WASHINGTON: IMF staff and Bangladesh have reached an agreement to unlock close to $1.2 billion in financing as the South Asian country grapples with declining foreign exchange reserves, the Washington-based institution said Wednesday.

Following two weeks of talks in the capital, Dhaka, the International Monetary Fund said a “staff-level agreement” had been reached to pay out the latest portion of three ongoing programs – subject to board approval.

“The authorities have made significant progress on structural reforms under the IMF-supported program, including the implementation of a formula-based fuel price adjustment mechanism for petroleum products,” the IMF said in a statement.

IMF says its mission will visit Pakistan this month to discuss new loan

But it added that spillovers from the “tightening of global financial conditions, and still elevated international commodity and food prices, coupled with domestic vulnerabilities, has led to persistently high inflation and declining foreign exchange (FX) reserves.”

“This has exacerbated pressures on the economy and heightened the complexity of macroeconomic challenges,” it said.

The IMF expects Bangladesh’s economy to grow by an inflation-adjusted 5.4 percent in the 2024 financial year – down slightly from six percent last year – before rebounding in 2025.

The Fund forecasts that inflation will remain elevated at around 9.4 percent this year, before easing to around 7.2 percent next year, “on the back of the continued tighter policy mix and projected lower global food and commodity prices.”