Dhaka, Bangladesh:
At the request of the Government of Bangladesh, an International Monetary
Fund (IMF) mission led by Mr. Rahul Anand visited Dhaka from October 26 to
November 9, 2022, to discuss the IMF’s support for Bangladesh and the
authorities’ comprehensive economic reform agenda. Bangladesh’s request is
part of the authorities’ measures to cushion its economy from the economic
disruptions caused by the ongoing war in Ukraine and to manage
macroeconomic risks posed by climate change.
At the end of the mission, Mr. Anand issued the following statement:
“The Bangladesh authorities and the IMF team have reached a staff-level
agreement to support the authorities’ reform policies under a new 42-month
ECF/EFF arrangement of about US$ 3.2 billion (SDR 2.5 billion, equivalent
of 231.4 percent of quota), and a concurrent RSF arrangement of about
US$1.3 billion (SDR 1 billion, equivalent of 93.8 percent of quota).
“The new ECF/EFF arrangement is aimed at restoring macroeconomic stability
and preventing disruptive adjustments to protect the vulnerable, while
promoting structural change to support strong inclusive and green growth.
Reflecting Bangladesh’s large climate financing needs, the concurrent RSF,
which supplements the resources made available under the ECF/EFF, will
expand the fiscal space to finance climate priorities identified in the
authorities’ plans, including by catalyzing other financing, and reducing
external pressures from import-intensive climate investment. The
staff-level agreement is subject to IMF management approval and Executive
Board endorsement, which is expected in the coming weeks.
“Bangladesh’s robust economic recovery from the pandemic has been
interrupted by Russia’s war in Ukraine, leading to a sharp widening of the
current account deficit, rapid decline of foreign exchange reserves, rising
inflation and slowing growth.
“Even as Bangladesh tackles these immediate challenges, addressing
long-standing structural issues remains critical, including threats to
macroeconomic stability from climate change. To successfully graduate from
Least Developed Country status and achieve middle-income status by 2031, it
is important to build on past successes and address structural issues to
accelerate growth, attract private investment, enhance productivity, and
build climate resilience.
“Against this backdrop, and following initial measures to maintain
macroeconomic stability, the authorities have put together a
program—supported by the IMF—that is expected to bolster its external
position, reduce vulnerabilities, and prepare the ground for a robust and
inclusive growth pick-up by scaling up much-needed social, development and
climate spending. Key elements of the program include:
-
Creating
additional fiscal space
. Higher revenue mobilization and rationalization of expenditures will
allow increasing growth-enhancing spending. The impact on the
vulnerable will be mitigated by higher social spending and better
targeted social safety net programs.
-
Containing inflation and modernizing the monetary policy framework
. The monetary stance will be guided by the inflation outlook. Monetary
policy modernization will promote macroeconomic stability and improve
policy transmission. Increased exchange rate flexibility will help
buffer external shocks.
-
Strengthening the financial sector
. Reducing financial sector vulnerabilities, strengthening oversight,
enhancing governance and the regulatory framework, and developing
capital markets will help mobilize financing to support growth
objectives.
-
Boosting growth potential
. Creating a conducive environment to expand trade and foreign direct
investment, deepening the financial sector, developing human capital,
and improving governance to enhance the business climate will lift
growth potential.
-
Building climate resilience
. Strengthening institutions and creating an enabling environment will
help meet climate objectives, support large-scale climate investments,
and help mobilize additional climate financing.
“The IMF team held meetings with Finance Minister Mr. Kamal, Bangladesh
Bank Governor Mr. Talukder, Finance Secretary Ms. Yasmin, and other senior
government and Bangladesh Bank officials. It also met with representatives
from the private sector, bilateral donors, think tanks, and development
partners.
“We would like to thank the authorities for candid discussions and their
warm hospitality and are looking forward to continuing our engagement in
support of Bangladesh and its people.”
REFERENCE:
The Resilience and Sustainability Facility:
https://www.imf.org/en/About/Factsheets/Sheets/2022/resilience-and-sustainability-facility-rsf
Bangladesh country page: https://www.imf.org/en/Countries/BGD
IMF Office in Bangladesh: https://www.imf.org/en/Countries/ResRep/BGD
IMF Lending
https://www.imf.org/en/About/Factsheets/IMF-Lending