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IMF Offers Bangladesh US$987 Million Loan

Apr. 12 – The International Monetary Fund approved a three-year US$987 million loan to Bangladesh on Wednesday to help give a boost to the country’s foreign exchange reserves which have been falling recently under budget and inflationary pressures.

“Macroeconomic pressures have intensified in Bangladesh since late 2010 due to a negative terms-of-trade shock, rising oil and infrastructure-related imports, and accommodative policies,” IMF Deputy Managing Director Naoyuki Shinohara said in an e-mailed statement, according to Bloomberg. “More recently, a weakening in external demand and a surge in oil prices have further weakened Bangladesh’s balance of payments and added to fiscal and inflationary pressures.”

Under the deal, the IMF will immediately disperse US$141 million of the loan and, as part of the loan, Bangladesh has agreed to increase tax revenues and reduce subsidy costs to boost revenues. Conditions for the loan include a “restrained” monetary policy, a reduction of trade barriers and “moderate” fiscal consolidation.

The IMF had previously projected an economic growth rate of 6.1 percent for Bangladesh this financial year, however current circumstances have caused the organization to warn that growth may slow to 5.5 percent.

The loan is the largest ever offered under the IMF’s Extended Credit Facility. The facility was created to help low-income countries get access to financing and help them weather any payment issues that occur as a result of sudden shifts in global markets or currency valuations.

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