B’desh scours for loans amid economic woes

WASHINGTON: Bangladesh recently became the third country in South Asia, after Pakistan and Sri Lanka, to seek financial support from the International Monetary Fund (IMF) this year. Dhaka is now reportedly also seeking assistance from the World Bank and the Asian Development Bank to overcome the economic challenges it has been facing in recent months. Prime Minister Sheikh Hasina’s government wrote letters to the two lenders, seeking $1 billion each, Bloomberg News reported, citing people familiar with the matter.

This comes after the Daily Star newspaper reported that the country last week knocked on the doors of the IMF, seeking $4.5 billion, including for budgetary and balance-of-payment support.

The IMF said Bangladesh wanted to tap the organisation’s new Resilience and Sustainability Facility, which is aimed at helping nations face challenges related to climate change and sustainability. The Washington-based lender said Wednesday that it is prepared to help Bangladesh with an aid program to face the current economic crisis, as well as financing for longer-term challenges. “The IMF stands ready to support Bangladesh with this request,” a fund spokesperson said in a statement, noting however that “the amount of support has not yet been discussed.” “This is not a bailout package for Bangladesh, rather a precautionary move by the government,” Ahsan Mansur, a former IMF economist and executive director of Dhaka-based Policy Research Institute, told DW.

He said that, if there were no improvement in the economic environment, the government would be forced to spend all its tax revenues to secure imports and will have little left for additional spending. “Government expenditure is doubling. Shortly, all the earnings will be spent to meet the expense of imports, pensions and all other expenditures. The whole development budget will have to be borrowed,” he said. Bangladesh, a nation of more than 160 million people, has had one of the fastest-growing economies in the world for years, but has been hit hard by the global economic consequences of the Russia-Ukraine war. The conflict, which began at the end of February, has compounded inflationary pressures.

The South Asian country has been particularly vulnerable as it imports significant amounts of essential items such as cooking oil, wheat and other food stuffs, as well as fuel. Soaring food and energy costs have inflated import costs and widened the current account deficit, which now stands at about $17 billion. Bangladesh’s currency, the taka has slid against the US dollar by about 20% over the past three months, straining the nation’s finances even further.

Applying further pressure are the dwindling foreign exchange reserves, which fell to about $39 billion as of July 20 — sufficient for just over five months worth of imports — from $45.5 billion a year earlier.

Utilities are struggling to source enough diesel and gas, resulting in frequent and lengthy power outages, sometimes for up to 13 hours a day.

Authorities say diesel power plants across the country have been taken off the grid, while some gas-fired plants remain idle.

The government has imposed measures such as electricity rationing, import curbs and cuts to development spending to tackle the situation. It has also urged tens of thousands of mosques to curtain the use of air conditioners to ease pressure on the power grid. The blackouts have hit industrial activity and triggered public protests.

Mohammed Helal Uddin, an economics professor at Dhaka University, said the economy was facing a crisis. “We are rationing electricity, the forex reserves have gone down, and cost of imports has risen dramatically. We have cut back on fuel imports, and the currency value is down. These are all indicators that the economy is suffering,” he told DW.