(Bloomberg) -- The International Monetary Fund pledged to work with Bangladesh’s interim government to regain economic stability as the country struggles to reduce pressure on foreign exchange reserves.
An IMF mission team led by Chris Papageorgiou discussed recent developments in the South Asian country and the authorities’ reform priorities during a visit from Sept. 24-30, according to a statement Monday from the Washington-based lender. This was its first visit since Muhammad Yunus took over as head of the interim government on Aug. 8.
The formation of the government has helped stabilize political and security conditions “fostering a gradual return to normalcy in the economy,” Papageorgiou said in the statement. “Nonetheless, economic activity has slowed markedly, while inflation remains at double-digit levels, owing to the recent turbulence and major floods.”
The deterioration in the balance of payments has put additional pressure on foreign exchange reserves and tax revenue collection has declined, while spending pressures have increased and domestic payment arrears have accumulated, he said.
Bangladesh sought $3 billion in additional funds from the IMF to rebuild foreign currency reserves as it’s under pressure to pay bills for overseas purchases. This would be in addition to a $4.7 billion loan program with the IMF.
“We support the authorities’ efforts to initiate policy adjustments, including continued monetary tightening and rationalizing non-priority capital spending, in response to these challenging circumstances,” Papageorgiou said.
The IMF will continue discussions on how to proceed with program reviews during the upcoming 2024 IMF-World Bank annual meetings in Washington, which start Oct. 21.
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