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The International Monetary Fund (IMF) announced on Wednesday that it has agreed to expand its existing multi-billion-dollar loan programme with Bangladesh and to release $1.3 billion in funds.
This decision comes as the IMF projects a significant slowdown in Bangladesh’s export-dependent economy, forecasting a growth of only 3.8 per cent this year.
This lower growth rate presents an immediate challenge for the new government led by Muhammad Yunus, who assumed power last year following the removal of former autocratic Prime Minister Sheikh Hasina.
The predicted growth rate would be the lowest in over two decades, excluding the Covid-19 pandemic period, according to IMF data.
Citing “significant macroeconomic challenges,” IMF Bangladesh mission chief Evan Papageorgiou stated that the authorities requested an increase in the existing loan programme by approximately $762 million.
The IMF has also agreed to combine the third and fourth reviews of three separate loan programmes, which will unlock around $1.3 billion for Bangladesh as it continues its economic reforms.
Both the expansion of the loan programme and the combined reviews are pending approval from the IMF’s executive board, which is generally considered a formality. A date for the board meeting on Bangladesh has not yet been announced.
Papageorgiou emphasised the necessity of “near-term policy tightening” to address the emerging external financing gap and support a continued decrease in inflation.
He also recommended that “fiscal consolidation should focus on the prompt implementation of additional revenue measures — such as streamlining of tax exemptions — while containing non-essential expenditures.”
