After Sri Lanka and Pakistan- another Indian neighbour seeks IMF’s help
Due to skyrocketing inflation, trade deficit and depleting forex reserve- Bangladesh becomes another Indian neighbour to seek a $4.5 billion loan from IMF.
The skyrocketing fuel prices due to the Russian-Ukraine conflict were detrimental to Bangladesh’s economy. The country is facing inflation that has increased the prices of fuels so much that households are reverting to wood for cooking.
The South Asian nation has experienced lengthy blackouts in recent weeks, sometimes for up to 13 hours a day, as utilities struggle to source enough diesel and gas to meet demand.
Government officials said that foreign reserves are about to end. This problem is also faced by Pakistan which has to urge its citizens to cut back on necessities like tea. Sri Lanka has seen widespread protests in which their president has to leave the country citing life threats.
Bangladesh is seeking help from the IMF, “We can’t print dollars; we have to earn them,” A.H.M. Mustafa Kamal, the finance minister of Bangladesh, said Wednesday. “We earn dollars by the hard work of our people who work or do business abroad. They are the driving force of our economy.”
Both money sent from Bangladeshis living overseas and exports has fallen amid fears of a global recession. Economists say the Bangladeshi taka has effectively slid against the US dollar by around 20 percent in the past three months. The depreciation of the local currency has further weakened the nation’s finances, with the current account deficit hitting $17 billion.
Alam said the government had rolled out “austerity measures” in addition to electricity rationing, including import curbs and cuts to development spending.
All the diesel-run power plants across the country are sitting idle, some gas-fired plants are also taken off the grid. The total generation capacity of diesel-run plants alone accounted for 1500 megawatts.
The IMF said Bangladesh was interested in its new Resilience and Sustainability Facility aimed at helping countries face climate-change challenges and had also requested negotiations for an “accompanying IMF programme”.
“The IMF stands ready to support Bangladesh, and the staff will engage with the authorities on program design as per the established policies and procedures of the Fund,” an IMF spokesperson said. “The amount of support will be part of the program design discussions.”
Many neighbouring nations are struggling with galloping inflation and deteriorating public finances triggered by the Russian-Ukrainian conflict.
Nearby Sri Lanka is currently in negotiations for an IMF bailout after running out of foreign currency to import even its most vital essentials, triggering long queues at petrol stations, food shortages and lengthy power cuts.
Angry crowds in the island nation stormed the president’s official residence earlier this month, prompting the leader to flee abroad and tender his resignation.
