It will not be possible to meet the target of net foreign exchange reserves by next June under the International Monetary Fund (IMF) loan program. Bangladesh has requested to reduce this target below 18 billion dollars. The IMF mission to monitor the implementation of the conditions has also promised to keep Bangladesh’s request to continue the loan program. Even before this, Bangladesh has taken concessions on the reserve target. The net reserve holding target is set at $20.10 billion by June.
The delegation headed by Chris Papageorgiu, head of IMF’s Development Microeconomics Division, who visited Dhaka on April 24, has already held several rounds of meetings with the Ministry of Finance, Power and Energy Department, Bangladesh Bank and National Board of Revenue (NBR) on various issues.

The mission held a review meeting with the finance department and Bangladesh Bank on Monday. According to sources in the Ministry of Finance, the IMF delegation will finalize the third tranche concession and redefine the June target for the fourth tranche on the basis of consensus by meeting with these two organizations of the government. The visiting mission is scheduled to hold a press conference in this regard tomorrow, Wednesday.
The current mission is in Dhaka ahead of the release of the third tranche of the IMF’s $4.7 billion pledged loan. If everything goes well, the third installment of $68.2 million will be released by the end of this month. The Mission is reviewing the implementation of various conditions for this tranche till last December. And for the fourth installment of 682.2 million dollars, several conditions are expected to be met as of next June.

According to the relevant sources, among the revised conditions that were given for compliance by last December, all other conditions have been fulfilled except the net reserve of foreign exchange. The reserve deficit is not too much. Therefore, the delegation did not raise much objection regarding the concession of the third installment. The government thinks that there will be no problem in getting this installment. However, after reviewing the current pace and growth, the government feels that it is almost impossible to meet the reserve and revenue targets for the next June target.
According to the conditions, the net reserve should be increased to 20.10 billion dollars by the end of June for the fourth installment. But currently there is about 15 billion dollars. In this case, the reason for the non-fulfillment of the target, the mission was informed, was that the desired budgetary support was not received from the development partners. Moreover, it was expected that the deficit in the financial account of foreign transactions would come down after the election, but it did not. Therefore, the government has requested to bring down this target between 17 and 18 billion dollars by the end of June. Meanwhile, Bangladesh Bank has promised to introduce the ‘crawling peg’ system in the exchange rate.

The IMF’s third tranche of concessions was initially set to raise net foreign exchange reserves to $26.81 billion last December. Subsequently, as the global economic situation did not improve in the reserves, it was reduced to 17.78 billion dollars in view of Bangladesh’s request. Still, Bangladesh was 58 million dollars behind this target. Bangladesh was about $4 billion short of the reserve target as of last June for the second tranche of concessions.
In this context, the former chief economist of the Dhaka office of the World Bank. Zahid Hossain told media that even if the new target of the reserve is 18 billion dollars, there will be doubts about its fulfillment. Because, considering the current situation, it is very difficult to raise 4 to 5 billion dollars in just seven weeks.

He also said that part of the IMF loan is the climate fund, which is the first given to Bangladesh. Therefore, the IMF wants this program to continue. But the condition of the reserve is such that if it is not fulfilled then a formal exemption is sought. As the target is not met, a third installment will also be sought. Again, if the situation is the same for the fourth installment, then the mission officials will be embarrassed. Because they have to give a logical answer to the management authority. Therefore, market-based exchange rates and effective measures to prevent money laundering should be taken to increase reserves.