Bangladesh seeks another IMF loan amid fuel-supply crisis

DHAKA, 28 July 2022:

The government of Bangladesh, which has imposed measure to limit the use of fuel amid record inflation, yesterday confirmed it had sought a loan from the International Monetary Fund (IMF) – but added that it would be accepted only if the conditions were favourable.

Finance minister AHM Mustafa Kamal said in a virtual press conference after a Cabinet meeting that authorities had on Sunday sent a letter to the IMF seeking negotiations for a loan.

However, he clarified that letter had not specified an amount, adding that if Dhaka reveals its demand and “everyone comes to know, the burden of the loan will be high.”

“We will stay alert so that no terms and conditions go against us. We did not say (the) amount. We will see their conditions first. If they positively benefit us, we will consider it.”

Local media outlets have suggested that Dhaka could seek US$4.5 billion from the Fund.

The Asian country could try to secure the amount under IMF schemes such as the newly launched Resilience and Sustainability Trust Fund, which offers long-term funding to low-income and vulnerable middle-income countries.

This is the first time in a decade that Bangladesh has sought an IMF loan, after securing US$987 million from the entity in 2012.

The request comes at a time when the national economy has come under pressure, with the country registering 7.56% inflation in June according to the Bangladesh Bureau of Statistics, much higher than the 5.64% recorded in the same month last year and the highest since 2014.

The high inflation and sustained devaluation of the taka compared to the US dollar, with the local currency losing 7% of its value within 2022, has come on the back of the foreign exchange reserves dropping to a 21-month low of US$39.77 billion in July this year.

Earlier this month, Bangladesh approved the temporary closure of all diesel-run power plants and keeping all petrol stations shut for one day every week, apart from imposing hours-long power cuts.

The measures came at a time when the long queues at fuel stations and daily power cuts in nearby Sri Lanka have grabbed headlines as the country passes through a severe economic and institutional crisis.

Some Bangladeshi economists have warned that an IMF loan may not drastically improve the country’s economic situation, and that major steps were needed to deal with serious issues affecting the economy.

“There are clear cases of governance failure in our economy. The loan will function if we can address this deficit. Accountability and transparency are needed for economic policy,” commented Rashed Al Mahmud Titumir, chairman of the department of development studies at the Dhaka University.

“Unless cause and effects are addressed, the result won’t come and the loan will grow.”