IMF offers help in dealing with global recession

The International Monetary Fund (IMF) has offered Bangladesh assistance without any condition to deal with the global recession and will hold formal talks on the matter in June.
"The IMF stands ready to assist the government to steer through the challenges ahead and to lay a foundation for faster growth that raises the living standard of the population," said an IMF Aide-Memoire sent to the finance ministry on April 2.
After a four-day visit from March 30 to April 2, an IMF mission said the assistance could be given from a fund for low-income developing countries.
Prime minister's Finance and Planning Adviser Dr Mashiur Rahman told The Daily Star, "Against the background of global financial meltdown, discussions were held on the type of assistance the IMF can provide. IMF's Article-4 mission will visit Bangladesh after a few months when talks will be held on the issue."
Finance ministry sources said the Article-4 mission is likely to visit Bangladesh in June for holding formal talks with the government.
Under the new loan package, Bangladesh might get 800 million Special Drawing Rights (SDR), double the present 400 million SDR it gets against the quota. Besides, there will be no condition for releasing the money, the sources said.
However, the IMF would review the government's economic programmes and also consider the government moves in the next budget for granting the loan.
The sources said the government would have to formally ask the IMF for the assistance.
"Our foreign currency reserve is good which now stands at above $ 6 billion. Decision on seeking assistance from the IMF will be made later as the matter is still premature," Dr Mashiur Rahman said.
The IMF Aide-Memoire said, "These budgets are a critical test for the recently elected government to indicate its policy intentions for the future. The government is encouraged to take innovative policy measures to lay a foundation for long-term sustainable growth."
The government should also address implementation bottlenecks -- perhaps with help from the World Bank, ADB and other donors -- that for many years have forced under-spending of the development budget, it said.
Given the vast need for infrastructure, the government should seek to expand its fiscal resources through revenue reform -- including the broadening of the tax base and a overhaul of income tax and VAT laws -- the proceeds of which can be invested for long-term prosperity, said the Aide-Memoire.
The IMF said Bangladesh has been largely insulated from the global crisis. While there are some signs of a slowdown in economic activity, the economy seems likely to hold up in the short run.
The confluence of downside risks will likely accumulate as the fiscal year turns, making the next budget critical not only for weathering fallouts from the global financial crisis, but also for determining the course of medium-term development, it said.
There are clear signals of a likely deterioration in the near future. The global retrenchment in consumer spending is beginning to manifest itself in the decrease in garment export orders, which is likely to depress exports. The difficulty in securing new employment opportunities overseas implies not only stagnant remittance inflows down the road, which could drive the current account to deficit, but also excess labour at home, which will strain the existing social safety net, the Aide-Memoire added.