BB eyes $2b loan, rising remittances, IMF support to cushion Iran war impact
The central bank said foreign exchange reserves remain strong enough to cover import expenses even if the war continues for three to four months.
Bangladesh Bank has outlined a series of policy measures and contingency plans to tackle potential economic fallout from the ongoing conflict in the Middle East, particularly the Iran war.
At a meeting with senior journalists and leaders of the Economic Reporters' Forum (ERF) in Dhaka today (29 March), BB Governor Mostakur Rahman and deputy governors highlighted both the strengths of the current macroeconomic situation and the risks posed by a prolonged conflict.
On the positive side, the central bank said foreign exchange reserves remain strong enough to cover import expenses even if the war continues for three to four months. The exchange rate has remained stable without intervention and is expected to avoid major fluctuations.
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To ease pressure on the balance of payments, BB is moving to secure a $2 billion loan. It also expects remittance inflows to increase by $2 billion to $2.5 billion in the current fiscal year, supported by seasonal factors such as Eid-ul-Azha. Additionally, the country anticipates receiving a $1.5 billion tranche from the International Monetary Fund (IMF) in June.
The government is also exploring government-to-government (G2G) arrangements with Middle Eastern countries to import fuel at lower prices or as grants. Efforts are underway to contain import-driven inflation and boost domestic demand, including regional initiatives.
The central bank plans to expand agricultural credit targets and introduce new refinancing schemes to support the sector. To improve revenue collection, the use of Bangla QR codes will be made mandatory from 1 July.
A Tk600 crore startup fund will begin disbursing loans in June to support employment generation, while steps are being taken to reopen all factories that remained closed before and after 5 August 2024.
Authorities also stressed priorities such as keeping the financial sector free from political influence, recovering stolen assets, and strengthening operations of consolidated Islamic banks.
However, BB warned of significant risks if the war prolongs. Bangladeshi migrant workers in the Middle East could lose jobs and return home, reducing remittance inflows and increasing pressure on domestic employment and welfare.
There are also concerns that the IMF may push for reduced fuel subsidies, potentially fueling inflation. Any increase in fuel prices would further drive inflation, which monetary policy alone may not be able to control effectively.
Weak revenue collection poses another challenge, with the government likely to face a deficit even in its operational budget. The central bank also noted that GDP growth must exceed 5% to attract meaningful foreign investment.
