- Bangladesh’s $416 billion economy has long been among the fastest-growing in the world.
- Rising energy and food costs have increased the country’s import bill and current account imbalance.
- The International Monetary Fund (IMF) will speak with Bangladesh about its request for assistance.
After Sri Lanka and Pakistan both requested loans, Bangladesh became the third nation in South Asia to do so on Wednesday, prompting the International Monetary Fund (IMF) to say that it would speak with Bangladesh about its request.
Bangladesh’s $416 billion economy has long been among the fastest-growing in the world, but the Russia-Ukraine war’s rising energy and food costs have increased the country’s import bill and current account imbalance.
According to the IMF, Bangladesh had expressed interest in the organization’s new Resilience and Sustainability Facility, which aids nations in addressing climate change concerns, and had also asked for talks to begin on an “accompanying IMF program.”
A representative for the IMF stated, “The IMF stands ready to support Bangladesh, and the staff will engage with the authorities on program design in accordance with the established norms and procedures of the Fund.”
The program design talks will include conversations about the level of assistance.
Bangladesh’s finance minister earlier in the day told reporters that the country’s macroeconomic conditions were good and that the government would only accept an IMF loan if the circumstances were favorable.
“We will accept the IMF requirements if they are favorable to the nation and consistent with our development strategy,” Minister AHM Mustafa Kamal said.
“An IMF loan request does not indicate that Bangladesh’s economy is in dire straits.”
Funds can only be used for up to $1 billion, or up to 150 percent of Bangladesh’s quota, under the IMF’s resilience and sustainability trust.
According to a report in Bangladesh’s Daily Star newspaper on Tuesday, the country requested a total of $4.5 billion from the IMF, including assistance with its budget and balance of payments.
The export-oriented clothing industry, which is the backbone of the nation’s economy, is bracing for a slowdown as important clients like Walmart are burdened with backlogs as people prioritize essentials due to inflation.
Remittances are Bangladesh’s second-largest source of foreign money after clothing, and the nation has a population of around 170 million.
As of July 20, its foreign exchange reserves were down from $45.5 billion a year earlier to $39.67 billion, or slightly over five months’ worth of imports.
Its current account deficit from July to May was $17.2 billion, up from a deficit of $2.78 billion in the same period the previous year as both its trade deficit and remittances decreased.
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