State Minister for Planning Shamsul Alam thinks the IMF loans will positively impact Bangladesh’s economy.
He also believes the reforms suggested by the IMF as part of the loan programme are “rational”.
“Our financial sector is undergoing continuous reforms following their advice. Other lenders are showing interest as we’ve taken these proposals positively,” Shamsul said at an annual conference organised by research organisation South Asian Economic Modeling, or SANEM, in Dhaka on Saturday.
His remarks came after Bangladesh received the first instalment of $4.7 billion loans from the International Monetary Fund last week. The funds are expected to help Bangladesh build a buffer against depleting foreign currency reserves needed for crucial imports, such as fuel.
Economists are worried about global price rises, the devaluation of the taka against the dollar, dwindling dollar reserves, and a fall in inward remittances, among others. Amid the global economic crisis, many more countries have sought support from the IMF and others.
In the country report on the government’s request for loans, the IMF backed Bangladesh’s decision to raise energy prices to cut subsidies. The report said control measures could prolong the ongoing hardships and will likely hurt both near-term growth and medium-term economic potential. Still, rationalising energy subsidies will free fiscal resources for social and development spending.
The key objectives of the loan programme also include enhancing revenue mobilisation, reducing the issuance of national savings certificates, and increasing spending efficiency with fiscal institutional reforms.
Professor Selim Raihan, executive director of SANEM, also sees the IMF loans positively. “It’s a turning point for Bangladesh, not a political decision. Other lenders’ confidence in Bangladesh will grow, and it’ll be easier to get loans on low interests.”
Economist Professor Rehman Sobhan advised the government to spot the damages suffered by the macroeconomy and set out a plan on how the government agencies will work to repair them.
Wahiduddin Mahmud said the falling reserve trend is more important than its size. “It’ll be difficult for an import-based country like us to tackle the situation within the rules if the reserves keep falling.”
As many as 150 economists, especially from South Asia, are participating in the two-day conference.