The Asian Development Bank (ADB) has already granted approval for a $400 million policy-based loan to assist Bangladesh. It is anticipated that the International Monetary Fund (IMF) will disburse $681 million within the next two days.
Furthermore, there are active deliberations concerning additional financial support, including a potential $250 million loan from the World Bank and another $400 million from the Asian Infrastructure Investment Bank (AIIB) in December.
The government is in the process of securing a substantial sum of $1.73 billion from various donor agencies alone. This influx of funds is a crucial component of the government's strategy to stabilize reserves in preparation for the upcoming January 7 elections.
In the past two months, the influx of remittances, totalling $3.9 billion, has been a positive indicator, However, emphasis has been placed on redirecting attention towards Resident Foreign Currency Deposit (RFCD), specifically channelling dollars that are currently within the country but outside the formal banking system, back into the banking sector.
Because of all these initiatives, economists, including Bangladesh Bank and the Economic Relations Division (ERD) are hoping that reserves will not decrease in December.
More than a billion dollars in foreign loans and budget support will be made available in December this year. Therefore, Bangladesh Bank hopes that the reserves will not fall this month, according to the central bank’s Managing Director and Spokesperson Mejbaul Haque.
In response to inquiries about the disbursement of foreign loans, Syed Ashrafuzzaman, joint-secretary at the Economic Relations Division (ERD) FCBA-1 branch, stated to Dhaka Tribune that numerous loans are expected in December. However, he noted that the specific timeline for disbursement would be better provided by the relevant department's staff.
Mejbaul Haque also highlighted the hope that the dollar's value would not increase, given the positive trend in remittance flow.
Offering a different perspective, Zahid Hussain, lead economist consultant at the World Bank Dhaka office, characterized the government's pre-election efforts as a type of temporary solution.
He told the Dhaka Tribune that this is more like addressing the symptom of the problem and not addressing the problem itself, just putting a band-aid over it. For long-term stability, good inflow is necessary.
“Only $2-3 billion may be available in this fiscal year. Even with that, you can purchase for about three months because Bangladesh Bank is selling dollars on a regular basis,” he explains.
According to ERD officials, it is certain that $400 million in budget support will be added to the Asian Development Bank reserve.
On December 8, ADB approved a $400 million policy-based loan to support the Bangladesh government's implementation of its National Adaptation Plan 2023–2050 and the Nationally Determined Contributions 2021 Update to the Paris Agreement to achieve climate-focused, inclusive development.
In addition, the second tranche of the International Monetary Fund (IMF) loan is expected to be approved by the organization’s board on December 12. If approved that day, the second tranche of $680 million will be added to the reserve the next day. This could bring in $108 million this month.
This is not the case and the government is trying to provide more support.
According to Finance Division officials, they already requested ERD to engage with the World Bank and finalize financial support by December.
It is known that the government had proposed a loan of $250 million in the current FY24, but it is now considering increasing it to $500 million.
Apart from the World Bank, discussions with the Asian Infrastructure Investment Bank (AIIB) for $400 million are underway.
ERD officials say there is a possibility of signing a loan agreement with AIIB this month.
However, Bangladesh received $1.7 billion in budgetary assistance from various development aid agencies in the last fiscal year.
The amount of support was $2.59 billion in FY22, $1.09 billion in FY21, and $1 billion in FY20.
Bangladesh Bank is now selling $7-8 million a day from reserves. Essentially, this amount is sold to purchase fuel and chemical fertilizers.
It has sold around $6 billion in the current financial year.
According to Bangladesh Bank data, on December 5 Bangladesh Bank’s reserves stood at $24.70 billion.