The International Monetary Fund (IMF) provisionally agreed a $4.5-billion support programme for Bangladesh, with the country’s finance minister saying the deal would help prevent economic instability escalating into a crisis.
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Bangladesh’s $416-billion economy has been one of the world’s fastest growing economy for years. But rising energy and food prices, sparked by Russia’s invasion of Ukraine, along with shrinking foreign exchange reserves, have swelled its import bill and current account deficit.
It became the third South Asian nation to secure a “staff-level agreement” with the IMF for loans this year, after Pakistan and Sri Lanka.
Bangladesh’s economic mainstay is the export-oriented garment industry, which is bracing for a slowdown as big customers like Walmart are saddled with excess stocks as inflation forces people to prioritise their spending.
The country’ foreign exchange reserves had dwindled to $35.74 billion by Nov. 2 from $46.49 billion a year ago, central bank data showed.
“The heat of the global economy has affected our economy to some extent,” Finance Minister A.H.M. Mustafa Kamal told reporters after the IMF announcement. “We requested the IMF loan as a precautionary measure to ensure that this instability does not escalate into a crisis.”
The Fund said a “staff-level agreement” had been reached for a 42-month arrangement, including about $3.2 billion from its Extended Credit Facility (ECF) and Extended Fund Facility (EFF), plus about $1.3 billion 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.
The International Monetary Fund (IMF) is an organization of 190 member countries, each of which has representation on the IMF’s executive board in proportion to its financial importance, so that the most powerful countries in the global economy have the most voting power.
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