IMF says it is working with Bangladesh on RST loan with 'safeguards'

© Reuters. FILE PHOTO: International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the IMF/World Bank annual meetings in Washington, U.S., October 14, 2017. REUTERS/Yuri Gripas

By David Lawder

WASHINGTON (Reuters) -The International Monetary Fund said it would work with Bangladesh to design a loan program request in coming months that meets the country's economic and social dynamics and has "safeguards" in the event of a further deterioration in economic conditions.

In a revised statement of support for Bangladesh's request for a loan from the new IMF Resilience and Sustainability Trust, the Fund said that work on an RST loan will proceed as the new trust is being made operational. It also said it will work with Dhaka to design an IMF-supported reform program that would be required for the loan.

The Fund said in a statement that the amount of support that can be provided to Bangladesh has "not yet been discussed - it will be part of the program design discussions."

Dhaka's Daily Star newspaper reported last week that the finance ministry was seeking $4.5 billion from the IMF, a figure that the Fund has declined to confirm.

Reuters first reported last week that Bangladesh was seeking the first loan from the RST, which is being created to allow wealthier countries to channel part of their excess IMF Special Drawing Rights reserves to poorer and vulnerable middle-income countries. The Fund later said it was ready to support the request from the third South Asian country to seek the Fund's support after Pakistan and Sri Lanka.

The IMF said external conditions for Bangladesh have deteriorated sharply due to economic spillovers from the war in Ukraine.

"As part of the policy response, Bangladesh’s request for an RST and accompanying IMF-supported program will provide safeguards in the event of further deterioration of external conditions, while supporting the country’s efforts to address the longer term macroeconomic implications of climate change," the Fund added.