The International Monetary Fund (IMF) has given a number of suggestions during the approval of re-leasing the second tranche of $690 million of a $4.7 l-billion loan for Bangladesh.
The IMF suggested a cautious monetary policy to restore macroeconomic stability in the short term. Along with this, the global lender has said to be more flexible fiscal policy in the currency exchange rate as a support of the policy.
The IMF suggested taking these measures along with increasing resilience to external shocks.
The IMF has appreciated the Bangladesh Bank’s initiative to modernize the monetary policy framework further.
“If monetary policy is modern, it will reduce inflation and strengthen the effect of central bank policy in various areas,” the IMF commented in the meeting.
“Praising the currency’s decision to adopt a single exchange rate, the IMF insisted on more flexibility gradually. They think it is necessary to deal with external shocks in the economy,” said the IMF.
However, among the $690 million, nearly $468.3 million will be given under the ECF/EFF arrangement and $221.5 million under the RSF arrangement.
The ECF/EFF and RSF arrangements count $4.7 billion for Bangladesh, approved by the executive board on January 30, 2023. The first tranche count of $476 million was made available in February 2023.
“The ECF/EFF arrangement has helped restore macroeconomic stability and prevent disruptive adjust-ments to protect the vulnerable while laying the foundations for strong, inclusive, and environmentally sustainable growth,” the IMF said in a release on Wednesday.
The concurrent RSF arrangement has supplemented the resources made available under the ECF/EFF. IMF said this fund will help catalyze additional financing and build resilience against long-term climate risks.