The Executive Board of the International Monetary Fund (IMF) has approved 3.3 billion U.S. dollars under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) agreements as well as 1.4 billion dollars under the Resilience and Sustainability Facility (RSF) for Bangladesh.
The 42-month program will help preserve macroeconomic stability, protect the vulnerable and foster inclusive and green growth, said the lender in a press release posted on its website on Monday.
Bangladesh is the first country in Asia to receive financing under the newly created RSF agreement.
Approval of the ECF/EFF arrangements enables immediate disbursement of about 476 million dollars, the statement said.
According to the statement, Bangladesh’s robust economic recovery from the pandemic has been interrupted by the Russia-Ukraine conflict, leading to a sharp widening of Bangladesh’s current account deficit, depreciation of the Taka and a decline in foreign exchange reserves.
The authorities have taken on a comprehensive set of measures to deal with these latest economic disruptions.
The authorities recognize that in addition to tackling these immediate challenges, long-standing structural issues and vulnerabilities related to climate change will also need to be addressed to accelerate growth, attract private investment, enhance productivity and build climate resilience.
At the conclusion of the executive board’s discussion, Antoinette M. Sayeh, IMF deputy managing director and acting chair, said since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards.
However, the COVID-19 pandemic and subsequent Russia-Ukraine conflict interrupted this long period of robust economic performance, she said, adding that multiple shocks have made macroeconomic management challenging in Bangladesh.
While confronting challenges resulting from the global headwinds, the authorities need to accelerate their ambitious reform agenda to achieve a more resilient, inclusive and sustainable growth.
In this regard, substantial investment in human capital and infrastructure will be needed to achieve Bangladesh’s aspiration to reach the upper-middle income status by 2031 and meet the Sustainable Development Goals (SDGs), said Sayeh.
She said the authorities should recognize these challenges and the need to tackle climate change issues, which expose the economy to large risks that could threaten macroeconomic stability.
The ECF/EFF arrangement will protect macroeconomic stability and rebuild buffers, while helping to advance the authorities’ reform agenda, she added.