The International Monetary Fund (IMF) has announced that it will be expanding its loan programme with Bangladesh and releasing $1.3 billion in funds to support the country’s struggling economy. This decision comes as the IMF predicts a significant slowdown in Bangladesh’s export-dependent economy, with a growth rate of only 3.8 per cent projected for this year.
The lower growth rate poses a challenge for the new government led by Muhammad Yunus, who took office last year after the removal of former Prime Minister Sheikh Hasina. This growth rate would be the lowest in over two decades, excluding the Covid-19 pandemic period, according to IMF data.
IMF Bangladesh mission chief Evan Papageorgiou cited “significant macroeconomic challenges” as the reason for the increase in the loan programme by approximately $762 million. The IMF has also agreed to combine the third and fourth reviews of three separate loan programmes, unlocking around $1.3 billion for Bangladesh to continue its economic reforms.
Both the expansion of the loan programme and the combined reviews are subject to approval from the IMF’s executive board, which is expected to be a formality. A date for the board meeting on Bangladesh has not yet been announced.
Papageorgiou stressed the importance of “near-term policy tightening” to address the emerging external financing gap and support a continued decrease in inflation. He also recommended that fiscal consolidation should focus on implementing additional revenue measures, such as streamlining tax exemptions, while containing non-essential expenditures.
The agreement between the IMF and Bangladesh for the $1.3 billion payout is a crucial step in supporting the country’s economy during these challenging times. The funds will help Bangladesh address its macroeconomic challenges and continue its economic reforms to ensure sustainable growth in the future.
