IMF approves $4.7 billion loan for bangladesh

[Black_cats]

IMF approves $4.7 billion loan for bangladesh

ECONOMY​

TBS Report
31 January, 2023, 12:05 am
Last modified: 31 January, 2023, 08:57 am

IMF approves $4.7 billion loan for bangladesh

Highlights- IMF approved Bangladesh's request for $3.3 billion under ECF and EFF arrangements, with immediate disbursement of $476 million. Bangladesh is the first Asian country to access the newly created Resilience and Sustainability Facility (RSF). IMF approved $1.4 billion for Bangladesh...

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The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo
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The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo

Highlights-

• IMF approved Bangladesh's request for $3.3 billion under ECF and EFF arrangements, with immediate disbursement of $476 million.
• Bangladesh is the first Asian country to access the newly created Resilience and Sustainability Facility (RSF).
• IMF approved $1.4 billion for Bangladesh under RSF.
• The 42-month programme aims to preserve macroeconomic stability, protect vulnerable populations and promote inclusive and green growth.
• Reforms will focus on fiscal space, financial sector, policy frameworks, and building climate resilience.

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The International Monetary Fund (IMF) approved Bangladesh's $4.7 billion loan proposal during a board meeting on Monday night (BDST).

Bangladesh will get about $3.3 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) and about $1.4 billion under the Resilience and Sustainability Facility (RSF), an IMF press release on early Tuesday said.

Besides, the Washington-based multilateral lender's ECF/EFF approval has enabled the immediate disbursement of about $476 million as the first of the seven installments slated over 42 months. The remaining amount will be in six equal instalments of $704 million each.

"The 42-month program will help preserve macroeconomic stability, protect the vulnerable, and foster inclusive and green growth. Reforms will focus on creating fiscal space to enable greater social and developmental spending; strengthening the financial sector; modernizing policy frameworks; and building climate resilience," reads the press release.

Confirming the matter to The Business Standard, Bangladesh's Finance Minister AHM Mustafa Kamal said, "We are certainly grateful to the IMF for this loan. Special thanks and appreciation to the team that visited Bangladesh on this loan, including IMF Deputy Managing Director (DMD) Antoinette Monceau Sayeh and Head of Mission Rahul Anand."

"I also express my gratitude to Bangladesh Bank Governor Abdur Rauf Talukder and Finance Department Senior Secretary Fatima Yasmin and other concerned officials of the Ministry of Finance who worked on this loan programme," he added.

The finance minister further said, "Many doubted that the IMF might not give us this loan. They thought the fundamental areas of our macroeconomy were weak, so the IMF would refrain from lending. This loan approval also proves that the fundamental areas of our macroeconomy are standing on a solid foundation and are better than many other countries."

IMF Deputy Managing Director (DMD) Antoinette Monceau Sayeh said, "While confronting challenges resulting from the global headwinds, the authorities (Bangladesh) need to accelerate their ambitious reform agenda to achieve a more resilient, inclusive, and sustainable growth. In this regard, substantial investment in human capital and infrastructure will be needed to achieve Bangladesh's aspiration to reach upper-middle income status by 2031 and meet the Sustainable Development Goals (SDGs)."

The ECF/EFF arrangement will protect macroeconomic stability and rebuild buffers while helping to advance the authorities' reform agenda, she observed.

According to Sayeh, the implementation of the domestic revenue mobilization strategy that relies on both tax policy and revenue administration reforms will allow increasing social, development and climate spending sustainably while fiscal reforms to strengthen the management of public finance, investment, and debt will improve spending efficiency, governance, and transparency.

"Reducing financial sector vulnerabilities, strengthening oversight, enhancing governance and the regulatory framework, and developing capital markets will help mobilize financing to support growth objectives," she further added.

In regards to the country's robust economic recovery, the DMD advised structural reforms to create a conducive environment to expand trade and foreign direct investment, deepening the financial sector, developing human capital, and improving governance to enhance the business climate are needed to lift growth potential.

Mentioning Covid-19 pandemic and subsequent Russia-Ukraine war among the multiple shocks that have interrupted the economic performance making macroeconomic management challenging in the country, Sayeh said, "The authorities recognise these challenges and also the need to tackle climate change issues, which expose the economy to large risks that could threaten macroeconomic stability."

With the approval of a $1.4 billion loan under the Resilience and Sustainability Facility (RSF), Bangladesh became the first country in Asia to receive a loan from the fund created for low and middle-income countries that are at risk due to climate change.

IMF said, "The authorities (Bangladesh) recognise that in addition to tackling these immediate challenges, long-standing structural issues and vulnerabilities related to climate change will also need to be addressed to accelerate growth, attract private investment, enhance productivity, and build climate resilience."

"The concurrent RSF arrangement will supplement the resources made available under the ECF/EFF to expand the fiscal space to finance climate investment priorities identified in the authorities' plans, help catalyze additional financing, and build resilience against long-term climate risks," it added.

Earlier, the first country in the world to receive this IMF loan was Barbados, followed by Costa Rica and Rwanda, after IMF executive board approved the fund on 13 April 2022 and it became effective on 1 May 2022.

According to finance ministry officials, the Bangladesh government has pledged to reduce corruption in the country as a condition for the loan amid the forex crunch. The ministry has made the commitment in the Memorandum of Economic and Financial Policy signed with the Wasington-based lender.

In addition to reducing corruption, there are about 30 conditions in the loan agreement, including dynamic adjustment of fuel prices, bringing down the default loan of state-owned banks to 10%, setting up asset management companies to recover defaulted loans, and leaving the exchange rate to the market, according to the officials.

However, the set of conditions does not incorporate lifting the interest rate cap on bank lending and deposits, they confirmed.

Finance ministry officials further said gas and electricity prices have already been hiked as part of IMF's conditions for reducing subsidies.

The agency stipulated that monetary policy announcements should be made four times a year, while Bangladesh has agreed to three announcements per year. And as part of that, the Bangladesh Bank announced a monetary policy in January this year.

The central bank has promised a market-based exchange rate in the new monetary policy as per the IMF terms. The size of the Export Development Fund (EDF) has also been decided to be reduced by $1 billion.

Apart from this, the IMF has set conditions for separating the allocation of interest on savings certificates and pensions of government employees from the social safety net allocation, which the Finance Division may implement in the next fiscal year.

Finance ministry officials said that the government had no obligation to fulfill any condition before the first installment.

An IMF team led by Rahul Anand visited Dhaka from 26 October to 9 November 2022, to thrash out the details of the programme.

After that the IMF's vice president, Antoinette Monsio Sayeh, visited Bangladesh from 14-18 January and praised the economic development and social progress she witnessed during her visit, saying it has left an impression on the whole world. Sayeh also congratulated Prime Minister Sheikh Hasina on that.

 

[pikkuboss]

Is this some kind of achievement for Bangladesh? Congrats for the achievement!

 

[Skull and Bones]

Congratulations

 

[Indos]

Is this some kind of achievement for Bangladesh? Congrats for the achievement!

This will help their currency strength

Just needs some months from now, global financial situation will be easing. This IMF loan is needed at the moment

 

[SEOminati]

This will help their currency strength

Just needs some months from now, global financial situation will be easing. This IMF loan is needed at the moment

It won't. Not that I don't want to see them suffer but which country after going to IMF prosper?

Also, was it absolutely necessary? when we're been given examples of look how Bangladesh is prospering.

 

[Indos]

It won't. Not that I don't want to see them suffer but which country after going to IMF prosper?

Also, was it absolutely necessary? when we're been given examples of look how Bangladesh is prospering.

Many countries get financial difficulties because the combination of problems of The Fed tightening policy and higher energy prices.

Energy prices have been moderating and The Fed policy will be tamed down as US inflation data shows inflation has already been going down so the expectation is that The Fed will slow its interest rate hike that will ease the pressure felt by many Currencies, including BD Taka

In other word, the storm is almost over

For many Currencies, it is The Fed tightening policy that become major problem, not higher energy prices

 

[pikkuboss]

Many countries get financial difficulties because the combination of problems of The Fed tightening policy and higher energy prices.

Energy prices have been moderating and The Fed policy will be tamed down as US inflation data shows inflation has already been going down so the expectation is that The Fed will slow its interest rate hike that will ease the pressure felt by many Currencies, including BD Taka

In other word, the storm is almost over

For many Currencies, it is The Fed tightening policy that become major problem, not higher energy prices

Fed will hike rate tomorrow itself. Watch out for tomorrow.

 

[SEOminati]

Many countries get financial difficulties because the combination of problems of The Fed tightening policy and higher energy prices.

Energy prices have been moderating and The Fed policy will be tamed down as US inflation data shows inflation has already been going down so the expectation is that The Fed will slow its interest rate hike that will ease the pressure felt by many Currencies, including BD Taka

In other word, the storm is almost over

For many Currencies, it is The Fed tightening policy that become major problem, not higher energy prices

I am never going to buy that. At least Muslim countries should stay away from anything based on interest. It's a war against "our creator". We run to yahoods asking them for money from which we burden ourselves and they keep earning more. What a vicious circle we're in.

 

[epebble]

Is this some kind of achievement for Bangladesh? Congrats for the achievement!

Yes. Read the subtext. A smaller country got $4.7 billion without the hand-to-hand combat that Pakistan had to indulge in for $1.2 billion. Moral of the story: when the bookkeeping is good, IMF behaves like a 'normal' bank. When bookkeeping is bad, it behaves like the Income Tax department. Innocent-till-proven guilty vs. Guilty till proven innocent.

 

[Indos]

I am never going to buy that. At least Muslim countries should stay away from anything based on interest. It's a war against "our creator". We run to yahoods asking them for money from which we burden ourselves and they keep earning more. What a vicious circle we're in.

Interest in Quran verses, IMO, is not really related to current Banking System.

Riba, in Quran, IMO, is more like you as individual lend money to your family and put interest on it.

Banking system is different, Bank doesnt own the money, they are just intermediary, and the interest is needed to make folk like you put the money on the bank and the bank interest is needed to make the business profitable. Banking system circulate the money and make you can own houses without the need to wait for many years, banking system will make entrepreneurs can build factory using money put on the banks by general public. Bank will make money is safer as well compared to put it on our own houses

Just see the Quran verses about Khidir and Prophet Musa, where Khidir violates many Shariah Law but is regarded as right by God because the end result will give good impact.

Muslim nations without Banking System will make the economy not growing faster. What happen if Muslim nations economy is weak ? You have the chance to be invaded and under Indian Modi regime (just example)

 

[pikkuboss]

Yes. Read the subtext. A smaller country got $4.7 billion without the hand-to-hand combat that Pakistan had to indulge in for $1.2 billion. Moral of the story: when the bookkeeping is good, IMF behaves like a 'normal' bank. When bookkeeping is bad, it behaves like the Income Tax department. Innocent-till-proven guilty vs. Guilty till proven innocent.

Great! I wonder if IMF would do the same if India asks for a loan. We wouldn't know until India asks for the same but I am curious.

 

[epebble]

Great! I wonder if IMF would do the same if India asks for a loan. We wouldn't know until India asks for the same but I am curious.

Not knowing a lot about the innards of Indian economy, I will use the Blackbox approach: Since India has not taken IMF loan for over 30 years, if a crisis arises, it will be helped favorably. Because I don't need new credit cards, I get solicitations every week. Banks are always keen to lend to people who don't need to borrow and shy about lending to people who must borrow.

 

[UKBengali]

It won't. Not that I don't want to see them suffer but which country after going to IMF prosper?

Also, was it absolutely necessary? when we're been given examples of look how Bangladesh is prospering.

You have a point but BD economy is no longer in any danger.

When the government approached IMF months ago, this was not clear then. I am not sure whether it was really possible for BD government to cancel at this late stage of the negotiations.

BD economy may power ahead at 8% GDP growth this fiscal as imports are down, exports/remittances up and the domestic economy is very healthy.

 

[bluesky]

Bangladesh secures $4.7 bln from IMF as other South Asian countries see delays

The International Monetary Fund (IMF) has approved loans of $4.7 billion to Bangladesh for disbursal starting immediately, making it the first to secure such funds out of three South Asian countries that applied last year amid economic trouble.

www.reuters.com

 

[bluesky]

I am never going to buy that. At least Muslim countries should stay away from anything based on interest. It's a war against "our creator". We run to yahoods asking them for money from which we burden ourselves and they keep earning more. What a vicious circle we're in.

Usury charged mostly at the personal level was dominant even during the first half of the last century.

Bank interest is certainly different from Usury.