The International Monetary Fund is set to open talks with Bangladesh on a lending programme as the country seeks to stabilise the economy in the face of global headwinds.
The South Asian country has asked for funds under a regular upper-credit tranche arrangement and from the Resilient and Sustainability Trust programme to stave off external shocks, according to Anne-Marie Gulde-Wolf, deputy director of IMF’s Asia and Pacific Department.
“We are currently preparing for the first negotiation mission to Bangladesh, which will start next week. We are also using the current period of the authorities here [Washington] to already start discussing some of the issues that have come up,” she said at a media briefing on Thursday.
In August, it was reported that Bangladesh was seeking a total of $4.5 billion in loans from the IMF, including for climate change resilience projects and to shore up the government’s budget.
But the final amount was still being negotiated, Finance Minister AHM Mustafa Kamal said in an interview published by The Financial Times.
The country’s efforts to secure external funding came amid the economic hit from the coronavirus pandemic, and the surge in fuel and food prices due to the Russia-Ukraine war.
The tumult in the global economy has also put a strain on Bangladesh’s foreign exchange reserves in light of a surging US dollar, with the country facing record trade deficits accompanied by a widening current account deficit.
Last week, the IMF cut its GDP growth forecast for Bangladesh in fiscal 2022-23 to 6 percent from its previous projection of 6.7 percent.
Although Gulde-Wolf believes the Bangladesh economy is still “growing strong” this year, she flagged concerns about a change in trajectory against the backdrop of the current global economic climate.
“We expect 7.2 percent of growth, but there are global headwinds that are quite significant. Bangladesh is an export dependent economy, and with headwinds in its major markets, our forecast for growth next year is 6 percent,” she said.
“We also have seen the taka depreciate by about 20 percent. Reserves have gone down. They’re still at a comfortable level, but the direction has been towards going down.”
Gulde-Wolf lauded Bangladesh for being ‘proactive’ in engaging with the IMF over an economic programme that will contain measures to stabilise the economy and avoid a further downturn.