The International Monetary Fund will give $732 million in emergency assistance to Bangladesh to help finance the health, social protection and macroeconomic stabilisation measures, meet the urgent balance-of-payments and fiscal needs arising from the coronavirus outbreak.
The IMF executive board on Friday approved the assistance under the Rapid Credit Facility and the Rapid Financing Instrument.
Under the scheme, it will disburse $244 million under the Rapid Credit Facility and $488 million under the Rapid Financing Instrument, said an IMF press release.
It said that Bangladesh’s economy had been severely impacted by the COVID-19 pandemic with weaker domestic demand and a sharp decline in exports and remittances.
Necessary policy responses to prevent a domestic pandemic, including the shutdown of major cities, will inevitably affect economic activities and slow down growth.
The government has scaled up health and social protection expenditures to mitigate the pandemic’s impact on the population and adopted several stimulus measures to preserve economic activity.
The authorities remain committed to promoting strong and inclusive growth while preserving macroeconomic stability.
Key policy challenges include tax revenue mobilisation, addressing nonperforming loans in the banking sector, and improving infrastructure and governance to enhance the business environment and attract foreign direct investment, it said.
The IMF continues to monitor Bangladesh’s situation closely and stands ready to provide further advice and support if needed.
The authorities have also committed to put in place targeted transparency and accountability measures to ensure the appropriate use of emergency financing, said the release.
IMF deputy managing director and acting chair of the board Antoinette Sayeh said that the outbreak was severely affecting the two main sources of Bangladesh’s external earnings — export of readymade garments and remittances.
The IMF’s emergency financial assistance will help cover the financing gap and support the authorities’ efforts to contain the adverse impacts of the outbreak and catalyse additional support from the international community, she said in a statement.
Once the crisis abates, the authorities of the country are committed to re-focus on addressing banking sector problems, including nonperforming loans and the poor performance of state-owned commercial banks, the statement said.
They are also committed to ensuring fiscal discipline and debt sustainability by broadening the tax base and strengthening tax administration and compliance, it said.
It also said that the Bangladesh Bank took appropriate steps to ease liquidity conditions and allow the financial sector to support the economy.
Further easing could be considered if the economic situation deteriorates and inflation remains moderate, it said, adding that a gradual increase in exchange rate flexibility should be allowed to adjust to the external shock while preserving foreign reserves.
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