Bangladesh (Commonwealth Union)_ The International Monetary Fund announced that a preliminary deal had been reached with Bangladesh to offer a $4.5 billion bailout package to assist the nation in coping with skyrocketing energy and food prices. Bangladesh, like many other Asian countries, has been severely impacted by the pandemic as well as high inflation caused by the Russia-Ukraine conflict, leading to heated public demonstrations. As a result, the South Asian nation with over 170 million people contacted the IMF for assistance early this year.
According to the latest statement from the organization, an IMF team and Dhaka officials have entered into a staff-level agreement to support Bangladesh’s economic objectives with a total of $4.5 billion under different facilities, and that the agreement is subject to IMF management approval. Bangladesh intends to utilize the IMF loan to strengthen its foreign exchange reserves, which have fallen from $46 billion to $34 billion.
According to government data, in recent months, the Bangladeshi taka has lost almost 25 percent of its value against the US dollar, while inflation having surpassed 10 percent. However, independent experts estimate that the genuine rate is closer to 20 percent. To relieve public displeasure, the government has vowed to control the cost of numerous basic commodities, including rice, since household budgets have been severely impacted.
According to IMF team leader Rahul Anand, “Bangladesh’s robust economic recovery from the pandemic has been interrupted by Russia’s war in Ukraine, leading to a sharp widening of the current account deficit, rapid decline of foreign exchange reserves, rising inflation, and slowing growth.” He also noted that even as Bangladesh confronts these urgent challenges, tackling long-standing structural concerns, such as threats to macroeconomic stability posed by climate change, remains crucial.
Bangladesh is the third South Asian country, following Sri Lanka and Pakistan, to get a rescue package from the IMF in response to the dramatic rise in food and energy costs triggered by the Coronavirus pandemic and the worldwide inflation induced by the conflict in Eastern Europe. The loan will be given in seven installments through December 2026, with the first payment of $447.48 million being made in February 2023. Following the signing of the deal in Dhaka, Finance Minister A.H.M. Mustafa Kamal addressed the media and informed that the interest rate of the loan would depend on the market rate at the time of maturity.
