IMF ready to help Bangladesh face ongoing crisis

IMF ready to help Bangladesh face ongoing crisis

The International Monetary Fund logo is seen at the IMF headquarters building during the IMF/World Bank annual meetings in Washington October 14, 2017. — Reuters pic

Thursday, 04 Aug 2022 5:10 AM MYT

WASHINGTON, Aug 4 — The IMF said Wednesday it is prepared to help Bangladesh with an aid program to face the current economic crisis, as well as financing for longer-term challenges.

Authorities in the South Asian nation last week requested funding from the International Monetary Fund to allow it to ride out a financial shock triggered by volatile global energy prices sparked by the Russian invasion of Ukraine.

Bangladesh has experienced lengthy blackouts in recent weeks, sometimes for up to 13 hours a day, as utilities struggle to source enough diesel and gas to meet demand, which has sparked protests in which dozens were injured and two killed.

The power shortfalls have been compounded by a depreciating currency and dwindling foreign exchange reserves.

“The IMF stands ready to support Bangladesh with this request,” a fund spokesperson said in a statement, noting however that “the amount of support has not yet been discussed.” A local newspaper said the government was seeking US$4.5 billion (RM20 billion) dollars from the Washington-based crisis lender.

While there have been contacts between authorities and IMF staff, timing of formal talks is unclear since the fund board is currently on recess.

The IMF spokesperson noted the “unprecedented global shocks” facing many countries, and pointed to measures Bangladesh already has taken “to deal with the economic disruptions caused by the ongoing war in Ukraine,” including allowing a flexible exchange rate, temporary restrictions on some non-essential imports, and reducing electricity demand.

An “IMF-supported program will provide safeguards in the event of further deterioration of external conditions, while supporting the country’s efforts to address the longer-term macroeconomic implications of climate change.” The fund also is prepared to provide aid under the new Resilience and Sustainability Trust (RST) that aims to provide affordable, long-term financing to address ongoing issues such as climate change.

Economists say the Bangladeshi taka has effectively weakened against the US dollar by around 20 per cent in the past three months, worsening the nation’s finances, with the current account deficit hitting US$17 billion.

Several South Asian nations are struggling with galloping inflation and deteriorating public finances triggered by global economic headwinds, including nearby Sri Lanka which also is negotiating an IMF loan. — AFP