Bangladesh to secure $1.31 billion loan in Dec: Cenbank

Bangladesh is on track to secure $1.31 billion in foreign loans this December from various sources, including the International Monetary Fund (IMF), according to the central bank.

Bangladesh Bank spokesperson Md Mezbaul Haque, in a press release on Wednesday, said the second tranche ($689 million) of the $4.7 billion IMF loan package allocated for Bangladesh will be available by Friday.

The country is also set to receive $400 million from the Asian Development Bank this month, along with $90 million from South Korea and an additional $130 million from other sources.

Mezbaul Haque said positive trends in remittance inflows and additional loan support from various donors this quarter are expected to contribute to a net increase in foreign exchange reserves, despite ongoing essential expenditures in key areas. 

"As per BPM6 calculation [the sixth edition of the IMF's Balance of Payments and International Investment Position Manual], our forex reserves currently stand at $19 billion. Disbursements of these loans will notably bolster our reserves," he said.

"A substantial portion from our reserves will be utilised next for ACU [Asian Clearing Union] import bill payments. Approximately $1 billion will be withdrawn from our reserve for this purpose in January," said the spokesperson.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, told The Business Standard that while the upcoming debt support may provide temporary relief for our foreign exchange reserves, its impact on reserve expenditure remains uncertain.

"It is somewhat comforting to see the dollar inflows, but how effectively this loan will support our import-related expenditures in the long run is yet to be seen," he said.

"We have had to sell more than $6 billion from reserves so far this fiscal year. That means selling $1 billion per month. With what we get this month as a loan, we can continue the sales of dollars for another five weeks," he said.

The economist said, "Donor loans will not arrive every month. We incur significant monthly expenses on essential imports like oil, gas, fertilisers, and staples. Therefore, exploring alternative ways to boost dollar inflows is crucial for long-term stability."

The central bank data reveals that around $12 billion in export earnings have not yet been repatriated. Some exporters may have delayed repatriation due to concerns about the economic climate, including upcoming elections. The government expects this situation to improve after the election, potentially stabilising the dollar crisis, Zahid Hussain said.

According to the IMF's $4.7 billion loan agreement, Bangladesh is expected to receive the full amount by December 2026. However, the loan comes with strings attached: Bangladesh must implement various conditions and reform programmes to strengthen its economy.

The IMF set a target of $26.81 billion for Bangladesh's net foreign exchange reserves by December. However, according to the Bangladesh Bank data, the current reserves as per BPM6 stand at $19 billion.

Selim Raihan, the executive director of the South Asian Network on Economic Modeling (Sanem), told the TBS, "The [IMF] loan facility has given some relief to the country's reserves. However, there is little progress in increasing organic dollar inflows. Export earnings, remittances, and foreign investments are not rising much."

While short-term bridge loans have provided a temporary buffer for the private sector, deeper challenges remain in the trade financing landscape. Traders are increasingly finding it difficult to secure buyers' credit, further exacerbated by a decrease in available deferred letters of credit, he said.

"Forex reserves will erode further if the pace of private lending does not pick up steam. Because then more dollars have to be released from the reserves for private-sector imports," Selim said