IMF approves $4.5b loan for Bangladesh

[bluesky]

IMF approves $4.5b loan for Bangladesh

The government and the IMF team have reached a staff-level agreement to support the authorities’ reform policies under a new 42-month ECF/EFF arrangement of about $3.2 billion, and a concurrent RSF arrangement of about $1.3 billion.

www.thedailystar.net

IMF approves $4.5b loan for Bangladesh​

Star Digital Report
Wed Nov 9, 2022 03:10 PM Last update: Wed Nov 9, 2022 03:55 PM

The government and the IMF team have reached a staff-level agreement to support the authorities' reform policies under a new 42-month ECF/EFF arrangement of about $3.2 billion, and a concurrent RSF arrangement of about $1.3 billion.

Reform policies include: creating additional fiscal space, containing inflation and modernizing the monetary policy framework, strengthening the financial sector, boosting growth potential and building climate resilience.

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The staff-level agreement is subject to IMF management approval and executive board endorsement, which is expected in the coming weeks, the Washington-based multilateral lender said in a press release.​

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Higher revenue mobilization and rationalisation of expenditures will allow increasing growth-enhancing spending.​

The impact on the vulnerable will be mitigated by higher social spending and better-targeted social safety net programmes.
The monetary stance will be guided by the inflation outlook. Monetary policy modernization will promote macroeconomic stability and improve policy transmission. Increased exchange rate flexibility will help buffer external shocks.

Reducing financial sector vulnerabilities, strengthening oversight, enhancing governance and the regulatory framework and developing capital markets will help mobilise financing to support growth objectives.

Creating a conducive environment to expand trade and foreign direct investment, deepening the financial sector, developing human capital, and improving governance to enhance the business climate will lift growth potential.

Strengthening institutions and creating an enabling environment will help meet climate objectives, support large-scale climate investments, and help mobilize additional climate financing.

"Bangladesh's robust economic recovery from the pandemic has been interrupted by Russia's war in Ukraine, leading to a sharp widening of the current account deficit, a rapid decline of foreign exchange reserves, rising inflation and slowing growth," said Rahul Anand, who led the ten-member IMF staff mission.

Even as Bangladesh tackles these immediate challenges, addressing long-standing structural issues remains critical, including threats to macroeconomic stability from climate change.

To successfully graduate from the least-developed country status and achieve middle-income status by 2031, it is important to build on past successes and address structural issues to accelerate growth, attract private investment, enhance productivity, and build climate resilience.

"Against this backdrop, and following initial measures to maintain macroeconomic stability, the authorities have put together a program -- supported by the IMF -- that is expected to bolster its external position, reduce vulnerabilities and prepare the ground for a robust and inclusive growth pick-up by scaling up much-needed social, development and climate spending," Anand added.

 

[villageidiot]

BC, hm to adopted hn na? ya elder sibling hn? Hmen koi poochta bhi nahi. IMF ho ya World Bank. Barely got peanuts (1.2B) after months of selling a*s to the IMF. FML

 

[Cheepek]

Congrats.

 

[bluesky]

IMF approves $4.5b loan for Bangladesh

The IMF loan approval will immediately stabilize the value of the Taka, at least for the time being.

 

[bluesky]

@Black_cats, what is your take on the opinion expressed by Pinaki?

 

[Realtalk108]

BD has actually done pretty well compared to other developing countries. Still got in trouble the moment an external shock came.

Really shows how vulnerable most of these countries are. The party can get over any moment. Basically you get 10-15 year windows to grow your economy as much as you can before the next shock comes.

 

[epebble]

BD has actually done pretty well compared to other developing countries. Still got in trouble the moment an external shock came.

Really shows how vulnerable most of these countries are. The party can get over any moment. Basically you get 10-15 year windows to grow your economy as much as you can before the next shock comes.

I am somewhat surprised they are still riding the gravy train of garment making instead of diversifying into small goods manufacturing. Household goods, kitchen appliances, hand tools, auto parts etc., Standard issue Wal-Mart or Home Depot stuff. Also, why not climb up the value chain in the garment industry. Why not go up from Wal-Mart to Macy's, Abercrombie, Saks, Nordstrom etc.,

 

[bluesky]

I am somewhat surprised they are still riding the gravy train of garment making instead of diversifying into small goods manufacturing. Household goods, kitchen appliances, hand tools, auto parts etc., Standard issue Wal-Mart or Home Depot stuff. Also, why not climb up the value chain in the garment industry. Why not go up from Wal-Mart to Macy's, Abercrombie, Saks, Nordstrom etc.,

I have been telling the same for the last five years and our patriots think I am an Indian. These patriots were thinking BD economy would overtake the Indian economy.

India is manufacturing the things that you have mentioned above. But, our people love to ridicule India.

Now, people here talk about the Ukraine war as if this war has ruined BD. Then, what about India? Why that war has not destroyed the Indian economy?

Building a few civil engineering projects with borrowed money is no recipe for development. BD balloon has burst and a mere $1.3 billion dollars of IMF loan will not dent the damage.

 

[Realtalk108]

I am somewhat surprised they are still riding the gravy train of garment making instead of diversifying into small goods manufacturing. Household goods, kitchen appliances, hand tools, auto parts etc., Standard issue Wal-Mart or Home Depot stuff. Also, why not climb up the value chain in the garment industry. Why not go up from Wal-Mart to Macy's, Abercrombie, Saks, Nordstrom etc.,

The problem is, it's easier said than done.

China cornered this market completely. Only bits and pieces are now left. I honestly don't see a way out for any of these countries. The world cannot accommodate another China.

Most of the third world will grow to some extent, but hardly any will ever reach middle class level. All of them will get stuck at somewhere between $5000-8000 GDPPC.

That in itself will still be a significant improvement over their current situation, but the third world as a whole simply won't ever break the $10000 mark.

 

[epebble]

The problem is, it's easier said than done.

China cornered this market completely. Only bits and pieces are now left. I honestly don't see a way out for any of these countries. The world cannot accommodate another China.

Most of the third world will grow to some extent, but hardly any will ever reach middle class level. All of them will get stuck at somewhere between $5000-8000 GDPPC.

That in itself will still be a significant improvement over their current situation, but the third world as a whole simply won't ever break the $10000 mark.

First off, $10,000 is a tremendous achievement in itself. That means out of poverty, an achievement many times more significant than going to moon. Secondly, China is supposedly having increasing wages and hence many low-end manufacturers are moving out to places like Vietnam. Thirdly, making things in China causes a lot of political headaches as they seem to enjoy rattling their sabers. Countries like Bangladesh can utilize the international ill will towards China to their advantage. I think countries like Taiwan, Korea, Japan can provide knowhow, inputs and capital if needed.

I have been telling the same for the last five years and our patriots think I am an Indian. These patriots were thinking BD economy would overtake the Indian economy.

India is manufacturing the things that you have mentioned above. But, our people love to ridicule India.

Now, people here talk about the Ukraine war as if this war has ruined BD. Then, what about India? Why that war has not destroyed the Indian economy?

Building a few civil engineering projects with borrowed money is no recipe for development. BD balloon has burst and a mere $1.3 billion dollars of IMF loan will not dent the damage.

So, Bangladeshis have some crazy mindset that if India does something, they should not do it? I thought that disease afflicts only Pakistanis.

 

[Bilal9]

I am somewhat surprised they are still riding the gravy train of garment making instead of diversifying into small goods manufacturing. Household goods, kitchen appliances, hand tools, auto parts etc., Standard issue Wal-Mart or Home Depot stuff. Also, why not climb up the value chain in the garment industry. Why not go up from Wal-Mart to Macy's, Abercrombie, Saks, Nordstrom etc.,

Both of those steps have been done, most people don't know. Export basket diversification will not stop, there is no reason to, when Vietnam labor costs are double that of Bangladesh and China's are three times as much - even in remote provinces.

The export market diversification changes in Bangladesh are rather slow in materializing and not to the extent expected, but things are not standing still.

However it will be a bad thing if Bangladesh walks into the middle income trap like some ASEAN countries. Thailand is a great example.

Value addition improvements for apparel export HAVE taken place, I am connected with the chamber in Dhaka, I know. Basic apparel items and high value-addition items (designer dresses and men's/women's jackets/suits) are both exported. Value addition will climb as local technical expertise for textile and apparel technology (such as CAD/CAM and working with specialized sectors like PPE and artificial fibre) increases. There is no reason this trend will be halted. Textile backward integration wise Bangladesh is in a way better situation than Vietnam is.

But when juggernauts like China and competitors like Vietnam exist, things will be tough on the EXPORT front for small plastic goods, Household goods, kitchen appliances, cellphones hand tools, auto parts etc.

Non-apparel exports like Pharma, Leather-goods, furniture, athletic shoes and sanitaryware/porcelain/ceramics items exports are bright spots and have been doing better.

But local market is almost completely supplied by local brands, assemblers and mfrs. for these items e.g. cellphones, small appliances and major appliances as well as light engg. items like bicycles and motorcycles.

This company for example, owns Italian fridge brands like Zanussi and exports to EU. They also make 4K and 8K voice command TVs.

Hand tools and auto parts exports are from informal sector only. Like the rest of the subcontinent.

 

[Bilal9]

The problem is, it's easier said than done.

China cornered this market completely. Only bits and pieces are now left. I honestly don't see a way out for any of these countries. The world cannot accommodate another China.

Most of the third world will grow to some extent, but hardly any will ever reach middle class level. All of them will get stuck at somewhere between $5000-8000 GDPPC.

That in itself will still be a significant improvement over their current situation, but the third world as a whole simply won't ever break the $10000 mark.

I cannot agree with your logic, but will digress because I do not have the time to point them out right now.

There is too much difference between the GDP per capita of the developed world and the 2nd/3rd world countries. Some equalizing will take place, and by no means we are finished with that.

 

[Realtalk108]

First off, $10,000 is a tremendous achievement in itself. That means out of poverty, an achievement many times more significant than going to moon.

Agreed, but I don't see that happening of course. In fact even to reach $5000, these countries will need decades. And then of course, the average figure is misleading. There is bound to be huge income inequality.

Technological improvements and production efficiency will make life a bit easier. That's about it.

The population numbers are simply too large in the subcontinent. My guess is that only 20-30% of Ind-Pak-BD will become somewhat affluent, and they will have to subsidize the rest, for a long time.

 

[VikingRaider]

@bluesky , @Bilal9 Bhai , what's your take on this video of Dr Reza kibria?

 

[bluesky]

@bluesky , @Bilal9 Bhai , what's your take on this video of Dr Reza kibria?

I truly understand the statement of Dr. Reaza Kibria that the visiting IMF staff team has no power to sanction loans. They came to estimate the ground reality of BD and will report their observation to the IMF Head Office.

After this, the IMF executive board will decide if it will grant any loans. However, our great newspapers at the insistence of finance minister Mustafa kamal published immature news.