IMF sets new target
Staff Correspondent: The International Monetary Fund (IMF) has set a target of $17.78 billion foreign exchange net reserves in Bangladesh Bank for December. Earlier, the net foreign exchange reserve target for December was $26.8 billion.
In the first review report published today (December 15), the IMF has given these new conditions for achieving reserves under the $4.7 billion loan package.
The IMF also reported that the country’s net reserves in October were $15.9 billion, while gross reserves were $20.3 billion.
Bangladesh Bank has failed to meet the June net reserve target. According to the IMF report, net reserves were $19.5 billion against the target of $23.7 billion in June.
Bangladesh Bank does not publish that information even though the IMF has fixed the net reserve ceiling as a condition for waiving the next tranche of the loan package. In a recent statement, Bangladesh Bank claimed that the published net reserve data of $15.9 billion is misleading. The central bank also claims that the country’s reserves under the BPM-6 system were $19 billion, all of which were usable.
According to IMF criteria, only the net reserve portion is immediately usable. That is why the multilateral lending agency sets a target for net reserves to cover subsequent loan installments.
According to the review report, the country’s current account deficit has narrowed considerably.
Bangladesh’s foreign exchange market, like other small open economies, has seen major ups and downs amid rising global inflation and continued fiscal tightening in major economies. To deal with this situation, Bangladesh Bank made the exchange rate more flexible, consolidated the existing exchange rates and tightened the monetary policy.
The rupee depreciated by 15.2 percent against the US dollar in FY 2022-23. The current account deficit has narrowed considerably (from 4.1 percent of GDP in FY 2021-22 to 0.7 percent of GDP in FY 2022-23) due to shrinking imports and relatively strong exports.
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