(Bloomberg) -- Bangladesh’s new central bank governor said the country is seeking an additional $3 billion from the International Monetary Fund as it looks to recover from recent political turmoil, and is buying dollars from local banks to meet unpaid debt.
The South Asian country has begun talks with the Washington-based IMF for the additional loan, central bank Governor Ahsan H. Mansur said in an interview in the capital Dhaka. Bangladesh secured $4.7 billion in funding from the IMF last year.
The country is only just emerging from weeks of upheaval following deadly protests that forced the ouster of Prime Minister Sheikh Hasina earlier this month. Bangladesh is also in talks with the World Bank, the Asian Development Bank and the Japan International Cooperation Agency for funds to help repay the debt it owes suppliers of critical services, such as electricity, the governor said.
The previous central bank governor, Abdur Rouf Talukder, was forced to resign days after Hasina fled. A new interim governor led by Nobel Prize-winning economist Muhammad Yunus appointed Mansur, a former IMF official, to the central bank post last week.
Garment exports, the country’s main foreign exchange earner, have been disrupted by the turmoil. Reserves were already under pressure before the current crisis, and stood at $20.5 billion as of July 31, just enough to cover about three months of imports.
The central bank bought more than $200 million in three days from the interbank market since Mansur was appointed governor at Bangladesh Bank on Aug. 13. The central bank aims to buy as much as $1 billion every month from local banks, he said.
Bangladesh has an immediate payment obligation of about $2 billion to foreign suppliers of critical services, including about $800 million to India’s Adani Power Ltd., according to Mansur. The country has already blocked repatriation of $323 million in airline revenue to delay dollar-denominated payments.
“We’re in crisis management,” the governor said. “We’re only paying what we’re asked to — the minimum.”
Credit rating companies already downgraded Bangladesh’s debt before the current turmoil, citing the country’s weak reserves. Fitch Ratings Ltd. warned last week that pressure on the sovereign rating could increase if the political transition faces challenges, such as prolonged violence. Moody’s Ratings said earlier this month that political stability and commitment to structural reforms will determine the outlook for the country’s credit rating.
Bangladesh wants to maintain its “impeccable record of servicing its foreign obligations,” Mansur said. “We never failed in the past, and we don’t want to fail ever in the future. That’s a very strong, clear commitment from our side.” The injection of additional funds would be “just to cover” the near-term payment obligations, he said.
The Bangladesh taka is down about 9% since the start of the year, according to data compiled by Bloomberg. Moves have been contained as part of a crawling peg foreign exchange rate system introduced three months ago that allows some limited movement in the currency around a level set by the central bank, and is intended as an intermediate step toward a more freely floating currency.
--With assistance from Anup Roy and Ronojoy Mazumdar.
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