Bangladesh seeks IMF loan but economy not in trouble: finance minister

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Garment workers walk out of a factory during lunch break as factories remain open despite a nationwide lockdown, in Dhaka, Bangladesh July 6, 2021. REUTERS/Mohammad Ponir Hossain

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DHAKA, July 27 (Reuters) – Bangladesh has asked the International Monetary Fund (IMF) to start talks for a loan, the finance minister told the Prothom Alo newspaper, adding that the economy was ” not in trouble”.

Minister AHM Mustafa Kamal said he did not specify any amount in a letter he sent to the IMF on Sunday. Two sources with knowledge of the matter, who declined to be identified because only the finance minister was authorized to speak to the media, said the government had not yet decided how much money it wanted.

“The IMF has been invited to enter into a formal negotiation for balance of payments loans and budget support,” Kamal said in the Prothom Alo report released on Wednesday.

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“When and how much loans will be available will depend on them. In terms of our current macroeconomic situation, we are in no way in difficulty.”

Kamal did not respond to requests for comment from Reuters.

A senior IMF official told Reuters on Tuesday that Bangladesh had asked him to start talks on a new loan under the global creditor’s Resilience and Sustainability Trust. These funds are capped at 150% of a country’s quota or, in the case of Bangladesh, a maximum of $1 billion. Read more

Bangladesh’s Daily Star newspaper reported on Tuesday that the country wants $4.5 billion from the IMF. Read more

The country’s economy, worth $416 billion, has been one of the fastest growing in the world for years, but rising energy and food prices due to the Russian-Ukrainian war inflated its import bill and current account deficit.

Bangladesh’s economic mainstay is its export-oriented garment industry, which could suffer if sales fall in its main markets in Europe and the United States due to a slowdown in the global economy. After clothing, remittances are the second largest source of foreign currency for Bangladesh.

The South Asian country’s foreign exchange reserves fell to $39.67 billion as of July 20 – enough for 5.3 months of imports – from $45.5 billion a year earlier.

Its July-May current account deficit was $17.2 billion, down from a deficit of $2.78 billion in the year-ago period, as its trade deficit widened and remittances have declined.

Sri Lanka and Pakistan are the other two South Asian countries to have requested IMF assistance this year.

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Additional reporting and writing by Krishna N. Das; Editing by Clarence Fernandez and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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