Bangladesh has asked the International Monetary Fund for support in riding out a financial shock triggered by volatile energy prices after the Russian invasion of Ukraine, officials said Tuesday.
The South Asian nation has experienced lengthy blackouts in recent weeks, sometimes for up to 13 hours a day, as utilities struggle to source enough diesel and gas to meet demand.
Tens of thousands of mosques around the country have been asked to curtail their use of air conditioners to ease pressure on the electricity grid, with power shortfalls compounded by a depreciating currency and dwindling foreign exchange reserves.
A senior finance ministry official, speaking on condition of anonymity, confirmed to AFP that Dhaka had sought an IMF credit line, without disclosing the amount.
Local newspaper the Daily Star reported that Bangladesh was seeking $4.5 billion dollars from the Washington-based lender following a recent visit to the country by its representatives.
Authorities were grappling with a “crisis” because of rising international fuel prices after the Russian attack on Ukraine, junior planning minister Shamsul Alam told AFP.
“Our balance of payments is in the negative zone. We need to stabilise our exchange rate,” he said.
Economists say the Bangladeshi taka has effectively slid against the US dollar by around 20 percent in the past three months.
Bangladesh formally seeks a US$4.5 billion IMF bailout. Good news is Dhaka is not swallowing the kool-aid that all’s well with its economy. But the tough news is that the debt over-burden is still a ticking time-bomb. https://t.co/5BpfORB9en
— Avinash Paliwal (@PaliwalAvi) July 26, 2022
The depreciation of the local currency has further weakened the nation’s finances, with the current account deficit hitting $17 billion.
Alam said the government had rolled out “austerity measures” in addition to electricity rationing, including import curbs and cuts to development spending.
Diesel power plants across the country, accounting for 1,500 megawatts of generation capacity, have been taken off the grid, while some gas-fired plants are also idle.
Bangladesh’s precarious financial position has been compounded by unprecedented floods in the northeast, inundating the homes of more than seven million people and causing nearly $10 billion in damage, according to government estimates.
The opposition Bangladesh Nationalist Party has blamed the government for the crisis, accusing it of squandering cash on multibillion-dollar vanity projects.
Several South Asian nations are struggling with galloping inflation and deteriorating public finances triggered by global economic headwinds.
Nearby Sri Lanka is currently in negotiations for an IMF bailout after running out of foreign currency to import even its most vital essentials, triggering long queues at petrol stations, food shortages and lengthy power cuts.
Angry crowds in the island nation stormed the president’s official residence earlier this month, prompting the leader to flee abroad and tender his resignation.
AFP with additional input by GVS News Desk