Friday, 27 January, 2023
E-paper

Thanks to IMF for ‘soft loan’ deal!

Thanks to IMF for ‘soft loan’ deal!

Presently, Bangladesh goes through a serious economic crisis. Its official foreign exchange reserve is gradually reducing. After nervously watching its foreign exchange reserves, the country had sought a bailout package from the IMF to tide over the sharp rise in food and energy prices caused by the coronavirus pandemic and the global inflation due to the Russia-Ukraine war. On Wednesday, Dhaka struck a preliminary deal with the IMF under which the global lender will provide a USD 4.5 billion support package to stabilise the country’s economy. The deal is subject to approval by the IMF's executive board, which is expected within weeks. Once the loan is available, it will help bring stability to the country’s economy and ease pressure on reserves. To make this happen, Bangladesh will have to ensure best possible use of the loan money.

The amount will be disbursed in seven instalments till December 2026. The first instalment of USD 447.48 million will be cleared in February next year, and the remaining will be available after every six months. The interest rate of the loan will be 2.2 percent, but Bangladesh will not have to pay any interest rate for the first instalment. The IMF loan has a grace period. During the grace period, only the principal amount has to be paid. With the loan announcement, the confidence of Bangladesh has lifted significantly. However, the global lender agreed to provide the loan under some conditions. As per its demand, Dhaka agreed to show the country’s net reserve which approximately stands at USD 26 billion what has been predicted by the financial analysts. IMF also asked the Bangladesh authorities to adjust fuel prices periodically, as per the international market price.

If the oil price falls in the international market in the future, it should be reduced in the same way in the country and fill the gap of capital shortfalls in banks and comply with Basel III, the international regulatory framework for banks. It is important for Bangladesh to address structural issues to accelerate growth, attract private investment, enhance productivity, and build climate resilience. The country’s top economists think that the conditions tagged with the IMF loan are suitable for Bangladesh. They have suggested for reforms by raising the tax-GDP ratio and lowering non-performing loans for the greater interest of the country.