IMF DMD focuses on financial sector reform

The Executive Board of the International Monetary Fund (IMF) is expected to consider approving $4.5 billion loan for Bangladesh on January 30, said its Deputy Managing Director Antoinette M Sayeh.

“I am very pleased to have had the opportunity to meet with Prime Minister Sheikh Hasina today, and Finance Minister Mustafa Kamal and Bangladesh Bank Governor Abdur Rouf Talukder yesterday,” she said in a press statement on Monday.

Antoinette who arrived in Dhaka on Sunday on a five-day visit to Bangladesh to discuss the loan issue also said, “I congratulated them on Bangladesh’s impressive economic growth and social development in last decade, which have allowed steady progress in poverty reduction and significant improvements in living standards.”

“Macroeconomic policies in recent years have helped keep inflation stable, debt-to-GDP ratio low and external buffers adequate.”

Just like other countries around the world, Bangladesh is now dealing with the impact of global shocks--first from the pandemic and then from the ongoing war in Ukraine, she added.

“We discussed the impact of these shocks on Bangladesh’s economy, and I welcomed Bangladesh’s comprehensive set of measures to deal with them – including their focus on ensuring protection for the vulnerable during these difficult times,” she said.

Bangladesh and the IMF recently reached a staff-level agreement under the Extended Credit Facility, Extended Fund Facility, and the IMF’s new Resilience and Sustainability Facility (RSF) to support the authorities’ homegrown reform agenda.

Regarding the discussion, the multi-lender’s DMD said, “We focused on the key elements of this programme, including the long-standing challenges of raising tax revenues, and building a more efficient financial sector.”

“Reforms in these areas, combined with measures to facilitate private investments and export diversification will help create conditions to make Bangladesh’s economy more resilient and support long-term, inclusive and sustainable growth.”

The statement quoted her as saying, “We also discussed Bangladesh’s plans to address the longer-term challenges related to climate change that could threaten macroeconomic stability.”

The IMF’s RSF aims to provide affordable, long-term financing to support Bangladesh’s climate investment needs, catalyse climate financing, and reduce balance of payment pressures from import-intensive climate investment, the statement added.

Bangladesh is now facing serious problem that has been created due to a massive deficit in balance of payment following a shortage of US dollar since March last year. To meet the crisis, Bangladesh government wrote a request letter to IMF in July last year to lend $4.5 billion.

Later, the IMF delegation, led by Rahul Anand, held meetings with various government departments in Dhaka from October 26 to November 9. The IMF team had reached a staff-level agreement with the government to lend $4.5 billion in seven installments by 2026 after approval from its executive board.

As per the new Monetary Policy Statement (MPS) unveiled on Sunday, the country’s current account deficit, which widened to $5.67 billion during the July-November period of the current fiscal year, may stand at $6.82 billion at the yearend.

Besides, the overall balance stood at $6.38 billion in July-November of FY23, and it will slightly down to $5.07 billion at the end of current FY. Bangladesh Bank hopes that the overall balance will drop because of 7.5 per cent export growth and 10.5 per cent negative growth in import in FY23.