Bangladesh to receive $1.3 billion from IMF after reform deal

Bangladesh is set to receive $1.3 billion in IMF funds on June 26, as part of the country’s ongoing $4.7 billion loan programme, following a months-long delay. The disbursement, approved by the IMF Executive Board on Monday night, includes the fourth and fifth tranches, according to Bangladesh’s Finance Ministry and Bangladesh Bank, as quoted by Prothom Alo.

The fresh funds will raise total disbursements under the programme to $3.61 billion, leaving $1.09 billion to be delivered later in two tranches. The final approval came after Bangladesh agreed to key IMF conditions, including implementing a market-based exchange rate, as per Reuters.

Why was the disbursement delayed?

The fourth tranche was initially scheduled for December 2024. However, as per Bangladesh Bank officials, a snowstorm in Washington disrupted IMF board operations, forcing repeated postponements. Subsequent board meetings in February and March did not include Bangladesh’s loan review, and an IMF team visiting Dhaka in April offered no commitment on the next tranche. Tensions reportedly emerged over the IMF’s demand for foreign exchange reform, which Dhaka resisted for several months.

Finally, following virtual negotiations in May led by Bangladesh Bank Governor Ahsan H. Mansur, an agreement was reached. On May 14, the IMF confirmed that disbursement would proceed in June, as per an official IMF statement quoted by Reuters.

What is the IMF loan programme?

The IMF approved the $4.7 billion package on January 31, 2023, to help Bangladesh manage its macroeconomic pressures, stabilise foreign reserves, and push forward reforms. At the time, the IMF stated the programme would also support climate resilience and inclusive growth.

The loan structure includes:

•     $3.3 billion under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF)

•     $1.4 billion under the Resilience and Sustainability Facility (RSF) — a climate-linked fund, from which Bangladesh became the first Asian country to receive financing, as per IMF documentation.

So far, Bangladesh has received:

•     $476.3 million in February 2023

•     $681 million in December 2023

•     $1.15 billion in June 2024

The upcoming instalment, $884 million under ECF/EFF and $453 million under RSF, totals $1.33 billion, as per Reuters reporting based on the IMF Board decision.

What’s next?

According to Reuters, IMF officials praised Bangladesh for “broadly satisfactory performance” despite political and economic challenges but called for further action on structural reforms. Former World Bank economist Zahid Hossain told Prothom Alo that the disbursement will help stabilise foreign exchange reserves. However, he stressed the need to focus on “fuel subsidy reform, revenue mobilisation, and banking sector cleanup” to meet upcoming IMF targets.

The final $1.09 billion will be disbursed in two phases, contingent on continued compliance with IMF conditionalities, particularly in the areas of fiscal discipline and exchange rate flexibility.

(With inputs from the agencies)