The International Monetary Fund (IMF) has tentatively agreed to provide Bangladesh with a $4.5 billion support package. The country’s finance minister said the deal would help prevent economic instability from escalating into a crisis.
Bangladesh’s $416 billion economy has been one of the fastest growing in the world for years. But rising energy and food prices, triggered by Russia’s invasion of Ukraine and dwindling foreign exchange reserves, swelled its import bill and current account deficit.
On Wednesday, it became the third South Asian country to strike a “staff-level agreement” with the IMF for loans this year after Pakistan and Sri Lanka.
“The heat of the global economy has affected our economy to some extent,” Finance Minister AHM Mustafa Kamal told reporters after the IMF announcement. “We asked for the IMF loan as a precautionary measure to prevent this instability from degenerating into a crisis.”
“Bangladesh’s strong economic recovery from the pandemic was interrupted by Russia’s war in Ukraine, leading to a sharp widening of the current account deficit, a rapid decline in foreign exchange reserves, rising inflation and a slowdown in growth,” said Rahul Anand. He led a visit by the IMF staff mission.
The group arrived in Bangladesh late last month to iron out loan arrangements for the South Asian nation of more than 160 million people.
IMF said a “staff-level agreement” had been reached for a 42-month arrangement, including about $3.2bn from its Extended Credit Facility (ECF) and Extended Fund Facility (EFF), plus about $1.3bn from its new Resilience and Sustainability Facility (RSF).
“The objectives of Bangladesh’s new Fund-supported program are to preserve macroeconomic stability and support strong, inclusive, and green growth while protecting the vulnerable,” the lender said in a statement.
A staff-level agreement is typically subject to approval by IMF management and consideration by its executive board, which is expected in the coming weeks