A delegation from the International Monetary Fund (IMF) is going to discuss the government’s request for a $4.5 billion loan in the form of budgetary support. Amid the slipping of Bangladesh’s foreign exchange reserves below $40 billion after the Bangladesh Bank cleared the import payments, high inflation, austerity and economic crisis, the IMF high officials’ visit raised curiosity among the citizens. Moreover, with the recent political unrest and fall of the governments in Pakistan, Sri Lanka, and the UK due to economic sluggishness, corruption and lack of good governance, the political government in Bangladesh is also under pressure.
If everything proceeds smoothly, the loan deal could be finalised by October this year and will shore up Bangladesh’s precarious foreign currency reserves. Typically, the World Bank and the IMF prescribe an import cover of three months, but in times of economic uncertainty, they advise keeping sufficient reserves to meet 8-9 months’ imports. Going forward, even though imports are slowly contracting, the elevated inflation levels around the world mean the country may face the odds of a slowdown in both remittance inflows and export orders, the two major sources of foreign currency for Bangladesh.
The IMF officials will look into the impacts of the Russia-Ukraine war and escalated global commodity prices on the Bangladesh economy, the status of recovery from the global coronavirus pandemic and the government’s large subsidy programme. Subsidy spending in the just-concluded fiscal year is Tk 66,825 crore, 24.1 per cent more than the original allocation. In this fiscal year’s budget, Tk 82,745 crore has been earmarked for subsidy. But considering the price trend of oil, gas and fertilizer in the international market, the estimated spending can be 15-20 per cent higher than the initial estimates.
The government has also signaled that it may raise the price of fuel oil and has proposed to the Bangladesh Energy Regulatory Commission to increase the electricity tariff to cut the subsidy burden. We must say a comprehensive strategic plan is required to keep the economy stable and citizens should be made aware of the upcoming crisis. Support for the low-income and vulnerable communities needed to be scaled up and capital transfer to agriculture and other basic sectors required support.
