Meeting IMF-set net forex reserve limit of $24.46 ‘challenging’

FE REPORT | Published: April 25, 2023 22:40:36

Achieving the targeted net foreign currency reserve of US$ 24.46 billion by June, as set by the International Monetary Fund (IMF), remains a matter of concern for the country, said sources at the Ministry of Finance (MoF).
They said Bangladesh managed to make good progress in implementing the reform suggestions of the IMF excepting the net reserve limit.
After a meeting with the visiting IMF delegation, the sources said the gross reserve size is now over $31 billion, but the net volume is less than $21 billion.
“We’ve to receive around $4.0 billion more in just over two months, which is a challenge. If we can reach close to the target, we can convince the IMF, and the government is working on it,” said an official of the MoF, who preferred to be anonymous.
The sources said the Washington-based global lender would probably give more focus on what policies the country takes to protect the reserve, instead of the target.
The visiting IMF representatives came to oversee progress of its conditions and get updated information about the country’s macroeconomic indicators.
They wanted to know about some key issues like implementation level of the ongoing budget, outcome of the revised budget, possible size of subsidy in the upcoming budget, size of fund to be allocated to pay interest, sources of the fund, and volume of operational costs.
As part of the IMF prescriptions, the National Board of Revenue (NBR) needs to increase revenue earning by 0.5 per cent as percentage of the GDP by June. The ministry is hopeful that the NBR would be able to meet the target, the sources added.
Meanwhile, the central bank informed the visiting IMF delegation that many of their reform prescriptions would be addressed in the upcoming Monetary Policy Statement (MPS), scheduled to be announced in third week of June.
Talking to the reporters after the meeting, Bangladesh Bank (BB) spokesperson Md Mezbaul Haque said the IMF team wanted to know about the progress of some key macroeconomic indicators, like market-driven exchange and lending rates, net reserve situation based on BPM6 method, interest rate corridors, etc.
He said the BB updated the IMF about the initiatives that the central bank had already taken to this effect.
“We informed them that many of their suggestions will be addressed in the next MPS.”
About the June net reserve threshold, as set by the IMF, the BB official was hopeful of reaching close to the target.
“It is only April. There is more time ahead of us. I don’t want to make any comment in advance on this issue right now.”
He stated that currently the country’s gross reserve stands at over $31 billion, and there is no major payment before June - excepting the Asian Clearing Union (ACU) payment.
Besides, over 9.0 per cent monthly growth was observed so far in terms of remittance inflow in April.
“We hope that the flow will continue to grow in the coming days. So we expect to reach close to the target by June.”
The central bank spokesperson also informed that the BB would release both net and gross reserve volume from July - when the next MPS regime would start.
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