IMF team to visit Bangladesh this week to discuss USD 4.5b loan request

[Black_cats]

IMF team to visit Bangladesh this week to discuss USD 4.5b loan request​

United News of Bangladesh . Dhaka | Published: 20:01, Oct 16,2022 | Updated: 20:38, Oct 16,2022

A delegation from the International Monetary Fund will arrive in Dhaka this week to start negotiations on Bangladesh’s request for a US $4.5 billion loan as budgetary support, officials said on Sunday.

The team from the Washington-based lending agency is likely to be led by Rahul Anand, chief of IMF Asia and Pacific Division, said the sources at Bangladesh Bank speaking on condition of anonymity.

Bangladesh Bank governor Abdur Rouf, now in Washington, held separate discussions with Anand and IMF deputy managing director Antoinette M Sayeh on Bangladesh’s loan request.

The central bank governor attended the IMF annual meeting in Washington on October 10-16.

According to the sources the IMF has assured Bangladesh of leading up to US $4.5 billion.

Related Coverage:​

• › Bangladesh forex reserve falls to $36.33 billion
• › Lending decision on Bangladesh in October, says IMF

The IMF team during its upcoming visit will focus their negotiations on conditions for the loan and financial reforms. The sources said that an agreement is likely to be inked on the programme which will then be sent to the IMF executive board for approval. Disbursement of money starts only after the approval.

The team will meet finance minister AHM Mustafa Kamal during the visit.

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.

The IMF loan will help Bangladesh ease the forex crisis created due to external effects from the Covid pandemic and the Russia-Ukraine war.

IMF team to visit Bangladesh this week to discuss USD 4.5b loan request

A delegation from the International Monetary Fund will arrive in Dhaka this week to start negotiations on Bangladesh’s request for a US $4.5 billion loan as budgetary support, officials said on Sunday....

www.newagebd.net

 

[epebble]

What is this? BD has $36 Billion reserves and needs IMF? I don't understand. Pakistan's finance minister says they have no problem and they have less than $8 billion.

Pakistan's Forex Reserves Fallen to their Lowest Level in 3 Years​

Pakistan's Forex Reserves Fallen to their Lowest Level in 3 Years

By IndraStra Global News Team

www.indrastra.com

 

[mb444]

What is this? BD has $36 Billion reserves and needs IMF? I don't understand. Pakistan's finance minister says they have no problem and they have less than $8 billion.

Pakistan's Forex Reserves Fallen to their Lowest Level in 3 Years​

Pakistan's Forex Reserves Fallen to their Lowest Level in 3 Years

By IndraStra Global News Team

www.indrastra.com

BD is seeking to shore up reserves. BD will get most of these at zero or very low rate of interest. Also it will be a drawing facility, use if needed otherwise wont be touched. However i believe BD will take up to its contribution to IMF coffer which is around $2b which will be at zero rates.

The pressure for dollar continues due to high cost of fuel and other imports.

BD is sending record high amount of workers this year abroad and its exports are rising relaxing the pressure somewhat.

However as we enter into a global recession it is a prudent move to get your overdraft in order to take you through this difficult period.

BD is hugely risk averse and what was the point in paying into the IMF collective if not to use the facility when needed. Realistically it may certainly be needed with very dark clouds in the economic horizon.

 

[epebble]

BD is seeking to shore up reserves. BD will get most of these at zero or very low rate of interest. Also it will be a drawing facility, use if needed otherwise wont be touched. However i believe BD will take up to its contribution to IMF coffer which is around $2b which will be at zero rates.

The pressure for dollar continues due to high cost of fuel and other imports.

BD is sending record high amount of workers this year abroad and its exports are rising relaxing the pressure somewhat.

However as we enter into a global recession it is a prudent move to get your overdraft in order to take you through this difficult period.

BD is hugely risk averse and what was the point in paying into the IMF collective if not to use the facility when needed. Realistically it may certainly be needed with very dark clouds in the economic horizon.

I think I can somewhat understand your logic - like go to the bank and keep a line of credit ready. But isn't it bad for the reputation that a country is going to IMF? Generally, it indicates they can't get money elsewhere since IMF is considered a window of last resort. Why would you go to a moneylender or pawn shop if you have a bank loan or credit card?

 

[bluesky]

A delegation from the International Monetary Fund will arrive in Dhaka this week to start negotiations on Bangladesh’s request for a US $4.5 billion loan as budgetary support, officials said on Sunday.

Dr. Reza Kibria of Bangladesh explains the procedure for getting loans from the IMF. He himself worked in the IMF loan section for many years. He knows how the loan application procedure moves.

 

[BananaRepublicUK]

I think I can somewhat understand your logic - like go to the bank and keep a line of credit ready. But isn't it bad for the reputation that a country is going to IMF? Generally, it indicates they can't get money elsewhere since IMF is considered a window of last resort. Why would you go to a moneylender or pawn shop if you have a bank loan or credit card?

IMF loans are cheap but their conditions are tough.

Bond market rates are higher but they ask fewer questions.

You take your pick.

IMF is a better choice for Bangladesh given Bangladesh has no problems with tough conditions.

 

[mb444]

I think I can somewhat understand your logic - like go to the bank and keep a line of credit ready. But isn't it bad for the reputation that a country is going to IMF? Generally, it indicates they can't get money elsewhere since IMF is considered a window of last resort. Why would you go to a moneylender or pawn shop if you have a bank loan or credit card?

Bangladesh government issued bond market is mostly closed to foreign investors. BD simply does not borrow in the open market. It prefers institutional lenders.

IMF is not the lender of last resort at all. Every country pays into a pot from where you can borrow from.

BD is doing that now that it requires it. It will not have any impact on the countries credit rating which are only impacted if you default. BD has never defaulted on any of its borrowings.

 

[Black_cats]

BD is seeking to shore up reserves. BD will get most of these at zero or very low rate of interest. Also it will be a drawing facility, use if needed otherwise wont be touched. However i believe BD will take up to its contribution to IMF coffer which is around $2b which will be at zero rates.

The pressure for dollar continues due to high cost of fuel and other imports.

BD is sending record high amount of workers this year abroad and its exports are rising relaxing the pressure somewhat.

However as we enter into a global recession it is a prudent move to get your overdraft in order to take you through this difficult period.

BD is hugely risk averse and what was the point in paying into the IMF collective if not to use the facility when needed. Realistically it may certainly be needed with very dark clouds in the economic horizon.

1.5 billion usd will be interest free and the rest at a rate of 2% which is not cheap. Just for your information.

Bangladesh is taking the loan for three projects though forgot the details of the projects. Out of 4.5 billion usd 1.5 billion usd May be released this year.

 

[PadmaBridge]

1.5 billion usd will be interest free and the rest at a rate of 2% which is not cheap. Just for your information.

Bangladesh is taking the loan for three projects though forgot the details of the projects. Out of 4.5 billion usd 1.5 billion usd May be released this year.

2% is dead cheap given global inflation and rates at bond markets.

Bangladesh can borrow at these ultra low rates because its Debt to GDP ratio is amongst the lowest in the world.

Furthermore, BD always complies with the rules and never borrows to pay interest on existing loans.

Bangladesh government issued bond market is mostly closed to foreign investors. BD simply does not borrow in the open market. It prefers institutional lenders.

IMF is not the lender of last resort at all. Every country pays into a pot from where you can borrow from.

BD is doing that now that it requires it. It will not have any impact on the countries credit rating which are only impacted if you default. BD has never defaulted on any of its borrowings.

Nor BD has ever borrowed to fund interest payments.

BD only borrows for investment. Never borrows to fund current spending.

 

[bluesky]

As far as I understand the present IMF loan is for shoring up the dwindling foreign currency reserves.

It has nothing to do with project financing. If so, please tell me what projects the GoB cited when it applied for the loan. i have not read any such projects.

 

[nahtanbob]

1.5 billion usd will be interest free and the rest at a rate of 2% which is not cheap. Just for your information.

Bangladesh is taking the loan for three projects though forgot the details of the projects. Out of 4.5 billion usd 1.5 billion usd May be released this year.

2% is not cheap

 

[Black_cats]

As far as I understand the present IMF loan is for shoring up the dwindling foreign currency reserves.

It has nothing to do with project financing. If so, please tell me what projects the GoB cited when it applied for the loan. i have not read any such projects.

It will be given as line of credit which Bangladesh will use as needed. I read somewhere Bangladesh may use it on certain projects. IMF has set 33 reform conditions for granting the line of credit.

2% is not cheap

China gives loan at a rate of 2-3% that many says expensive from that perspective I said it’s expensive.

 

[bluesky]

2% is not cheap

I think @Black_cats is comparing with the interest rates of Chinese loans. In many cases, the rates are between 3% to 6%. So, the IMF loan at 2% seems to be cheap, but, in reality, it is not.

For example, the interest volume of $4,500 million immediately after the grace period is $4500 x 2% = $90 million. Now, if the period of payment is assumed to be 20 years, the volume of interest only is $900 million.

$4500 divided by 20 years (assumed) is $225 million. So, the GoB will be paying back ($225 million + $45 million) = $270 million of money every year.

And the total repayment volume is ($270 x 20 years) = $5400 million. $900 million is the interest. $900 million in interest money is not that small.

Many countries in Latin America lost their economic strength due to the loan burden.

 

[Ajamal]

1.5 billion usd will be interest free and the rest at a rate of 2% which is not cheap. Just for your information.

Bangladesh is taking the loan for three projects though forgot the details of the projects. Out of 4.5 billion usd 1.5 billion usd May be released this year.

Add 19% Depreciation of Taka Vs USD in last 1 year. 19%+2%=21% return BD will have to pay on loan assuming taka continues to fall at same rate.

 

[bluesky]

It will be given as line of credit which Bangladesh will use as needed. I read somewhere Bangladesh may use it on certain projects. IMF has set 33 reform conditions for granting the line of credit.

No, not project financing. The loan is for budget financing. WB loan is also for the same purpose, budget financing. The tax rate is only 8% of the GDP a pittance.

BB chief discusses $5.5bn loans with IMF, World Bank to build a buffer

Bangladesh Bank Governor Abdur Rouf Talukder had quite a busy schedule over the weekend as he sat with top officials of both the International Monetary Fund, or the IMF, and World Bank, or the WB, in back-to-back meetings to discuss Dhaka’s request to get $5.5 billion in total in loans in the...

thefinancialexpress.com.bd