Bangladesh and the International Monetary Fund (IMF) have reached a staff-level agreement that would see the country receive a total $4.5 billion in loan support amid global economic uncertainty due to the Russia-Ukraine war.
The 42-month agreement says that funds will be divided between the Extended Credit Facility (ECF), the Extended Fund Facility (EFF), and the Resilience and Sustainability Facility.
“The Bangladesh authorities and the IMF team have reached a staff-level agreement to support the authorities’ reform policies under a new 42-month ECF/EFF arrangement of about US$ 3.2 billion, and a concurrent RSF arrangement of about US$1.3 billion,” said Rahul Anand, who led the IMF team mission to visit Dhaka from Oct 26 to Nov 9.
During the trip, the Bangladesh authorities and the IMF discussed the government’s comprehensive economic reform agenda, reports bdnews24.com.
The fund-supported programme aims to preserve macroeconomic stability amid the disruption of the war in Ukraine, and support strong, inclusive, and green growth, while protecting the vulnerable.
It will also go to managing the macroeconomic risks posed by climate change.
“The staff-level agreement is subject to IMF management approval and Executive Board endorsement, which is expected in the coming weeks,” said Anand.
Bangladesh's 'robust' post-pandemic recovery was hampered by the war and led to a sharp widening of the current account deficit, a steep decline in foreign exchange reserves, rising inflation and slowing growth, he said.
The country is also facing a number of long-term issues such as climate change, he added.
"To successfully graduate from Least Developed Country status and achieve middle-income status by 2031, it is important to build on past successes and address structural issues to accelerate growth, attract private investment, enhance productivity, and build climate resilience," the IMF official said.
“Against this backdrop, and following initial measures to maintain macroeconomic stability, the authorities have put together a program—supported by the IMF—that is expected to bolster its external position, reduce vulnerabilities, and prepare the ground for a robust and inclusive growth pick-up by scaling up much-needed social, development and climate spending."
Some of the key elements to this plan are creating additional fiscal space, containing inflation and modernising the monetary policy framework, strengthening the financial sector, boosting growth potential, and building climate resilience.
GETTING WHAT WE ASKED FOR: KAMAL
The IMF will disburse funds under the programme in seven tranches until 2026, according to Finance Minister AHM Mustafa Kamal. The first instalment will be available in February 2023, he said at a media briefing on Wednesday.
"We are going to get the IMF loans as requested. They [the IMF] attached the necessary conditions which we ourselves initiated," he said.
The funds will come at an interest of 2.2 per cent, the minister added.