Commuters make their way along a street amid dusty conditions in Dhaka
Commuters make their way along a street amid dusty conditions in Dhaka on January 25, 2023. Image Credit: AFP

Dhaka: The International Monetary Fund has signed off on a $4.7 billion support loan package for Bangladesh to help it cope with soaring energy and food costs that have sparked huge protests.

Bangladesh and other South Asian countries dependent on fossil fuel imports were hit hard by sharp cost-of-living increases following Russia's invasion of Ukraine.

Nationwide blackouts of up to 13 hours a day hit the electricity grid last year and the government extended food relief for households unable to afford rice and other staples.

The IMF package makes $476 million immediately available to the government but commits it to tax hikes and bringing down the number of bad loans in the banking sector.

"Multiple shocks have made macroeconomic management challenging in Bangladesh," the lender's active chair Antoinette Sayeh said in a statement released on Tuesday.

"Authorities need to accelerate their ambitious reform agenda to achieve a more resilient, inclusive, and sustainable growth," she said.

Bangladesh plans to use the IMF loan to prop up its foreign exchange reserves, which have nosedived from $46 billion to $34 billion.

The local currency has depreciated around 25 percent against the US dollar since last May, driving up costs for petrol distributors and power utilities that have rippled across the rest of the economy.

Bangladesh's official inflation rate is around 8.7% but independent economists say the true figure is substantially higher.

The opposition Bangladesh Nationalist Party has blamed the government for the crisis, accusing it of squandering cash on multibillion-dollar vanity projects.

It has organised a series of rallies demanding Prime Minister Sheikh Hasina's resignation and a general election.

Bangladesh is one of several South Asian countries seeking international help in navigating economic shocks over the past year.

Pakistan is in the grips of a major crisis and facing the prospect of looming national bankruptcy, with an IMF delegation visiting Tuesday to discuss a vital cash injection.

Sri Lanka is still waiting to finalise its own bailout with the lender after an unprecedented meltdown last year that saw months of major food and fuel shortages.