Govt to ask IMF for 4.5b loan assistance

A Bangladesh delegation will discuss a $4.5 billion loan with International Monetary Fund officials in Washington next week.

The delegation led by Bangladesh Bank Governor Abdur Rouf Talukder is scheduled to leave for Washington on Sunday.

The delegation has plans to hold a number of meetings with the IMF officials on the sidelines of the World Bank and IMF's annual meetings from October 10 to October 16, said officials at Bangladesh Bank and finance ministry.

The first meeting will be held with Rahul Anand, chief of IMF Asia and Pacific Division, and his team on October 11. There will be another meeting with IMF Deputy Managing Director Antoinette M Sayeh the same day, the sources said.

There will also be meetings with different IMF teams on October 13 in Washington, sources said.

The conditions for the loan will be discussed when Rahul Anand visits Dhaka at the end of this month.

During the visit, the IMF team will meet Finance Minister AHM Mustafa Kamal.

Once the agreement is reached, which usually takes a few months, the loan programme will be sent to the IMF executive board. Disbursements are made after the board approves the programme.

The IMF's standard practice is to work closely with the authorities to come up with a programme that is most relevant to the borrowing country's economic and social dynamics.

Bangladesh's economy was still recovering from the losses of the pandemic when the Russia-Ukraine war began in February, disrupting global supply chains and eventually causing inflation in many countries including Bangladesh.

Uncertainties over the forex reserve also became a major concern.

On August 4, the country's foreign exchange reserve was around $36 billion, down from around $46 billion at the same time last year.

The IMF's standard practice is to work closely with the authorities to come up with a programme that is most relevant to that country's economic and social dynamics.

The $4.5 billion loan to be discussed next week will be a three-year reform programme, the sources said.

Of the amount, $1.5 billion is likely to be disbursed this year if the talks bring positive outcomes.

The reasons why the fund is being sought include the country's climate financing needs and to cushion the impact of war in Ukraine.

Part of it will come from IMF's newly created Resilience and Sustainability Trust. Loans from RST come with a 20-year maturity and a ten-and-a-half-years grace period. The IMF has come up with a three-tier interest rate structure based on the country's income.

Bangladesh can get up to $1.5 billion from the RST, which targets specific areas within the mandate of the IMF.

The government's request for a fund programme will ease the financing constraints and allow for advancing the efforts to manage fiscal, monetary and financial stability risks in light of climate change and recent global developments.

Sources said the Bangladesh delegation will also meet Martin Raiser, World Bank vice president for South Asia, next week to discuss a $500 million loan.

The delegation is also likely to discuss a $1 billion loan from the World Bank.

Bangladesh is expected to get more than $3 billion from the World Bank, IMF and other lenders this fiscal year.