Bangladesh seeks IMF assistance to overcome financial crisis

Bangladesh has asked the International Monetary Fund to help weather the financial shock caused by volatile energy prices after Russia’s invasion of Ukraine, officials said on Tuesday.

The South Asian nation has seen long outages in recent weeks, sometimes up to 13 hours a day, as utilities struggle to supply diesel and gas to meet demand.

Tens of thousands of mosques across the country have been told to reduce their use of air conditioners to ease pressure on the power grid, as power shortages are compounded by currency depreciation and dwindling foreign exchange reserves.

A senior finance ministry official, speaking on condition of anonymity, confirmed to AFP that Dhaka had requested a credit line from the IMF, without disclosing the amount.

Local newspaper, the Daily Star, reported that Bangladesh is seeking $4.5 billion from the Washington-based lender following a recent visit to the country by its representatives.

Authorities were in the grip of a “crisis” due to rising international fuel prices after the Russian attack on Ukraine, Deputy Planning Minister Shamsul Alam told AFP.

“Our balance of payments is in the negative zone. We need to stabilize our exchange rate,” he said.

Economists say the Bangladeshi taka has actually slipped against the US dollar by about 20% in the past three months.

The depreciation of the local currency has further weakened the country’s finances, with the current account deficit reaching $17 billion.

‘Austerity measures’

Alam said the government had introduced “austerity measures” in addition to power rationing, including import restrictions and development spending cuts.

Diesel-fired power plants across the country, representing a generating capacity of 1,500 megawatts, have been taken off the grid, while some gas-fired plants are also idle.

Bangladesh’s precarious financial situation has been worsened by unprecedented floods in the northeast, inundating the homes of more than seven million people and causing nearly $10 billion in damage, according to government estimates.

The opposition Bangladesh Nationalist Party blamed the government for the crisis, accusing it of wasting money on vain multibillion-dollar projects.

Several South Asian countries are grappling with runaway inflation and deteriorating public finances triggered by headwinds in the global economy.

Neighboring Sri Lanka is currently in negotiations for an IMF bailout after running out of foreign currency to import even its basic necessities, triggering long queues at gas stations, food shortages and long power cuts .

Angry mobs in the island nation stormed the president’s official residence earlier this month, prompting the leader to flee abroad and hand in his resignation.

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