The International Monetary Fund (IMF) has approved loans of $4.7 billion to Bangladesh for disbursal starting immediately, making it the first to secure such funds out of three South Asian countries that applied last year amid economic trouble.

The loans are a win for Prime Minister Sheikh Hasina ahead of a general election early next year and will help the country, which has seen a sharp widening of its current account deficit, depreciation of the taka currency and a decline in its foreign exchange reserves.

Bangladesh will get about $3.3bn under the IMF’s extended credit facility and related arrangements, with an immediate disbursement of about $476 million. The IMF executive board also approved about $1.4bn under its newly created Resilience and Sustainability Facility for climate investments for Bangladesh, the first Asian country to access it.

The IMF said the loans will “protect macroeconomic stability and rebuild buffers, while helping to advance the authorities’ reform agenda”.

The agenda includes creating fiscal space to enable greater social and developmental spending, strengthening Bangladesh’s financial sector, boosting fiscal and governance reforms and building climate resilience.

“Since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards,” Antoinette M. Sayeh, the IMF’s deputy managing director, said in a statement.

“However, the Covid-19 pandemic and subsequent Russia’s war in Ukraine interrupted this long period of robust economic performance,” Sayeh added.

“Multiple shocks have made macroeconomic management challenging in Bangladesh.”

The country last year also sought $2bn from the World Bank and the Asian Development Bank amid efforts to bolster its foreign exchange reserves.

Bangladesh’s regional counterparts, Sri Lanka and Pakistan, are doing much worse economically but have not been able to get final approval for IMF loans.

Bangladesh’s current account deficit hit a record $18.7bn in the last financial year, which ended on June 30, as exports of garments failed to offset a surge in energy costs. The Bangladesh central bank expects the deficit to fall to about $6.8bn at the end of the current fiscal year.

The government has also raised fuel and energy prices in recent months as it approached the IMF. It announced a five per cent increase in retail power prices from Wednesday, the second such rise this month.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Smog hazard
Updated 05 Nov, 2024

Smog hazard

The catastrophe unfolding in Lahore is a product of authorities’ repeated failure to recognise environmental impact of rapid urbanisation.
Monetary policy
05 Nov, 2024

Monetary policy

IN an aggressive move, the State Bank on Monday reduced its key policy rate by a hefty 250bps to 15pc. This is the...
Cultural power
05 Nov, 2024

Cultural power

AS vital modes of communication, art and culture have the power to overcome social and international barriers....
Disregarding CCI
Updated 04 Nov, 2024

Disregarding CCI

The failure to regularly convene CCI meetings means that the process of democratic decision-making is falling apart.
Defeating TB
04 Nov, 2024

Defeating TB

CONSIDERING the fact that Pakistan has the fifth highest burden of tuberculosis in the world as per the World Health...
Ceasefire charade
Updated 04 Nov, 2024

Ceasefire charade

The US talks of peace, while simultaneously arming and funding their Israeli allies, are doomed to fail, and are little more than a charade.