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Dhaka: At a time when Bangladesh is in serious financial stress amid rising costs of energy import and a historic revenue shortfall, the International Monetary Fund has suspended its existing $5.5 billion loan programme, declining to release the next tranche of $1.3 billion by June.

This is the first shock that the new Bangladesh government will need to deal with, just two months since it inherited an ailing economy and vulnerable financial sector from the deposed Sheikh Hasina government. 

The IMF’s move also comes at a time when the Bangladesh government has been aggressively looking for additional financial support of at least $3.25 billion from the IMF, World Bank and other development partners to meet rising fuel import costs following higher international oil prices triggered by the US-Israel war on Iran that started on February 28.

The IMF took the decision to pause the loan during the Spring Meetings of the IMF and World Bank in Washington, D.C. in April. It could have a wider impact and may result in development partners growing hesitant to release financial support that they had already promised. This, in turn, is likely to trigger a foreign exchange reserve erosion. 

The country’s foreign exchange reserve is already under pressure amid higher global prices as the government estimates that it will require an additional $3.2 billion foreign exchange for importing fuel, gas and fertilizer. 

Moreover, the rising energy import cost has resulted in additional subsidy costs of over $3 billion just for energy and fertilizer. 

The additional subsidy pressure comes at the time when revenue collection has hit a historic deficit of approximately Tk 98,000 crore – equivalent to over $8 billion – against target in the first nine months of the current fiscal........

© The Wire