The Financial Express

IMF sets floor for net forex reserve at $24.4b for June

| Updated: February 04, 2023 20:53:37

IMF sets floor for net forex reserve at $24.4b for June

Bangladesh will have to maintain net international reserves of at least US$24.46 billion in June this year in line with the International Monetary Fund (IMF)'s BPM6 definition.

The IMF set this floor for the foreign-exchange reserves in Quantitative Performance Criteria (QPC) of its $4.7 billion-loan programmes approved this week to Bangladesh to help maintain macroeconomic stability.

The net international reserves are gross reserves minus central bank's foreign currency liabilities and reserves earmarked for quasi-fiscal activities.

In December this year the reserve position must stand at least at $26.81 billion, both the figures will checked in the first two reviews.

Bangladesh does not publish BPM6-based forex-reserve position, but the government has pledged to the IMF that it will begin to do so by this June.

On February 1, according to the central bank data, total foreign currency reserve stood at US$32.19 billion which included various liabilities, including unpaid letters of credit, some of which turned into short-term loans, money diverted for the Export Development Fund (EDF), the loan given to Sri Lanka and also for the Payra Port development.

Experts and economists believe Bangladesh's net international reserve stands somewhere around $20 billion, if all liabilities are excluded and thus maintaining a $24.46 billon gross reserve will be "very tough".

Dr Zahid Hussain, former lead economist of the World Bank's Dhaka office, told the FE Friday the central bank was selling nearly $1.5 billion each month to fund import bills and thus the reserve was going down further everyday.

He said the trade imbalance needed to be lowered to see an upward trend in the reserve position.

Mr Hussain said there was a gap of $1.0 billion in the financial account which would not be surplus in the next five months.

He said there might be some foreign loans available in the meantime but that would not be enough, because the reserve would have to be increased by around $4.0 billion by then.

"This is hard to see this going to happen," said Mr Hussain.

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