New economic pressure from Middle East war: Government seeks $3 billion emergency loan

Staff Correspondent

Dhaka: The ongoing war in the Middle East has created a new crisis in the Bangladeshi economy as the prices of fuel oil, gas and fertilizer have increased abnormally in the global market. To deal with this situation, the government has taken the initiative to borrow 3 billion US dollars (about 37 thousand crore taka) as budget support until June.

The Macroeconomics Branch of the Ministry of Finance has written to the Economic Relations Division (ERD) to discuss the issue. The letter has also been accompanied by a detailed position paper, which highlights the data and data on the pressures caused by the war.

In the four months (March to June), $3 billion will be required to import fuel oil, gas and fertilizer at higher prices. In addition, it is estimated that an additional Tk 38,542 crore will be spent on subsidies.

The position paper states that this loan assistance will serve three important roles:

• Maintaining foreign exchange reserves and ensuring fuel, fertilizer and food imports
• Providing short-term assistance to specific populations
• Preventing abnormal price increases in fuel and fertilizer within the country

According to the Ministry of Finance, the war in the Middle East has put a huge strain on Bangladesh’s external balance of payments. This loan will help meet urgent needs as well as maintain economic stability.

A similar crisis occurred earlier in 2022 during the Russia-Ukraine war. At that time, Bangladesh’s foreign exchange reserves rapidly decreased due to rising fuel and food prices and the poverty rate increased to more than 9 percent.

Finance Minister Amir Khasru Mahmud Chowdhury had said on March 31 that Bangladesh’s economic situation would be highlighted at the spring meetings of the World Bank and the IMF. Currently, senior officials of the Finance Ministry, including the Finance Minister, are attending the meeting in Washington, where the issue of seeking additional loans from the IMF will also be discussed.

The government hopes that if it receives this emergency loan from development partners, it will be possible to significantly reduce economic pressure in the latter part of the current fiscal year.