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Sunday, 17 February, 2002, 15:58 GMT
Bangladesh talks with IMF fail
Women at a garment manufacturing unit
The garment industry, a big forex earner in crisis
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By the BBC's Waliur Rahman in Dhaka

Negotiations between Bangladesh and the International Monetary Fund for an emergency balance of payments loan have failed.

Bangladesh has been seeking millions of dollars from the IMF to boost the country's foreign exchange reserves.

Officials say the foreign reserves are so low that it is difficult for Bangladesh to carry out normal trade.

This latest round of talks was the third in two months.

There has been no immediate reaction from the government.

Drop in reserves

An IMF spokesman in Dhaka said the talks would continue but he did not give a fresh date for the discussions.

Prime Minister, Khaleda Zia
Khaleda Zia: Economic condition is fragile

The Finance Ministry sought the loan when the foreign currency reserve dipped to around $1bn, equivalent to five weeks' worth of imports.

The IMF team held discussions with officials in Dhaka for two weeks.

The IMF's resident representative in Dhaka, Marijin Verhoeven, said the talks would continue on the basis of a comprehensive policy package which should be framed in the context of the budget for the next fiscal year.

The new budget is expected to go to parliament next June.

The Finance Minister, Saifur Rahman, had earlier said the IMF team was not happy with the current budget which proposed a huge deficit financing arrangement.

Bold measures

The IMF says Bangladesh must curb public expenditure, close down loss-making state-run industries and ensure good governance before it can hope to get more financial assistance.

The authorities in Bangladesh said the IMF loan was crucial for the country to avoid a balance of payments crisis.

Exports from Bangladesh have declined by nearly 15% since the 11 September attacks on America.

Last month, the country had to borrow from the commercial banks to pay for its import bills.

Because of the failure of negotiations with the IMF, the authorities are now pinning their hopes on the annual aid meeting in Paris next month.

See also:

08 Nov 01 | South Asia
Bangladesh gets no trade favours
17 Oct 01 | South Asia
Bangladeshi PM warns on economy
07 Feb 02 | South Asia
Timeline: Bangladesh
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