By Waliur Rahman BBC correspondent in Dhaka

The IMF wants to see more people quickly brought out of poverty

The announcement came a day after the World Bank separately cleared more than $500m for development programmes in Bangladesh.

The approvals followed lengthy negotiations between the government and the two leading donor agencies.

Both lenders say the approval of such big funds reflects their recognition of the country's progress in economic reform efforts.

The approval for about $490m in special drawing rights was given by the executive board of the IMF during its meeting in Washington.

The three-year arrangement under the IMF's Poverty Reduction and Growth Facility (PRGF) for Bangladesh will support the government's economic reform programme up to 2006.

Stronger economy

The IMF announcement said the decision would make available immediately to Bangladesh the first disbursement of an amount equivalent to about $70m.

MONEY FOR BANGLADESH IMF: $490m over three years, with $70m available immediately World Bank: $536 million in interest-free loans

The IMF's Deputy Managing Director, Shigemitsu Sugisaki, said that over the past year Bangladesh's economic performance had strengthened as a result of the "authorities' prudent macroeconomic management and renewal of structural reform".

"The challenges facing Bangladesh now are to build on this record of policy implementation and to put the economy on a path of higher growth with faster poverty reduction," he said.

The IMF's approval followed the announcement by the World Bank that it would make $536 million available in interest-free loans to Bangladesh for four development projects.

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The approvals of more than $1bn by the two organisations in a couple of days are good news for the Bangladesh Finance Minister, Saifur Rahman, who had been worried since the country's foreign exchange reserves dipped as low as $1.5bn last year.

The reserve position had since improved to $2bn earlier this month, but it still can barely cover only two months' imports.

Under the PRSP program, real GDP growth is targeted to rise to 6.5% by June 2006, to be met largely by external assistance on concessional terms.

Official reserves will be built to over three months of imports within three years.

To achieve these goals, the key elements in the programme are:

• fiscal reform
• reforms of nationalised commercial banks
• state-owned enterprise reforms
• more liberal exchange and trade regimes

Mr Rahman welcomed the announcements by the World Bank and the IMF saying these reflected their confidence in the government's economic programme.