IMF Announces a $4.5 Bln Bailout Deal With Bangladesh Amid Dipping Forex Reserves

Bangladesh’s Finance Minister Mustafa Kamal has said that funds under the IMF package will be disbursed in seven installments from February next year till December 2026. He further claimed that Bangladesh would pay 2.2 per cent interest rate on the IMF loan.

The International Monetary Fund (IMF) on Wednesday reached a staff-level agreement (SLA) with Bangladesh for a $3.2 billion bailout package under the Extended Fund Facility (EFF), the Washington-based lender said in a statement.

The IMF also announced a concurrent $1.3 billion Resilience and Sustainability Facility (RSF) package for the South Asian economy.

The RSF facility is geared towards helping low and middle-income countries in dealing with challenges related to climate change and pandemic preparedness.

The EFF package is subject to approval by the IMF management and the Executive Board. Once approved, funds under the facility will be disbursed to Dhaka over a period of 42 months, said the statement.

The bailout package was approved at the end of a two-week IMF mission to Bangladesh to review the economic situation and comes at a time when the country is grappling with depleting forex reserves and high inflationary pressure owing to a combination of factors, including high food and fuel prices and a strong US dollar.

Retail inflation for the month of August rose to 9.5 per cent, the highest for the month in 12 years. The worsening inflation statistics were reported after the government announced a hike in fuel prices ranging from 42 to 51 per cent.

Prime Minister Sheikh Hasina urged people to control expenditure and avoid purchases of luxurious items owing to the prevailing economic condition.

The IMF said that the EFF facility is aimed at “restoring macroeconomic stability and preventing disruptive adjustments” as well as promoting structural changes to support an inclusive and a green growth.

It said that the RSF facility is geared towards expanding the “fiscal space” to finance Dhaka’s transition towards a green economy.

According to the IMF, the key elements of the economic package include the creation of additional fiscal space through higher revenue mobilization and “rationalization of expenditure”, containing inflation through monetary policy intervention and building climate resilience.

Bangladesh has become the third South Asian country this year to avail a bailout by the IMF.

The IMF announced similar agreements with Pakistan and Sri Lanka in July and September respectively. Both the countries have been facing a balance of payments problem caused by high food and fuel prices in the wake of western countries’ sanctions against Russia over its special military operation in Ukraine.