Another Neighbouring Nation In Trouble? After Sri Lanka & Pakistan, Bangladesh Seeks $4.5 Billion IMF Loan

Besides the crisis under which Pakistan and Sri Lanka are reeling, it seems that another neighbouring nation of India is in financial trouble. As forex reserves continue to shrink, Bangladesh has sought a $4.5 billion loan from the International Monetary Fund (IMF), the country¡¯s leading newspaper Daily Star newspaper reported yesterday.

The nation, which is known for its big garment-exporting industry, has sought the funds for its balance of payment and budgetary needs, besides for efforts to deal with climate change, the report mentioned.

It said Finance Minister A H M Mustafa Kamal wrote to IMF Managing Director Kristalina Georgieva on Sunday.

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The Bangladesh Bank had recently announced a policy to preserve dollars by discouraging imports of luxury goods, fruits, non-cereal foods, and canned and processed foods, as per an Al Jazeera report.

The central bank¡¯s foreign exchange reserves have fallen to $39.67 billion as of July 20th 2022, down from $45.5 billion a year earlier. As of now, this is sufficient for imports for more than five months.

As many migrant workers lost their jobs because of the COVID-19 pandemic and many of them could not get home because of the travel disruption it caused, remittances from overseas Bangladeshis fell 5% in June to $1.84bn, the central bank said.

Al Jazeera report mentioned that economists say the Bangladeshi taka has effectively slid against the US dollar by approximately 20% in the past three months. The depreciation of the local currency has further weakened the nation¡¯s finances, with the current account deficit hitting the $17 billion mark.

¡®Austerity measures¡¯

Bangladesh¡¯s State Minister of Planning Shamsul Alam reportedly said the government had rolled out ¡°austerity measures¡± in addition to electricity rationing, including import curbs and cuts to development spending.

Similar to what Sri Lanka faced amid an economic crisis this year, Bangladesh has experienced lengthy blackouts in recent weeks, with power cuts sometimes stretching up to 13 hours a day, as utilities struggle to source enough diesel and gas to meet demand.

Besides that tens of thousands of mosques around the country have been asked to curtail their use of air conditioners to ease pressure on the electricity grid, with power shortfalls compounded by the depreciating currency and dwindling foreign exchange reserves.

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Bangladesh¡¯s financial situation has also been worsened by the unprecedented floods in the northeast, flooding the homes of millions of people and causing nearly $10bn in damage, according to government estimates.

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