The optics look perfect. The global lender of last resort coming to the rescue of a not-too-well-endowed country struggling with the economic impact of the pandemic with no strings attached.
A couple of weeks back, Bangladesh requested for emergency funding to tackle the economic impact of the global coronavirus pandemic and the International Monetary Fund responded to that call just as swiftly, sanctioning $732 million for the country -- without any conditions.
It is the last part that seems rather surprising as it is the idea of "conditionality" that underpins almost all of the IMF's lending relationships with member states.
Whenever it lends, it insists that the borrowing government tighten its belt and exercise restraint in public spending.
This helps to achieve three objectives. One is to stabilise the public debt burden, to ensure that the resources made available are not wasted. The second is to limit the whole economy's need for foreign exchange, a shortage of which had prompted the country to seek the IMF's help in the first place.
And the third is to ensure that the IMF can get repaid. Since it does not take any physical collateral from countries to whom it is lending, the belt-tightening helps to act as a kind of collateral.
So the fact that the latest funding from the Washington-based multilateral lender comes without strings, as the official statement says, seems a rather uncharacteristic move.
But if one reads in between the lines, the assistance is not all it is cracked up to be.
The crisis lender says it will closely monitor how the country fares in promoting strong and inclusive growth while preserving macroeconomic stability once the public health crisis abates.
Key policy challenges for the country include tax revenue mobilisation, addressing the mounting default loans in the banking sector, and improving infrastructure and governance to enhance the business environment and attract foreign direct investment, the IMF said.
In other words, the lender is letting the country be off-leash -- for now.
But once normal order returns in the world, the country would be put back on the leash for the Tk 6,222 crore that is coming with next to no interest rates.
Bangladesh would get about $244 million under the Rapid Credit Facility, meaning there would be zero interest rate, and another $488 million under the Rapid Financing Instrument that has less than 1 per cent interest.
The repayment period would be 15 years with a grace period of five years, said a finance ministry official.
Normally, IMF financing is added to the country's foreign currency reserves managed by the Bangladesh Bank as it comes through in phases.
This time, the amount would arrive in one go within a few days, and the government would issue a special bond to borrow the funds from the central bank to use the money, the finance ministry official said.
The finance ministry would now sign a letter of intent with the BB to this effect.
Of the sum, Tk 3,000 crore would be used as interest rate subsidy on the loans going to the pandemic-hit micro, small, medium and large entrepreneurs, farmers and exporters.
Another Tk 2,000 crore would go to banks to cushion them from the losses from the deferred interest payment on loans for May and June.
About Tk 16,000 crore in interest was to be paid in the two months; and the borrowers would be repaying the Tk 14,000 crore over 12 months in instalments, the finance ministry official said.
The global last-resort lender will not stop here; it would make available another $700 million for the country if it needs.
"The IMF continues to monitor Bangladesh's situation closely and stands ready to provide further advice and support, if needed," it said in the press release.
Bangladesh has responded quickly to the coronavirus outbreak with a comprehensive set of measures aimed at containing the spread of the virus, providing immediate relief to the most vulnerable households and affected businesses, and preserving the country's macroeconomic prospects, said Antoinette Sayeh, deputy managing director and acting chair of the IMF.
The government has unveiled various stimulus packages amounting to $101,117 crore, which is 3.6 per cent of the country's gross domestic product, to help people, businesses, entrepreneurs, farmers, industrialists and exporters counter the impact of the pandemic.
A temporary increase in the fiscal deficit is necessary, and it will be important to ensure transparency and accountability in the use of all emergency spending, Sayeh said.
The Bangladesh Bank took appropriate steps to ease liquidity conditions and allow the financial sector to support the economy. Further easing could be considered if the economic situation deteriorates and inflation remains moderate, she said.
"A gradual increase in exchange rate flexibility should be allowed to adjust to the external shock while preserving foreign reserves."
To secure the funds from the IMF, the government would now speed up its ongoing reforms at the National Board of Revenue and in the banking sector.