2nd tranche of $690m loan: IMF recommends for cautious monetary policy, flexible exchange rate

Staff Reporter :
The International Monetary Fund (IMF) has suggested the government for taking a cautious monetary policy, flexible fiscal policy for exchange rate and increasing resilience to avert external shocks while releasing its second tranche of $690 million of a $4.7 billion loan for Bangladesh.

The global lender recommended for the cautious monetary policy to restore macroeconomic stability in the short term.

It also said that a more flexible fiscal policy in the currency exchange rate will be supportive for the monetary policy.

IMF also appreciated the Bangladesh Bank’s recent initiative to modernise the monetary policy framework further.

“If the monetary policy is modern, it will tame inflation and strengthen central bank’s policy efforts in various areas,” the IMF said in a statement.

The IMF insisted on more flexibility gradually, praising the BB’s move to adopt a single exchange rate. “It is necessary to deal with external shocks in the economy,” said the IMF.

However, among the $690 million, nearly $468.3 million will be given under the ECF/EFF arrangement and $221.5 million under the RSF arrangement.

The ECF/EFF and RSF arrangements count $4.7 billion for Bangladesh, approved by the executive board on 30 January. The first tranche count of $476 million was made available in February this year.

“The ECF/EFF arrangement has helped restore macroeconomic stability and prevent disruptive adjustments to protect the vulnerable while laying the foundations for strong, inclusive, and environmentally sustainable growth,” the IMF said in a press statement on Wednesday.

The concurrent RSF arrangement supplemented the resources made available under the ECF/EFF.

The IMF said this fund will help catalyse additional financing and build resilience against long-term climate risks.