(Reuters) - Bangladesh has sought a $4.5 billion loan from the International Monetary Fund, the Daily Star newspaper reported on Tuesday, joining South Asian neighbours Pakistan and Sri Lanka in seeking help to cope with mounting pressure on their economies.

Known for its big garment-exporting industry, Bangladesh has sought the funds for its balance of payment and budgetary needs, as well as for efforts to deal with climate change, the Daily Star reported, citing documents it had seen.

The country’s $416 billion economy has been one of the fastest-growing in the world for years, but rising energy and food prices because of the Russia-Ukraine war has inflated its import bill and the current account deficit.

The Daily Star said Finance Minister AHM Mustafa Kamal wrote to IMF Managing Director Kristalina Georgieva on Sunday. A senior finance ministry official, who did not want to be named, said the matter was indeed “being discussed” but declined to give details.

Kamal and IMF’s office in Bangladesh, a country of more than 165 million people, did not respond to requests for comment.

Atiur Rahman, a former central bank governor, welcomed any approach to the IMF, saying the country should seek long-term, low-interest rates from international institutes in exchange for broader economic reforms like having flexible bank interest rates.

“We have been encouraging the government to do this,” said Rahman on the IMF loan request. “There’s a need for a balance-of-payments support. Exports and remittances alone cannot handle that. You need an extra dose of external funding.”

Bangladesh’s July to May current account deficit was $17.2 billion, compared with a deficit of $2.78 billion in the year-earlier period, according to central bank data, as its trade deficit widened and remittances fell.

In the first 11 months of the fiscal year that ended on June 30, imports jumped 39% but exports grew 34%.

The central bank, the Bangladesh Bank, recently announced a policy to preserve dollars by discouraging imports of luxury goods, fruit, non-cereal foods, and canned and processed foods.

Its foreign-exchange reserves fell to $39.67 billion as of July 20 - sufficient for imports for about 5.3 months - from $45.5 billion a year earlier.

Remittances from overseas Bangladeshis fell 5% in June to $1.84 billion, the central bank said, as many migrant workers lost their jobs because of the COVID-19 pandemic and many could not get home because of the travel disruption it caused.

Elsewhere in South Asia, Sri Lanka is facing its worst economic crisis in seven decades while Pakistan’s foreign exchange reserves are depleting rapidly.

The region’s economies have been hit particularly hard by the Ukraine war, which has raised the cost of fuel and other essential imports.

Source: Reuters

--Agencies