Nneka Nwogwugwu
The IMF Executive Board approved on Monday, Bangladeshs request for SDR 2.5 billion (about US$3.3 billion) under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) arrangements.
This approval enables the immediate disbursement of SDR 352.35 million (about US$476 million).
The IMF Executive Board also approved SDR 1 billion (about US$1.4 billion) under the newly created Resilience and Sustainability Facility (RSF). Bangladesh is the first Asian country to access the RSF.
The 42-month program will help preserve macroeconomic stability, protect the vulnerable, and foster inclusive and green growth. Reforms will focus on creating fiscal space to enable greater social and developmental spending; strengthening the financial sector; modernizing policy frameworks; and building climate resilience.
Bangladeshs robust economic recovery from the pandemic has been interrupted by Russias war in Ukraine, leading to a sharp widening of Bangladeshs 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.
The IMF-supported program under the ECF/EFF arrangements will help preserve macroeconomic stability and prevent disruptive adjustments to protect the vulnerable, while laying the foundations for strong, inclusive, and environmentally sustainable growth. The concurrent RSF arrangement will supplement the resources made available under the ECF/EFF to expand the fiscal space to finance climate investment priorities identified in the authorities plans, help catalyze additional financing, and build resilience against long-term climate risks.
At the conclusion of the Executive Boards discussion, Ms. Antoinette M. Sayeh, Deputy Managing Director, and Acting Chair, made the following statement:
Since independence, Bangladesh has made steady progress in reducing poverty and significant improvements in living standards. However, the COVID-19 pandemic and subsequent Russias war in Ukraine interrupted this long period of robust economic performance. Multiple shocks have made macroeconomic management challenging in Bangladesh.
The ECF/EFF arrangement will protect macroeconomic stability and rebuild buffers, while helping to advance the authorities reform agenda. The implementation of the domestic revenue mobilization strategy that relies on both tax policy and revenue administration reforms will allow increasing social, development and climate spending sustainably. Fiscal reforms to strengthen the management of public finance, investment, and debt will improve spending efficiency, governance, and transparency. Reducing financial sector vulnerabilities, strengthening oversight, enhancing governance and the regulatory framework, and developing capital markets will help mobilize financing to support growth objectives.
Access to RSF will provide financing to support Bangladeshs climate change adaptation and mitigation efforts. The RSF reforms will complement reforms under the ECF/EFF by improving climate investment potential, strengthening institutions and enhancing climate-spending efficiency to build resilience and catalyze additional official and private finance.”