IMF Staff Reaches Staff-Level Agreement with Bangladesh on the Extended Credit Facility/Extended Fund Facility and the Resilience and Sustainability Facility

IMF News, November 9, 2022

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Canonical URL: IMF Staff Reaches Staff-Level Agreement with Bangladesh on the Extended Credit Facility/Extended Fund Facility and the Resilience and Sustainability Facility

Staff-level agreement reached to support Bangladesh with:
- a 42-month arrangement of about US$ 3.2 billion under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF).
- a concurrent Resilience and Sustainability Facility (RSF) arrangement of about US$1.3 billion.
Equivalents and quota metrics stated by IMF staff:
- US$ 3.2 billion = SDR 2.5 billion, equivalent of 231.4 percent of quota.
- US$1.3 billion = SDR 1 billion, equivalent of 93.8 percent of quota.
The staff-level agreement is subject to IMF management approval and Executive Board endorsement, expected in the coming weeks.

The RSF is expected to:
- provide affordable, long-term financing to support Bangladesh’s climate investment needs.
- catalyze climate financing.
- reduce balance of payment pressures from import-intensive climate investment.
The concurrent RSF supplements resources made available under the ECF/EFF and will expand fiscal space to finance climate priorities identified in the authorities’ plans, including by catalyzing other financing and reducing external pressures from import-intensive climate investment.

Mission timing and purpose:
- IMF mission led by Mr. Rahul Anand visited Dhaka from October 26 to November 9, 2022, at the request of the Government of Bangladesh to discuss IMF support and the authorities’ comprehensive economic reform agenda.
Reasons cited for the request:
- Cushion the economy from economic disruptions caused by the ongoing war in Ukraine.
- Manage macroeconomic risks posed by climate change.
Recent economic developments noted:
- Bangladesh’s robust economic recovery from the pandemic has been interrupted by Russia’s war in Ukraine, leading to:
- a sharp widening of the current account deficit,
- rapid decline of foreign exchange reserves,
- rising inflation,
- slowing growth.

Quoted objectives from Mr. Rahul Anand:
- The new ECF/EFF arrangement is aimed at restoring macroeconomic stability and preventing disruptive adjustments to protect the vulnerable, while promoting structural change to support strong inclusive and green growth.
- To successfully graduate from Least Developed Country status and achieve middle-income status by 2031, it is important to build on past successes and address structural issues to accelerate growth, attract private investment, enhance productivity, and build climate resilience.
Program expected outcomes:
- bolster external position,
- reduce vulnerabilities,
- prepare ground for a robust and inclusive growth pick-up by scaling up social, development and climate spending.

Creating additional fiscal space
- Higher revenue mobilization and rationalization of expenditures to allow increasing growth-enhancing spending.
- Mitigation of impact on the vulnerable through higher social spending and better targeted social safety net programs.
Containing inflation and modernizing the monetary policy framework
- Monetary stance will be guided by the inflation outlook.
- Monetary policy modernization to promote macroeconomic stability and improve policy transmission.
- Increased exchange rate flexibility to help buffer external shocks.
Strengthening the financial sector
- Reducing financial sector vulnerabilities.
- Strengthening oversight, enhancing governance and the regulatory framework.
- Developing capital markets to help mobilize financing to support growth objectives.
Boosting growth potential
- Creating a conducive environment to expand trade and foreign direct investment.
- Deepening the financial sector, developing human capital, and improving governance to enhance the business climate.
Building climate resilience
- Strengthening institutions and creating an enabling environment to meet climate objectives, support large-scale climate investments, and help mobilize additional climate financing.

IMF team meetings included:
- Finance Minister Mr. Kamal.
- Bangladesh Bank Governor Mr. Talukder.
- Finance Secretary Ms. Yasmin.
- Other senior government and Bangladesh Bank officials.
- Representatives from the private sector, bilateral donors, think tanks, and development partners.
Closing remark from the IMF team: thanks to the authorities for candid discussions and warm hospitality and intent to continue engagement in support of Bangladesh and its people.

Press Release No. 22/375 — IMF Communications Department — November 9, 2022