IMF Approves USD 4.7bn Fund Facility for Bangladesh

IMF Executive Board approved Bangladesh’s request for USD 3.3bn under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements and USD 1.4 billion under the newly created Resilience and Sustainability Facility (RSF) as Bangladesh becomes first Asian country to access the RSF.

· IMF’s ECF/EFF approval has enabled the immediate disbursement of about USD 476mn as the first of the seven instalments slated over 42 months. The remaining amount will be in six equal instalments of USD 704mn each.

· IMF recognizes that Bangladesh has taken a comprehensive set of measures to deal with the latest economic disruptions caused by Russia’s War in Ukraine.

· IMF also stated that the IMF-supported program under the ECF/EFF arrangements would help preserve macroeconomic stability and prevent disruptive adjustments to protect the vulnerable, while laying the foundations for strong, inclusive, and environmentally sustainable growth.

· According to a renowned national daily, there are some specific conditions imposed by IMF that include:

· Dynamic adjustment of fuel prices

· Bringing down the default loan of state-owned banks to 10%

· Setting up asset management companies to recover defaulted loans

· Leaving the exchange rate to the market

· Separating the allocation of interest on savings certificates and pensions of government employees from the social safety net allocation

· We may see further reforms targeting both fiscal and monetary policy in the coming months.

IMF shared their estimates and projections on key economic indicators of Bangladesh in the press release. Few of the key indicators are mentioned below.

 IMF’s EstimatesIMF’s Projections
ParticularsFY19FY20FY21FY22FY23FY24FY25FY26FY27
Real GDP growth rate7.9%3.4%6.9%7.2%5.5%6.5%7.1%7.3%7.4%
CPI Inflation (annual average)5.5%5.6%5.6%6.1%8.9%6.5%5.6%5.5%5.5%
CPI inflation (end of period)5.5%6.0%5.6%7.6%8.1%5.9%5.5%5.5%5.5%
Balance of Payments (as % of GDP)         
Current account balance-1.3%-1.5%-1.1%-4.1%-3.2%-4.2%-3.5%-3.0%-3.0%
Capital account balance0.1%0.1%0.1%0.0%0.0%0.1%0.1%0.1%0.1%
Financial account balance1.5%2.3%3.1%3.0%2.5%5.5%5.2%5.0%4.6%
Gross international reserves (billions of U.S. dollars)32.73646.433.430.034.240.046.453.1
Import coverage (in months)6.56.15.84.63.53.84.24.44.5

Link of IMF press release: https://www.imf.org/en/News/Articles/2023/01/30/pr2325-bangladesh-imf-executive-board-approves-usd-ecf-eff-and-usd-under-rsf