Bangladesh Government Seeks $4.5b From IMF

Govt Officially Asks for $4.5b Foreign Aid From IMF

AHM Mustafa Kamal, the Finance Minister of Bangladesh, formally requested 4.5 billion dollars in foreign assistance from the International Monetary Fund. The amount has been sought as the balance of payment and to mitigate the effects of climate change on Bangladesh. Of the $4.5 billion sought, $1.5 billion would most likely be interest-free, and the remaining amount would come at an interest less than 2 percent, said finance ministry officials informed on the matter.

IMF mission is expected in September when the terms and conditions for the loan will be thrashed out. Loans from the IMF typically come with tough reform plans, which often end up being too exacting to implement for many countries. Recommendations made by the mission are implementing a fuel pricing mechanism, removing the interest rate caps on lending and borrowing, resetting the methodology to report on foreign currency reserves, increasing the revenue base, and strengthening corporate governance in the banking sector. IMF also recommends removing energy subsidies. 

Bangladesh’s need for a balance of payment or BOP support is due to the global inflation effect on the country’s economy. According to the  Bangladesh Bank data,  imports reached $81.5bn between July – May of FY 2021-2022, an increase of 39% over the previous year. So, the current account deficit has increased more than six times to $17.2 billion in the first 11 months of fiscal 2021-22.

Leave a Comment