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Budget deficit financing: Country turns again to IMF after a decade

bluesky

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Budget deficit financing​

Country turns again to IMF after a decade​

FHM HUMAYAN KABIR | Published: June 28, 2022 08:09:55 | Updated: June 28, 2022 18:26:49

Country turns again to IMF after a decade

After the lapse of a decade, Bangladesh is likely to borrow funds from the International Monetary Fund (IMF) to narrow its budget deficit, seen as a bit high in current context.

Ministry of Finance (MoF) officials said Monday they had opened negotiations with the Washington-based lender on the potential budgetary support.

"We had a meeting with IMF Dhaka office on Monday. The IMF has offered us the budgetary credit support to help minimise the budget deficit," a senior MoF official said.

The IMF recently offered the policy-support credit meant for financing the deficit of the total Tk 6.78-trillion budget in the upcoming fiscal year (FY) 2022-23.

The multilateral funding agency had last confirmed $987 million worth of budget support, titled Extended Credit Facility (ECF), in April 2012 to help restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth.
Back then, Bangladesh was hit hard by a global financial meltdown that started in 2007.

A senior MoF official says since Bangladesh has also been affected by the Covid-19 pandemic and the recent global price push amid Russia-Ukraine war, "we are trying to explore the budget-support facility from the IMF".

"The amount of the loan has yet to be confirmed. But we are hopeful of getting more than $1.0 billion from the IMF," he told the FE.

"We started meeting with the Washington-based lender Monday. Some few other meetings will be held in the coming days before finalising the loan," says another MoF official.

The IMF Resident Representative in Bangladesh, Jayendu De, high officials from Finance Division, Economic Relations Division (ERD) and Financial Institutions Division were present at the talks.

The lender informed Bangladesh that the country could avail up to $6.8 billion worth of loans in next few years, if the need arises so, the official adds.

The government will analyse detailed offers of the IMF with the country's financial health, he further says. "We will also calculate the repayment cycles and its pressure on government's fiscal and monetary situation amid the internal and global situations," he adds.

Besides, the government will analyse IMF's proposed terms and conditions regarding different kinds of reforms tagged to the credit facility.

The IMF has introduced short-maturity loans under the nomenclatures of Resilience and Sustainability Facility (RSF), Extended Fund Facilities (EFF) and Extended Credit Facility (ECF).
The Fund has offered the RSF as it wants to help Bangladesh in the area of climate-change impact.

The RSF arrangements have a 20-year maturity and a 10.5-year grace period during which no principal is required to be repaid.
Borrower country will have to pay nearly 1.539 per cent of interest (SDRi+75 basis points) and a 0.25-percent service charge for receiving the IMF loan.

Meanwhile, the government is also searching for several other credit facilities from the World Bank, the Asian Development Bank and from some other lenders for minimising the budget deficit in the coming days.

kabirhumayan10@gmail.com
 

bluesky

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The government is again borrowing from the IMF to cope with the reserve pressure
Ittefaq report
Published: 29 June 2022, 00:11

The government is again approaching the International Monetary Fund (IMF) to ease the pressure on foreign exchange. Preliminary discussions have already started. With the decline in remittances, the reserve has come under pressure due to abnormal increase in import expenditure.

The effect of this is to reduce the value of money against the dollar in stages, but the instability is not cutting. Bangladesh Bank's foreign exchange reserves have now come down to 41.8 billion or 4,180 crore dollars. The foreign exchange reserves in the corona rose to record highs last year. But later this trend is coming down.

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With the current reserves, it is possible to cover the cost of imports for 5 to 5 and a half months. According to analysts, the lack of reserves to meet at least three months of import obligations remains a concern. Finance ministry officials say Bangladesh is not at a critical stage right now. However, as part of the precaution, the IMF is considering borrowing.

An IMF delegation is scheduled to visit Dhaka next month. It is learned that the issue of taking new loan will be discussed at that time.

In October last year, the IMF announced a আর 750 billion SDR (Special Doing Rights) for 190 member countries to address the global coronary crisis. Of which 3 billion dollars was allocated for Bangladesh. But the government did not take SDR at that time.

Because at that time the amount of reserves in Bangladesh was at a record high. Due to low import demand and record remittances, the country's foreign exchange reserves exceeded ৬ 46 billion. But after the Corona situation began to return to normal, a new crisis began. Fuel oil prices have risen sharply since the Ukraine war. The prices of daily commodities have risen at an unusual rate all over the world. As a result, the import cost of Bangladesh is also increasing. On the other hand, remittance flow is declining. As a result, the pressure on the reserve has increased.

Meanwhile, Bangladesh will have to pay ২ 2 billion to the Asian Clearing Union next week. As a result, foreign exchange reserves will fall below বিল 40 billion. Considering the overall situation, the finance ministry is considering taking a loan from the IMF, a source said.

However, the next decision on the loan depends a lot on the conditions given by the IMF. Last time, when the IMF proposed the loan, it included 33 conditions, all of which the government did not agree with. Therefore, the issue of borrowing has not progressed. The IMF has always suggested reducing budget subsidies.

Moreover, there is a condition to reduce the interest rate on savings certificates and reduce the defaulted loans in the banking sector.
 

PadmaBridge

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hahahaha @UKBengali where is Walton ? Once a bhikhari always a bhikhari.

Says the guy from a country that couldn’t even supply oxygen to its dying or firewood to burn its dead!

Your people threw dead bodies into rivers from bridges.

Millions died from covid.

Millions remain toilet-less!

Your rivers have floating sewage - Ram tere ganga smelly!


These are extraordinary times.

Every country is borrowing to fill budgetary gaps.

Raising taxes at this time will be suicidal.

It would be stupid to not take advantage of low interest loans.
 

UKBengali

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Says the guy from a country that couldn’t even supply oxygen to its dying or firewood to burn its dead!

Your people threw dead bodies into rivers from bridges.

Millions died from covid.

Millions remain toilet-less!

Your rivers have floating sewage - Ram tere ganga smelly!



These are extraordinary times.

Every country is borrowing to fill budgetary gaps.

Raising taxes at this time will be suicidal.

It would be stupid to not take advantage of low interest loans.



Just another troll who has been added to my ignore list.

This one is new and so could be another one of nilgiris reincarnations.

Looks like his *** is on fire with the "Asian Tiger Economy" thread I created.:flame:
 

bluesky

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Bol liya bhosidi k. Who was crying for Covishield ? We gifted you in millions under Maitri Program without any cost par your randirona never stops.. First you had issues with Pakistan then you started making underwears and started thinking of yourself as first world country whereas Myanmar don't give you a ****. Chotte mote kaale maachkhor bhag jaate hai post chorr kar.
What underwear you are talking here? Our textile exports this year will overtop $50 billion. How about your Hindia?

Now, you will be begging BD to allow your freight trains to run over the Padma Bridge that we built with our own money.

India remains a shame to the world. With our economic prowess, India will get segregated by the force of our development.
 
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Protest_again

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Budget deficit financing​

Country turns again to IMF after a decade​

FHM HUMAYAN KABIR | Published: June 28, 2022 08:09:55 | Updated: June 28, 2022 18:26:49

Country turns again to IMF after a decade

After the lapse of a decade, Bangladesh is likely to borrow funds from the International Monetary Fund (IMF) to narrow its budget deficit, seen as a bit high in current context.

Ministry of Finance (MoF) officials said Monday they had opened negotiations with the Washington-based lender on the potential budgetary support.

"We had a meeting with IMF Dhaka office on Monday. The IMF has offered us the budgetary credit support to help minimise the budget deficit," a senior MoF official said.

The IMF recently offered the policy-support credit meant for financing the deficit of the total Tk 6.78-trillion budget in the upcoming fiscal year (FY) 2022-23.

The multilateral funding agency had last confirmed $987 million worth of budget support, titled Extended Credit Facility (ECF), in April 2012 to help restore macroeconomic stability, strengthen the external position, and engender higher, more inclusive growth.
Back then, Bangladesh was hit hard by a global financial meltdown that started in 2007.

A senior MoF official says since Bangladesh has also been affected by the Covid-19 pandemic and the recent global price push amid Russia-Ukraine war, "we are trying to explore the budget-support facility from the IMF".

"The amount of the loan has yet to be confirmed. But we are hopeful of getting more than $1.0 billion from the IMF," he told the FE.

"We started meeting with the Washington-based lender Monday. Some few other meetings will be held in the coming days before finalising the loan," says another MoF official.

The IMF Resident Representative in Bangladesh, Jayendu De, high officials from Finance Division, Economic Relations Division (ERD) and Financial Institutions Division were present at the talks.

The lender informed Bangladesh that the country could avail up to $6.8 billion worth of loans in next few years, if the need arises so, the official adds.

The government will analyse detailed offers of the IMF with the country's financial health, he further says. "We will also calculate the repayment cycles and its pressure on government's fiscal and monetary situation amid the internal and global situations," he adds.

Besides, the government will analyse IMF's proposed terms and conditions regarding different kinds of reforms tagged to the credit facility.

The IMF has introduced short-maturity loans under the nomenclatures of Resilience and Sustainability Facility (RSF), Extended Fund Facilities (EFF) and Extended Credit Facility (ECF).
The Fund has offered the RSF as it wants to help Bangladesh in the area of climate-change impact.

The RSF arrangements have a 20-year maturity and a 10.5-year grace period during which no principal is required to be repaid.
Borrower country will have to pay nearly 1.539 per cent of interest (SDRi+75 basis points) and a 0.25-percent service charge for receiving the IMF loan.

Meanwhile, the government is also searching for several other credit facilities from the World Bank, the Asian Development Bank and from some other lenders for minimising the budget deficit in the coming days.

kabirhumayan10@gmail.com
Revenues are very low. And for past 3-4 fiscals, BD has been putting up budgets of over $6 trillion, never to actually achieve the said goal, always falling short of BE of revenue. Even the next fiscal revenue estimates are unlikely to be achieved. All hype no substance.

India is also still borrowing from IMF right until this day ?
Lol. INDIA doesn't borrow to finance budget deficits. Infact last fiscal India's revenue was 30% more than budget estimates. Unlike Bangladesh which for hype overestimate their budget, we keep our budgets realistic.
 

Sliver

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India is also still borrowing from IMF right until this day ?
India borrowed SDR 3.9 billion during the period 1981-84. Again during 1991 to 1993, India borrowed an amount of SDR 3.56 billion (SDR 1351.98 million under the Compensatory and Contingency Financing Facility and SDR 2207.925 million under Standby Arrangement). Repayment of all the loans taken from International Monetary Fund has been completed on May 31, 2000. India is now a contributor to the IMF.

it is smart of BD to go to IMF during this time and not under duress. you get better terms when you are planning for a year or two into the future.
 

Indos

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India borrowed SDR 3.9 billion during the period 1981-84. Again during 1991 to 1993, India borrowed an amount of SDR 3.56 billion (SDR 1351.98 million under the Compensatory and Contingency Financing Facility and SDR 2207.925 million under Standby Arrangement). Repayment of all the loans taken from International Monetary Fund has been completed on May 31, 2000. India is now a contributor to the IMF.

it is smart of BD to go to IMF during this time and not under duress. you get better terms when you are planning for a year or two into the future.

How much loan India take from IMF?


Long-term debt
S. No.Component of Long-term debtDebt (US$ billion) March 2021
1Multilateral69.7
2Bilateral31.0
3IMF loans5.6
 

Indos

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Lol. INDIA doesn't borrow to finance budget deficits. Infact last fiscal India's revenue was 30% more than budget estimates. Unlike Bangladesh which for hype overestimate their budget, we keep our budgets realistic.

LOL so how come you finance your budget deficit if not by borrowing ? India Budget deficit normally around 6 % of GDP ( excluding pandemic year since in pandemic it will be even greater).

Usual countries with strong economy borrow money by issuing bonds, some of them in USD and some in local currency.

------------------------------------------

Budget estimate is already calculating how much the bond issuance will be
 

Sliver

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Protest_again

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LOL so how come you finance your budget deficit if not by borrowing ? India Budget deficit normally around 6 % of GDP ( excluding pandemic year since in pandemic it will be even greater).

Usual countries with strong economy borrow money by issuing bonds, some of them in USD and some in local currency.

------------------------------------------

Budget estimate is already calculating how much the bond issuance will be
I don't know why you want to indulge in things you don't understand. INDIA'S budget deficit is financed through rupee bonds and through banking, we don't take loans from external sources to cover budget deficit.
 
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