We’re relieved that the deal between the International Monetary Fund and Bangladesh government has finally come off, ending weeks of speculations about its likelihood and possible conditions to be imposed by the multilateral lender. No, there is no “harsh condition” or reform plan attached to it, as was anticipated, but whether this will be good for Bangladesh in the long term will depend on who you ask. Reportedly, the two sides have reached a preliminary agreement on a USD 4.5 billion loan, which would be disbursed over a 42-month period, with the first of seven planned instalments expected in February. Bangladesh has thus become the third country in South Asia, after Pakistan and Sri Lanka, to secure a “staff-level” loan agreement with the IMF this year.
The development comes at a critical time for Bangladesh, with the government struggling with multiple crises including widening of the current account deficit, alarming decline of foreign exchange reserves, slowing growth, rising inflation, food and energy security concerns, etc. In his reaction, the finance minister suggested that the move was a “precautionary measure” to ensure that the economic instability caused by the Russia-Ukraine war does not “escalate into a crisis.” In the grand scheme of things, the loan amount, it must be said, is not substantial, nor is it a cut-and-dried solution to our dwindling foreign exchange reserves. But it holds a short-term value that Bangladesh can use right now.
