Bangladesh has officially sought $4.5 billion from the International Monetary Fund (IMF) to ride out the ongoing financial shock triggered and subsequently worsened by persisting energy and dollar crises.
The government sent a letter in this regard to IMF Managing Director Kristalina Georgieva on Sunday through the organisation's resident representative office in Bangladesh, according to people familiar with the matter. The request was made following a recent visit by IMF representatives to Bangladesh.
The letter, signed by Finance Division Secretary Fatima Yasmin, requested the IMF to begin negotiations for the loan to be used for Bangladesh's balance of payment and budgetary needs for the next three years.
Now the IMF headquarters will form a team to formally negotiate with Bangladesh, said finance ministry officials, adding that the process may take up to a year.
Bangladesh is experiencing growing economic pressure as its foreign exchange reserves continue to dwindle to cope with the impacts of global inflation resulting in hiked commodity prices following the Russian invasion of Ukraine. The local currency has slid significantly against a rising dollar while volatile energy prices have forced authorities to adopt drastic measures such as countrywide power rationing.
Bangladesh has also sought $2 billion in support from the World Bank and the Asian Development Bank in a similar fashion to tackle the financial shock.
Besides, talks are ongoing between the officials of the finance ministry and the China-led Asian Infrastructure Investment Bank (AIIB) for another $400 million in budget support. In addition, an agreement is expected to be signed with the European Union for a $99 million credit line.
According to government officials, efforts are being made to get as much budget support as possible from various organisations, including the IMF, considering the current global situation. So far, the government has secured $1.86 billion of budget support in the running fiscal year.
Meanwhile, according to people familiar with the matter, initial discussions for a large amount of budget support from the IMF began a year ago.
"The matter of getting the loan has been unofficially confirmed through informal discussions with the organisation
," said an official on condition of anonymity."It is difficult to say exactly when the negotiations will begin…There will be discussions about the terms of the loan. We have prepared for it. The discussion will begin as soon as the IMF forms their team," the official added.
Finance ministry officials said the government began attempts to get budget support since the Covid pandemic began, resulting in ensuring $7.7 billion in budget support from various agencies in the 2020-21 fiscal year. Of the loan, more than $6 billion has been released as of last June keeping the foreign exchange reserves from falling to $30-32 billion. The rest of the loan will be released in the current financial year.
Meanwhile, with its request for support from the IMF, Bangladesh has joined its South Asian neighbours Pakistan and Sri Lanka to cope with mounting pressure on their economies. The countries have been grappling to handle the galloping inflation triggered by global economic headwinds.
