The government will soon begin negotiations with the International Monetary Fund (IMF) on a $4.5 billion budget-support credit as the IMF is set to send another delegation later this week to determine the country's credit worth.
An IMF executive in a press briefing Saturday spoke about Bangladesh's approach for the credit and its economic situation, especially inflation, currency depreciation, growth prospects and the like.
"We are currently preparing for a negotiation mission, for the first negotiation mission to Bangladesh, which will start next week," said Anne-Marie Gulde, deputy director, Asia and Pacific Department at the IMF.
Bangladesh has already sought the budgetary support from the IMF to minimize its fiscal deficit at this trying time for all across the globe for geopolitical and economic volatility.
Gulde also said: "We expect 7.2% of GDP growth, but there are global headwinds that are quite significant. Bangladesh is an export-dependent economy, and with headwinds in its major markets, our forecast for growth next year is 6%."
They also noticed the taka having depreciated about 20%.
"Reserves have gone down. They're still at a comfortable level, but the direction has been towards going down," the IMF deputy director said.
Meanwhile, the World Economic Outlook has cut Bangladesh's economic growth forecast to 6% for fiscal year FY23 from its earlier projection of 6.7%.
In its latest WEO, the IMF downgraded the projection of its April forecast of 6.7% growth citing high energy and food prices, inflation, higher interest rates, and the Russia-Ukraine war.
Meanwhile, Director of the Asia and Pacific Department Krishna Srinivasan in his speech said the IMF has identified three risks -- a significant tightening of global financial conditions, the Ukraine-Russia war, and Chinese economy's uncharacteristic and sharp slowdown in growth.
With respect to the April WEO, growth forecasts for Asia and the Pacific are being downgraded by 0.9 percentage points in 2022 and 0.7 points in 2023. So, growth in 2022 and 2023 is projected at 4% and 4.3% respectively, he also said.
The IMF director advised the Asia-Pacific region tight monetary policy, and the fiscal consolidation to continue.
He notes that Asia is now "the largest debtor in the world besides being the biggest saver, and several countries are at high risk of debt distress. Public and private debt dynamics are already worse following the pandemic because of slower growth, rising rates, and higher debt levels."
The IMF executive predicts that large depreciations and rising interest rates could trigger financial stress in countries with high leverage among non-financial corporates and households as well as unhedged balance sheets and those facing refinancing risks.
If interest rates rise substantially, this would raise the fiscal balance needed to stabilize debt, crowding out fiscal space for other priorities, Srinivasan added.
