Bangladesh seeks $4.5bn IMF loan as foreign reserves dwindle: Report | News from the International Monetary Fund
Bangladesh has applied for a $4.5 billion loan from the International Monetary Fund, according to the country’s major newspapers, joining South Asian neighbors Pakistan and Sri Lanka in asking for help to deal with the growing pressure on their economies.
Known for its large garment export industry, Bangladesh has been seeking funds for its balance of payments and fiscal needs, as well as for climate change efforts, the Daily Star reported on Tuesday, citing documents that he had seen.
He said Finance Minister AHM Mustafa Kamal wrote to IMF Managing Director Kristalina Georgieva on Sunday.
Officials from the Ministry of Finance and the IMF office in Bangladesh did not immediately respond to requests for comment.
The Bangladesh Bank recently announced a policy to preserve dollars by discouraging imports of luxury goods, fruits, non-grain foods, and canned and processed foods.
The bank’s foreign exchange reserves fell to $39.67 billion as of July 20 – enough for imports for more than five months – from $45.5 billion a year earlier.
Bangladesh’s current account deficit from July to May was $17.2 billion, down from a deficit of $2.78 billion the previous year, according to central bank data.
In the first 11 months of the fiscal year that ended June 30, imports jumped 39%, but exports rose only 34%.
Remittances from Bangladeshis abroad fell 5% in June to $1.84 billion, the central bank said, as many migrant workers lost their jobs due to the COVID-19 pandemic and many of them were unable to return home due to the travel disruptions she caused.
Economists say the Bangladeshi taka has actually slipped against the US dollar by about 20% in the past three months. The depreciation of the local currency has further weakened the country’s finances, with the current account deficit reaching $17 billion.
Authorities were grappling with a “crisis” due to rising international fuel prices after Russia’s attack on Ukraine, Deputy Planning Minister Shamsul Alam said.
“Our balance of payments is in the negative zone. We need to stabilize our exchange rate,” he said.
Alam said the government had introduced “austerity measures” in addition to power rationing, including import restrictions and development spending cuts.
Diesel-fired power plants across the country, representing a generating capacity of 1,500 megawatts, have been taken off the grid, while some gas-fired plants are also idle.
The country has seen long blackouts in recent weeks, sometimes up to 13 hours a day, as utilities struggle to get diesel and gas supplies to meet demand.
Tens of thousands of mosques across the country have been told to reduce their use of air conditioners to ease pressure on the power grid, as power shortages are compounded by currency depreciation and dwindling foreign exchange reserves.
Bangladesh’s precarious financial situation has been worsened by unprecedented floods in the northeast, inundating the homes of more than seven million people and causing nearly $10 billion in damage, according to government estimates.
The opposition Bangladesh Nationalist Party blamed the government for the crisis, accusing it of wasting money on vain multibillion-dollar projects.
Elsewhere in South Asia, Sri Lanka, facing its worst economic crisis in seven decades, is currently negotiating an IMF bailout.
The island nation has run out of foreign currency to import even its basic necessities, causing long queues at gas stations, food shortages and lengthy power cuts.
Pakistan’s foreign exchange reserves are rapidly depleting. Earlier this month, he struck a deal with the IMF that would pave the way for an additional $1.2 billion in loans to be released and unlock more funding.