Bangladesh proposed an increment of taxes in its annual budget released last week as it prepares to meet the conditions of its loan of USD 4.7Bn from the IMF. The move comes a day after Moody’s cuts Bangladesh’s debt into junk territory. External vulnerabilities and the deterioration of the country’s FX reserves are among the main reasons for the downgrade.
Although there have been some improvements, the ongoing scarcity of dollars and the decline in foreign exchange reserves indicate sustained pressures on Bangladesh’s external position. These pressures further exacerbate constraints on imports and subsequently lead to energy shortages.