Bangladesh Gets $987 Million Loan from IMF
The amount represents the largest loan ever offered to a member country under the IMF’s reformed concessional lending architecture, and is to be staggered across seven equal installments, with a disbursement of $141 million to be made available immediately.
“With steady but forceful action, the authorities’ program is expected to reduce imbalances and catalyze additional support from development partners, putting Bangladesh’s balance of payments on a sustainable path over the medium term,” said Naoyuki Shinohara, Deputy Managing Director of the IMF, following approval for the loan at a meeting of the Fund’s Executive Board.
Over the last year and a half, Bangladesh has faced mounting balance of payments pressures and declining foreign exchange reserves mainly due to increased demand for oil imports. Its balance of payments went into deficit last year and it is confronting similar pressures in the current fiscal year, with global headwinds and firming oil prices now adding to these pressures.
The IMF expects the country’s GDP growth to slow in 2012, while inflation, which moderated recently, still remains high.
Largest loan under ECF
The near billion dollar loan is to be made under the IMF’s Extended Credit Facility designed to give low-income countries access to financing in the face of balance of payments pressures.
Bangladesh is benefiting from reforms to the IMF’s concessional financing, which effectively doubled access to financial resources for many low income countries. Under these reforms, the Extended Credit Facility replaced the Poverty Reduction and Growth Facility as the IMF's main tool for medium-term financial support for low-income countries.
As well as currently carrying a zero percent interest rate, the Extended Credit Facility provides a higher level of access to financing, more concessional terms, increased flexibility in its use, and more focused and streamlined conditionality.
The reform process
As part of the loan agreement, the Bangladeshi authorities agreed to create fiscal space by increasing tax...
To continue reading
Request your trial