The International Monetary Fund approved a $987 million loan to Bangladesh today after rising oil imports depleted the country’s currency reserves.
Bangladesh will immediately receive $141 million under the three-year arrangement, the IMF said in an e-mailed statement. Conditions for the loan include a “restrained” monetary policy, a reduction of trade barriers and “moderate” fiscal consolidation, according to the release.
“Macroeconomic pressures have intensified in Bangladesh since late 2010 due to a negative terms-of-trade shock, rising oil and infrastructure-related imports, and accommodative policies,” IMF Deputy Managing Director Naoyuki Shinohara, acting chairman of the meeting, said in the statement.
“More recently, a weakening in external demand and a surge in oil prices have further weakened Bangladesh’s balance of payments and added to fiscal and inflationary pressures,” he said.
The South Asian nation is dependent on remittances and export earnings, both of which have fallen recently, to pay for import of its oil, wheat and sugar requirements. Remittances fell to $1.1 billion in March from $1.13 billion in Feb., the central bank said last week while exports fell 8 percent in February from the previous month.
The IMF said that Bangladesh’s central bank, which has already tightened monetary policy, was committed to taking more measures if needed to keep a lid on inflation.
Bangladesh’s economic size will be about $124 billion this year, the IMF forecast in January.