IMF says ready to help Bangladesh amid financial crisis

IMF says ready to help Bangladesh amid financial crisis

The International Monetary Fund stands ready to support Bangladesh, which recently requested help to overcome the financial crisis caused by the volatility of energy prices since the Russian invasion of Ukraine. “The IMF stands ready to support Bangladesh in this request,” a spokesperson for the institution said in a statement. But the amount of assistance “has not yet been discussed,” the IMF defines, noting that this “will be part of discussions on program design.” Dhaka has requested $4.5 billion from the International Monetary Fund, according to a local daily.

Discussions have taken place between the state authorities and the IMF teams, but the schedule has not been set, as the fund’s board is currently on vacation. “External conditions have deteriorated sharply, and the unprecedented global shocks are putting countries like Bangladesh in a situation of great uncertainty,” an IMF spokesperson said. Bangladesh can therefore benefit from the new Trust Fund for Resilience and Sustainability (RD Trust Fund, RST in English), as well as the ‘Companion Programme’, in which Dhaka has ‘proactively shown interest’. This will provide “guarantees in the event of a further deterioration in external conditions, while supporting the country’s efforts to address the long-term macroeconomic effects of climate change.”

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Electricity rationing

Bangladesh, a poor country in South Asia, is being hit hard by rising global energy prices as utilities struggle to source diesel and gas to meet demand. And so the country has suffered long blackouts in recent weeks, sometimes up to 13 hours a day. This led to protests in which dozens were injured and two were killed. Dhaka has instituted “austerity measures” such as rationing electricity, limiting imports and cutting development spending.

The shortage has been exacerbated by the depreciation of the local currency, the taka – about 20% against the dollar – economists say – and dwindling foreign exchange reserves. The current account deficit was $17 billion. Several South Asian countries are struggling with hyperinflation and deteriorating public finances, including neighboring Sri Lanka, which is also negotiating an IMF loan.

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