Bangladesh's net international foreign-exchange reserves target for June has been bent to around $18 billion by an IMF loan-appraisal mission in view of the country's replenishment prospects.
Sources said the visiting International Monetary Fund (IMF) team agreed to lower the mark for next month from the previously set target of $20.1 billion on request from the government.
Led by Chris Papageorgiou, Chief of the Development Macroeconomics Division of the IMF, the delegation Monday had meetings with finance officials all day long sharing the findings they had collated since late last month about the country's financial strengths and weaknesses.
Officials said the Fund appraisers today (Tuesday) would also have consultations with the Finance Division and central bank's officials before finalising the letter of intent and memorandum of understandings for the third tranche of the $4.7-billion loan package attached with strings that involve painful reforms.
They will have closing meetings with the central bank governor and his team on the day before packing their bags to leave Bangladesh tomorrow (Wednesday).
They said the government "could convince the IMF delegation that necessary contractionary measures had been taken to lessen imports and save foreign currencies but, despite many other cost-cutting measures, the reserves situation could not be improved as expected".
"The government has promised to continue the contractionary measures and also to go for exchange-rate flexibility as much as possible to enhance reserves position," said one official close to the consultations.
On enhancement of revenue collection, officials said, the government acknowledged that they would not be able to meet the June target of Tk 3.94 trillion.
However, revenue-board officials also pledged heightened efforts to get to the goal. But, until Monday, the IMF team had not given a final decision on lowering the revenue target for June.
Sources say the IMF is scheduled to release the third tranche of the loan later this month and finance officials are confident that the funds will be available in time.
Officials said the IMF delegation had reviewed achievements of targets and reform conditions until December last for releasing the third tranche of the loan by the end of this month. And the Finance Division officials are upbeat about getting by the dollars.
To get released fourth tranche of the loan the government of Bangladesh will have to meet the targets set for June.
Sources say excepting the reserve position, the government could meet the targets set for December last. However, the finance officials think that meeting all the targets for June, including forex reserves and revenue collection, is impossible. So, they sought mitigation in these cases.
In the face of macroeconomic instability, Bangladesh in late 2022 approached the IMF for a loan programme to replenish its forex reserves on slide. The Washington-based financier in January last year approved a $4.7-billion loan and at the same time put forward some reform measures to help bring financial stability.
The IMF-furnished to-do recipe includes cutbacks on state subsidies on various sectors, which economists and analysts say would lead to tariff rises. It also cajoles for market-based interest and exchange rates.
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