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First installment of $4.5bn IMF loan next February: Finance Minister

Finance Minister AHM Mustafa Kamal on Wednesday confirmed Bangladesh will get $4.5 billion from the International Monetary Fund amid hope that the lending agency will release the first installment of the much-needed loan by next February, reports UNB.

He said this in a briefing after meeting with the IMF delegation held at the ministry’s conference room at the Secretariat on Wednesday.

Separately, the IMF said it has reached staff-level agreement with Bangladesh government on the loan. The agreement came following two weeks of negotiations with a visiting IMF team and Bangladesh officials ending on Wednesday.

“The amount of loan is $4.5 billion,” confirmed Kamal. “The loan will be available in seven installments until 2026.”

“I hope that the IMF will be able to release the first installment of SDR352.35 million by next February. The remaining loan will be available in six equal installments of SDR 519 million every six months until December 2026 under Special Drawing Rights (SDRs),” he added.

SDRs are allocated based on the quota amounts of each IMF member country. The higher the quota amount, the larger the SDR allocation a country will receive. In general, stronger economies have higher quotas.

The finance minister said that the IMF mission has informed this according to their action plan. All the formalities and final board approval of the loan proposal will be completed within the next three months.

Under the extended credit facility (ECF) Bangladesh will get interest-free SDR822.82 million. Under the extended fund facility (EFF) the country will get SDR1645.64 million at a floating SDRi+1 percent interest rate while under the resilience and sustainability facility SDR1 billion will come at a floating SDRi+ 0.75 interest rate, according to the official documents of the finance ministry.

Kamal said that the economy of the whole world is going through a transitional period. Abnormal inflation has occurred in all developed and developing countries. Almost all countries’ currencies depreciated against the dollar.

In reply to a question, he said the foreign exchange reserves have decreased as the global economic crisis has affected Bangladesh’s economy to some extent.

“We requested the IMF for the loan as a pre-emptive measure to ensure that this instability does not escalate into a crisis. They have met several times before. We have successfully completed the ongoing loan negotiation,” the minister added.

The visiting IMF team held discussions with all stakeholders of the Bangladesh government, especially those involved with the financial sector.

“They (IMF) told us that our macroeconomic management is better than many other countries. The IMF team agrees to our ongoing economic reforms. Accordingly, we are going to take a four-year loan programme,” Kamal said.

The Washington-based global lender’s delegation arrived in Bangladesh on October 26 to discuss the loan request and make a first-hand assessment of the economic situation after Dhaka sought the loan in July this year.

This is Bangladesh’s highest amount of loan sought from the IMF as the economy has been hit by the Covid-19 pandemic and the Russia-Ukraine war leading to a fall in the foreign exchange reserves.

During the visit the IMF team held a series of meetings with the finance ministry, Bangladesh Bank, Bangladesh Bureau of Statistics, Power Division, Bangladesh Energy Regulatory Commission, Bangladesh Garment Manufacturers and Exporters Association (BGMEA), ERD, NBR, BIDA, and other financial organizations.