Rejaul Karim Byron

The International Monetary Fund (IMF) has reaffirmed its support for Bangladesh’s interim government in overcoming the various economic challenges the country has been facing in recent times.

Distressed loans at banks totalled over Tk 4.75 lakh crore at the end of 2023 – a revelation that makes for a sobering read of the actual health of this vital sector of the economy.

Per capita foreign debt of Bangladesh more than doubled in the last eight years, according to official data, as economists attribute the hike to unplanned foreign-funded projects and corruption, ultimately ballooning the liability on low-income people, including the extremely poor.

The government’s interest payments against foreign loans surged 24.5 percent in fiscal year 2023-24, exceeding the Tk 100,000 crore mark for the first time in history, thanks to higher borrowing costs for loans from both domestic and foreign sources.

The International Monetary Fund (IMF) has assured the interim government of providing more loans on a “fast-track” basis as Bangladesh expects $3 billion from the global lender.

Inflation is projected to hit double digits at the end of the current fiscal year owing to supply-side disruptions and higher import costs as a result of currency depreciation, according to the Asian Development Bank (ADB).

For the first time, a proposal for a mega project will be sent back for further review as the interim government intends to re-evaluate all large projects to assess their usefulness carefully.

The International Monetary Fund (IMF) is likely to give more reform recommendations to reduce subsidies and increase revenue collection for an additional $3 billion loan sought by the interim government, according to a top official of the multilateral lender in Dhaka.

An International Monetary Fund (IMF) delegation due to arrive later this month will assess Bangladesh’s potential financial needs as the country sought a fresh $3 billion loan from the multilateral lender.

The government has requested China to lower the interest rates on existing Chinese loans to 1 percent and extend the repayment period to 30 years.

In an effort to bring normalcy back to the industries, the government will review the workers’ wage through the minimum wage board, the interim government has decided.

Bangladesh could get $3 billion in budgetary support under an Asian Development Bank (ADB) and World Bank (WB) arrangement for energy and power sector reforms and the upcoming status graduation from a least developed country (LDC) to a developing nation in 2026.

Bangladesh aims to increase its merchandise and service exports by about 12.74 percent year-on-year to $57.5 billion in the fiscal year 2024-25, according to Finance and Commerce Adviser Salehuddin Ahmed.

The interim government is planning to revise the national budget for the current fiscal year urgently and cut “wasteful expenditures” in order to alleviate the pressure on the foreign currency reserves and tame persistent inflation.

The government is seeking as much as $8 billion in budget support by December from the development partners, including the International Monetary Fund (IMF), to pay back foreign liabilities and boost foreign exchange reserves.

Although the authorities took steps to eliminate mismatches in export data in recent months, discrepancies in the data of revenue collection and expenditure among government agencies continue to persist.

As foreign aid in the pipeline reached nearly $46 billion at the start of this fiscal year, the interim government will take initiatives to utilise those funds to bolster the country’s foreign currency reserves.

Bangladesh is facing several challenges, including restoring law and order and stabilising the economy in the near term.

Interest payments against foreign loans shot up 162 percent year-on-year in the first nine months of the last fiscal year as debt servicing of loans taken for some mega projects has started.

When Sheikh Hasina returned to power in 2008, Bangladesh’s total debt was just $33.66 billion. When she fled amid an unprecedented student-led uprising on August 5, she left behind a burden of $156 billion in local and foreign loans for the country to carry.