The Executive Board of the International Monetary Fund (IMF) approved a $4.7 billion loan on Monday, according to a press release from the institution.
The Board approved Bangladesh’s application for US$3.3 billion under the Extended Credit Facility (ECF) and Extended Credit Facility (MEDC) and US$1.4 billion under the new Resilience and Sustainability Facility (RDF).
Bangladesh is the first Asian country to benefit from the FRD.
“Several shocks have complicated macroeconomic management in Bangladesh,” said Antoinette Sayeh, deputy managing director of the IMF, in a statement released on Tuesday.
“The authorities need to accelerate their ambitious reform agenda to achieve more resilient, inclusive and sustainable growth,” she added.
Last November, an IMF delegation and representatives from Dhaka struck a tentative agreement “in support of Bangladesh’s economic policies” totaling $4.5 billion.
Board approval allows for an immediate payout of approximately $476 million.
Like Sri Lanka in particular, Bangladesh has been hit hard by the sharp rise in global food and energy prices following Russia’s invasion of Ukraine last February.
In recent months, the South Asian country of 170 million has seen lengthy blackouts as utilities struggle to get diesel and gas supplies.
Dhaka had to initiate “austerity measures”. The country’s foreign exchange reserves are currently $32 billion, up from $46 billion last year.
The Bangladeshi taka depreciated about 25% against the dollar.
Because of this devaluation and the drop in foreign exchange reserves, Bangladesh is struggling to finance fossil fuel imports, leading to a sharp increase in fuel prices.
In August, the government hiked oil and diesel prices by almost 50%.
The official inflation rate is 8.71%, but independent economists say the real figure is around 20%.
The main opposition party, the Bangladesh Nationalist Party (BNP), blames the government for the crisis and accuses it of wasting billions of dollars on futile projects.
The opposition has staged protests in recent months calling for the resignation of Prime Minister Sheikh Hasina and for general elections to be held under an interim government.