Bangladesh hopes to get $5.5 billion from the International Monetary Fund and the World Bank in budget support, which will help the country shore up its depleting foreign currency reserves.
“We believe that if we get the loans, our dollar crisis will be over,” Bangladesh Bank Governor Abdur Rouf Talukder told reporters in Washington DC on Saturday after a series of meetings with officials from the two multilateral lenders. .
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Dhaka has asked lenders for the funds to better manage fiscal, monetary and financial stability risks amid the Russian-Ukrainian war and also to address climate challenges.
The BB Governor said there had been talks to secure loans of $4.5 billion from the IMF and $1 billion from the World Bank as budget support.
“According to our quota, we can take $7 billion from the IMF. But we plan to take $4.5 billion and have discussed it with IMF officials,” Rouf said.
He further said that the loan was sought from the IMF’s Resilience and Sustainability Trust Fund (RST), which was recently established to help countries build resilience to external shocks and ensure sustainable growth.
“IMF guidelines, however, state that if you request loans from one of its components, you should also take funds from its other components,” he said, adding that Bangladesh had also requested loans. loans from the IMF’s Extended Credit Facility (ECF) and Extended Financing Facility (EFF).
The BB governor said they had also held talks with the World Bank to secure a $1bn loan – $250m from the Development Policy Credit (DPC) and $750m from the fund. Inclusive Green and Resilient Development (GRID) program from the global lender – as budget support.
He said the advantage of a budget support fund is that it is easier to obtain. “That’s why we preferred this fund.”
On the country’s balance of payments (BoP), the governor said pressure on the current account balance has eased over the past three months, with combined remittances and export earnings equal to import invoices during the period.
According to Investopedia, the current account balance is part of a country’s financial inflows and outflows. This is part of the BoP, the record of all transactions made between one country and another.
Rouf said pressure on the current account balance would ease further once payments from outstanding LCs (letters of credit) were made.
“I think the pressure on foreign currency reserves would be gone after November-December, provided the economy doesn’t experience any more global shocks,” he said.
Bangladesh’s foreign exchange reserve has been strained since the start of the Russian-Ukrainian war in February as the import bill soared due to rising commodity prices, particularly food, fuel and fertilizers on the international market.
As of October 12, the reserve stood at $36.33 billion, compared to $41.82 billion as of June 30 this year. It was $46.13 billion on October 12 last year, according to BB data.
At a press conference in Washington DC on Friday, Anne-Marie Gulde-Wolf, deputy director of the IMF’s Asia and Pacific department, said she would send a team to Bangladesh next week to discuss the IMF’s loan request. country.
“We have also seen the taka depreciate by around 20 percent. Reserves have declined,” she said, adding that reserves were still at a comfortable level but had been on a downward trend.
“So with that, we are pleased that the authorities have been proactive in engaging with the IMF in discussing an economic program that will contain measures to stabilize the economy and avoid a further downturn in the economy,” she noted.
Seeking anonymity, a finance ministry official told the Daily Star yesterday that an IMF delegation will arrive in Dhaka on October 26.