Access to RSF will provide financing to support Bangladesh’s climate change adaptation and mitigation efforts. The RSF reforms will complement reforms under the ECF/EFF by improving climate investment potential, strengthening institutions and enhancing climate-spending efficiency to build resilience and catalyze additional official and private finance.
‘ECONOMIC BASE IS STRONG’
Earlier, Bangladesh Finance Minister AHM Mustafa Kamal announced the development in a statement on Monday night, thanking the global lender, especially Sayeh and staff mission head Rahul Anand who visited Bangladesh to discuss the loans.
Kamal also expressed gratitude to Bangladesh Bank Governor Abdur Rouf Talukder, Finance Secretary Fatima Yasmin and other officials who worked on the loan programme.
The finance minister said the global monetary agency’s decision came as an answer to critics who doubted the strength of Bangladesh’s economy.
“The approval of the loans proves that our macroeconomic base is strong and better than many other countries.”
Bangladesh reached a staff-level agreement with the IMF in November last year for the loans that officials expect will help the country stabilise its economy and prevent a crisis.
The funds will come at an interest of 2.2 percent, Kamal had said at that time.
The IMF loans are expected to create a reserve buffer for Bangladesh with no sign of the global economy improving anytime soon amid the Russia-Ukraine war.
The shrinking reserves also triggered fears that an ongoing energy crisis would worsen, which affected daily life and factory production with a gas supply crunch and rolling power outages.
After meetings with Bangladesh officials during her visit earlier in January, Sayeh said they focused on the key elements of the funding 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.”
They 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, catalyze climate financing, and reduce the balance of payment pressures from import-intensive climate investment,” Sayeh said.