IMF Offers Bangladesh $700m Soft Loan
Friday, 21 August 2009

The International Monetary Fund has offered Bangladesh a $700 million soft facility to assist with the impact of the global economic downturn, Bangladesh Bank governor Atiur Rahman said.

"We received an e-mail from the IMF on Tuesday saying it had decided to give the loan assistance to help Bangladesh face the adverse affects of the global economic downturn, and boost the economy," Atiur Rahman, governor of the central bank, told on Wednesday.

The central bank will receive the loan by September, said Rahman.

Foreign exchange reserves now total $8.22 billion, said Rahman, adding that the IMF assistance would push the figure up to $9 billion and should help encourage greater foreign investment to the country.

A visiting IMF team last month said they wished to provide the loan assistance to stabilise Bangladesh's balance of payments (BOPs) and help the country face the fallout from the global recession, said the BB governor.

"I told them we had not felt the heat of recession too badly, and our BOPs were free from negative effects. Moreover, I said we had surplus reserves," said Rahman.

Rahman said he had, nevertheless, asked the IMF to reward Bangladesh for keeping its BOP surplus under control amid the global downturn.

"The IMF's decision might be a part of that reward," he said, adding that the organisation usually provided hard loans to nations trying to stabilise their BOPs. Soft loans at low interest rates, however, such as the one being offered are designed to reward IMF members who have good economic fundamentals.

"We do not need the loan right now. But with a comparatively low interest rate, it will be helpful in facing the impact of the recession," said Rahman.

The global recession had a negative impact on shrimp and leather exports, but the ready-made garments (RMG) sector was relatively untouched, since it mainly exports mid-range garments, he said.

"Demand for less expensive garments in the world market did not fall significantly," said the BB governor.

He said the recession could even provide Bangladesh with some opportunities: "Now many countries are shaking off the worst affects of the downturn, so new markets will be created, and we should be prepared to take advantage of the situation."

Turning to another topic, Rahman said he hoped to see remittances reach the $10 billion mark by the end of the year.

"Remittances are increasing day-by-day. They stood at $8 billion just more than a week ago, they were $8.22 billion on Tuesday, and by the end of the year they should exceed $10 billion," said Rahman.

In his July monetary policy announcement, the BB governor said loans would be disbursed from excess reserves to boost investment in the country.

He also said loans would be provided for exporters from the reserve.

Finance minister AMA Muhith, after a meeting with IMF's visiting Asia-Pacific adviser Masato Miyazaki last month, had said the lending agency was interested in offering Bangladesh a soft loan facility at 0.025 percent interest, under its Poverty Reduction Growth Fund (PRGF).

Muhith said IMF was offering the facility as Bangladesh has a good reputation for repaying on time.

He also said such loans would be most useful in supporting various public and private sector gas and power projects.


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