In a letter submitted to the IMF in July, Bangladesh explained why it had obtained a loan from the specialized lending agency. The letter said that there was a sustainable macroeconomic situation in the country while the growth rate of gross domestic product (GDP) was also quite good.
The ongoing war between Russia and Ukraine has brought new challenges to the economy. The prices of fuel, foodstuffs and daily necessities have soared at an unprecedented rate in the world market and the supply system has also been disrupted.
Presenting a negative picture of remittances, the letter also indicates that there has been a negative growth of 15.12% in expatriate income in the current financial year due to the slow economic recovery after the Covid shock in major labor markets.
In the first 11 months of FY22, the current account deficit stood at $17.23 billion, compared to a deficit of $2.78 billion in the same period a year ago. The current account deficit and imported inflation have hit the commodity market hard.
Additionally, climate change has made Bangladesh one of the most vulnerable countries in the world. It’s a critical moment overall. This is why the country urgently needs money as budget support and to ensure the balance of the current account.
Mirza Azizul Islam, a former adviser to the caretaker government, said the IMF loan was badly needed as the reserve ran out. It is time to focus on the conditions set by the IMF.
The conditions do not include impossible problems, rather than problems that the government itself should execute, he added.
“If the IMF asks to further lower the interest rate on cash certificates, I support it because the rate is higher than the market. The government’s debt burden is increasing due to this interest rate,” explained Mirza Azizul.
He hopes that the IMF will talk about increasing the use of digital methods in revenue collection, finding new taxpayers, improving the tax-to-GDP ratio, and that the government will also comply.
“One issue is left out – the multiple exchange rates in effect. It is important to clear up the confusion. The IMF can also offer suggestions on the matter,” he said.