The International Monetary Fund (IMF) on Tuesday approved the second tranche of $4.7 billion loans, amounting to US $689.8 million, for Bangladesh.
At the same time, the IMF executive board called the Bangladesh authority for “a calibrated monetary policy tightening, supported by a neutral fiscal stance, and for greater exchange rate flexibility to restore near-term macroeconomic stability and bolster external resilience” restore near-term macroeconomic stability.
Of the $689.8 million, nearly $468.3 million will be given under the ECF/EFF arrangement and $221.5 million under the RSF arrangement.
The ECF/EFF and RSF arrangements totalling $4.7 billion for Bangladesh were approved by the executive board on January 30, 2023, and the first tranche totalling $476 million was made available on February 2022.
“The ECF/EFF arrangement has helped preserve macroeconomic stability and prevent disruptive adjustments to protect the vulnerable while laying the foundations for strong, inclusive, and environmentally sustainable growth,” the IMF said in a release early on Wednesday.
The concurrent RSF arrangement has supplemented the resources made available under the ECF/EFF to expand the fiscal space to finance climate investment priorities identified in the authorities’ plans, help catalyze additional financing, and build resilience against long-term climate risks, it said.
“Bangladesh economy has been buffeted by multiple shocks,” the lender Aid adding the spillovers from Russia’s war in Ukraine and global monetary tightening have interrupted a strong post-pandemic recovery, with real GDP growth slowing to 6.0 per cent in FY23 and headline inflation reaching a decade high of 9.9 per cent year-on-year in August 2023.
Due to strict import compression, the current account (CA) deficit narrowed considerably (¾ per cent of GDP in FY23 compared to 4.1 per cent of GDP in FY22).
“However, an unprecedented reversal of financial account, driven by global uncertainties and inadequate policy response, has kept FX (forex) reserves and the Taka under pressure,” noted the lender.
Antoinette Sayeh, Deputy Managing Director and Acting Chair of the IMF executive board said 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.”
“Near-term policies should continue to focus on containing inflation and rebuilding external resilience,” she underscored.
“Raising tax revenues and rationalizing expenditures will allow increasing social, developmental, and climate-related spending’ added the deputy managing director.
syful-islam@outlook.com