and be prepared to deal with any further deterioration in external conditions, said the IMF official.

In response to a perception that Bangladesh has increased the prices of fuel oils and fertiliser to comply with an IMF's condition imposed against the loans, he said the IMF is yet to begin discussion on the proposed loans and thus did not put forward any reform measure.

"We haven't started any negotiations with the authorities on the design of the programme. We'll be working very closely with the authorities to come up with a programme that is most relevant to Bangladesh's economic and social dynamics," said the official. He added: "The timing of the mission is yet to be set, but we expect it to take place sometime after the IMF/World Bank annual meetings in October."

The finance ministry officials said that during last month's annual staff mission, the IMF team made some observations after reviewing the country's macroeconomic conditions.

The lender, officials said, suggested implementing a fuel oil-pricing mechanism, changing the method of calculating foreign exchange reserves, and strengthening governance in the banking sector, among others.

Bangladesh expects US$4.5 billion in loans from the IMF as budgetary support, owing to the higher import payments and lower inflow of foreign currency in the recent months.

Finance Minister AHM Mustafa Kamal recently told a foreign media outlet that he was expecting the first instalment of $1.5 billion from the total package.

Bangladesh's forex reserves now stand over $39 billion, declining from $45 billion a year ago, raising concern among the government high-ups, economists, and experts.

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