Kazi Zahidul Hasan :
Bangladesh is looking for a multi-billion dollar loan from the donor agencies to deal with the balance of payment (BOP) crisis and boost the foreign exchange reserve.
Officials said,the country was seeking $4.5 billion loan from the International Monetary Fund (IMF), $1.0 billion from the Asian Development Bank (ADB) and $750 million from the World Bank (WB) as its economy faces crisis marked by a mounting balance of payments deficit and dwindling foreign currency reserves.
“The government of Bangladesh has already approached the multilateral donors seeking financial assistance from them. It sought the funds to overcome the country’s ongoing balance of payment crisis and finance the budget deficit,” a finance ministry official told The New Nation yesterday on condition of anonymity.
Bangladesh is currently facing a balance-of-payments crisis – with a nearly $18 billion current account deficit, according to the latest figures by the Bangladesh Bank (BB).
The main factor behind the crisis is its inflated import bill, caused by soaring fuel and food prices because of the Russia-Ukraine.
Between July and May period of the immediate past fiscal year(2021-22), imports increased to $ 75.40 billion, up 39 per cent year-on-year when exports grew 33 per cent to $ 44.58 billion.
The inflated import bill also led to a significant erosion of the country’s foreign exchange reserve held by the central bank.
Bangladesh’s foreign exchange reserves fell to $39.67 billion as of July20, from $45.5 billion a year earlier, owing to the increasing current account and trade deficits and declining inflows of remittance, said BB officials.
The reserve is barely enough to cover the country’s imports for just over five months.
Bangladesh’s current account deficit from July-May period of FY 22 was $17.2 billion, compared with a deficit of $2.78 billion in the year-earlier period.Its trade deficit hit a historic high of $30.81 billion in the first 11 months of the FY 22, according to the central bank data.
Besides, the country’s inward remittances that has had an important contribution to fill the current account deficit, fell by 19 per cent to $21.03 billion in FY22 from $ 24.77 billion in FY21.
Remittances are the second highest source of foreign currency for Bangladesh after the RMG exports.
Regarding the IMF loan, the finance ministry official said, “Bangladesh wanted $4.5 billion from the IMF for its balance-of-payment and budgetary needs as well as for efforts to deal with climate change.”
He added, “The government of Bangladesh sought ADB loan as budget assistance three months ago. Talks are on with the Manila-based lender for $1 billion loan and also with the World Bank for $750 million financial assistance.”
When asked, the fiancé ministry official said both the lenders (ADB, WB) tagged certain conditionalities for the loans and officials of the concerned government agencies have already engaged in discussion with the two global lenders over their conditionalities.
He, however, declined to give the details of the conditionalities.
“Rising inflation for the higher cost of fuel, the country is spending more on imports. As a result,its current account deficitis widening and forex reserve is depleting,” said economist Dr Ahsan H. Mansur.
He said Bangladesh sees a 10 per cent fall in its reserve in last one year due to the soaring import bills.
“Bangladesh’s $416 billion economy has been one of the fastest-growing in the world for years is now under strain, owing to spiraling inflation, falling remittances and falling value of local currency against the US dollar and depleting reserve,” observed Dr Mansur.
When asked, he said, “Bangladesh was seeking loans from donor agencies, including IMF, during this difficult times of economy. The move is appropriate and timely. The government agencies should engineer hectic efforts to make sure that the loan deals should be made as soon as possible after successful negotiations.”
He also said that loans from donor agencies would help Bangladesh overcome its balance of payment crisis, stabilize the economy and boost the forex exchange reserve.
