Bangladesh won an initial funding approval from the International Monetary Fund, which allows the country to receive the next loan tranche from a $4.7 billion bailout package.

The staff-level agreement on economic policies must be approved by the IMF’s executive board before the South Asian nation can get its next payout of about $681 million, the Washington-based lender said on Thursday. Further monetary tightening, supported by neutral fiscal policy, and greater exchange rate flexibility, is needed to restore near-term macroeconomic stability, it said.

“Continued global financial tightening, coupled with existing vulnerabilities, is making macroeconomic management challenging, putting pressures on the taka and FX reserves,” IMF’s Bangladesh mission chief Rahul Anand said in a statement after concluding a visit to the country.

The funds will be key to cushioning Bangladesh’s economy from a global slowdown and elevated commodity prices. Moody’s Investors Service slashed Bangladesh’s credit rating deeper into junk territory in May, citing a deteriorating external position.

Bangladesh expects approval for the disbursement of the funds at an IMF board meeting in December, central bank spokesman Mezbaul Haque told reporters at a media briefing in Dhaka.

Authorities have hiked taxes, removed subsidies and allowed the taka to float more freely to meet the key prescriptions from the IMF to unlock money. The taka has fallen more than 6% against the dollar this year.

However, the nation missed key targets on foreign-currency reserves and revenue collection. Bangladesh’s dollar stockpile dropped to $21.1 billion as of Oct. 11, below the IMF target of $25.3 billion. Tax revenue was 150 billion taka ($1.36 billion) short of the target set for the fiscal year ended June.

“Raising revenue is critical to create additional space for social spending and investment,” Anand said. A concerted tax policy and administrative measures will be needed to raise Bangladesh’s low tax-to-GDP ratio in a sustainable manner, he added.

The funds will also ease pressure on Prime Minister Sheikh Hasina, who is facing calls to resign and give way to a caretaker government to ensure free and fair elections due in January next year. The largest opposition group, the Bangladesh Nationalist Party, will hold a street rally in Dhaka on Oct. 28 to raise cocerns about the polls.

(Updates with taka in sixth paragraph.)

Author: Arun Devnath and Karl Lester M. Yap