IMF agrees to give $4.5b loan to BD

Staff Reporter :
Though the International Monetary Fund (IMF) has agreed to lend $4.5 billion to Bangladesh, it will be released in seven installments by 2026 on conditions.
The Finance Ministry has calculated that the interest rate would be around 2.2 per cent.
The first tranche of the loan will be $447.78 million which will be disbursed by February 2023, Finance Minister AHM Mustafa Kamal said during a press briefing in the Secretariat on Wednesday.
“The remaining six portions of the loans will be released in every six months amounting $660 million as Special Drawing Rights (SDR). IMF is sanctioning the loans in the way the government wanted. The total loan amount is $4.5 billion,” he added.
The IMF issued a press release on Wednesday saying that the IMF staff and the Bangladesh authorities have reached a staff-level agreement to support Bangladesh’s economic policies with a 42-month arrangement of about $3.2 billion under the Extended Credit Facility and the Extended Fund Facility as well as of about US$1.3 billion under the Resilience and Sustainability Facility (RSF).
The IMF confirmed the loan in its statement on the final day its two-week long mission in Bangladesh.
According to the IMF statement, 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.
A staff-level agreement means that the IMF team and the negotiating team of a sovereign country, in this case Bangladesh, are able to reach a deal on a country’s overall economic programme incorporating the loan, its disbursement schedule, and the planned reforms and policies.
This will then be presented to the IMF executive board.
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 IMF statement said.
The RSF is expected to provide affordable, long-term financing to support Bangladesh’s climate investment needs, catalyse climate financing, and reduce balance of payment pressures from import-intensive climate investment.
Finance Minister AHM Mustafa Kamal said, “interest rate of the loan will depend on the market rate at the time of maturity. The finance ministry has calculated that the rate would be around 2.2 per cent.”
“IMF has advised to reduce non-performing loans and increase revenue collection,” he added.
The Finance Minister, however, said that the international money lender did not say anything regarding government subsidies.
According to the Finance Minister, government revenue collection will be increased by strengthening the reform of the revenue system and enhancing the efficiency of tax administration.
“We have taken the initiative to set up EFD machines for VAT collection. So far 6,732 machines have been installed,” AHM Mustafa Kamal said.
He also said, 60,000 more machines will be installed in the next year and 240,000 machines will be installed in the next four years; fuel oil prices will be adjusted from time to time with the international market price, so that if the oil price falls in the international market in the future, it can be reduced in the same way in the country; the task of determining the exchange rate should be left to the market; the issue of climate change risk should be considered seriously in formulating the government’s development plan and to implement the annual development programme and to undertake development projects with that in mind; a disaster risk financing should be planned, including disaster relief and more.
Addressing the development, Rahul Anand, who is leading IMF delegation presently visiting Bangladesh, said, “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 $3.2 billion and a concurrent RSF arrangement of about $1.3 billion.”
“Bangladesh’s robust economic recovery from the pandemic has been interrupted by Russia’s war in Ukraine, leading to a sharp widening of the current account deficit, rapid decline of foreign exchange reserves, rising inflation and slowing growth,” Rahul added.
“Even as Bangladesh tackles these immediate challenges, addressing long-standing structural issues remains critical, including threats to macroeconomic stability from climate change. To successfully graduate from Least Developed Country status and to 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.
At the request of Bangladesh government, an International Monetary Fund mission led by Rahul Anand visited Dhaka from October 26 to November 9 to discuss the IMF’s support for Bangladesh and the authorities’ comprehensive economic reform agenda.