The International Monetary Fund (IMF) has raised concerns regarding several key aspects of the Bangladesh economy, including inflation, growth, and foreign reserves, as it concluded its mission under the $4.7 billion loan program.
In a press release issued after the conclusion of the staff team visit on May 7, the IMF highlighted persistent inflationary pressures, increased volatility in global financial conditions, and a slowdown in major advanced trading partners as factors weighing on growth, foreign currency reserves, and the local currency, Taka.
The IMF has announced plans to conduct the first review of its Extended Credit Facility, Extended Fund Facility, and Resilience and Sustainability Facility arrangements later this year, according to the press release. Bangladesh is expected to witness a decline in reserves to $29.86 billion, the lowest level in seven years, as import bill payments for two months are due next week.
In April, exports experienced a significant decline of 16.5% to $3.95 billion compared to the previous year, mainly attributed to a slowdown in orders from clothing retailers. Additionally, inward remittances, which contribute to the country’s balance of payments, decreased by 16% year-on-year to $1.68 billion in April.
Bangladesh, during the visit of the IMF team from April 25 to May 7, highlighted plans for a more flexible exchange rate and reforms in banks’ lending rates. Starting in July, banks will be permitted to set their lending rates at a maximum of 3% above the six-month weighted average rates for Treasury bills. This new rate corridor, which replaces the previous 9% cap on lending rates, fulfills a key IMF condition.
In February, Bangladesh received the first installment of IMF loans amounting to $476 million, with the second tranche expected to be disbursed in November. The IMF’s ongoing review and engagement with Bangladesh reflect efforts to address the economic challenges faced by the country and promote sustainable growth in the future.
