The International Monetary Fund (IMF) has agreed to reduce the foreign exchange reserve target of Bangladesh Bank from 20.10 billion to 14.769 billion dollars at the end of the current financial year.
This information is known from the related sources of IMF. As a result, there was no obstacle for Bangladesh to get the third installment of the IMF loan. Bangladesh will get 1.152 billion dollars in the third installment of the loan.
It is known that the reserve target at the end of September this year is 14.885 billion dollars and at the end of December this target has been set at 15.300 billion dollars. Besides, 16.601 billion dollars at the end of March 2025 and 19.440 billion dollars at the end of June.
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According to the BPM6 method, actual reserves currently stand at $15 billion. As a result, the country has slightly more reserves than the IMF’s new target. The IMF has given a plan on how Bangladesh will increase its reserves in the future.
Meanwhile, Bangladesh is getting the money for the third installment of the IMF loan, said Chris Papageorgeou, head of the development microeconomics division of the donor organization, who is visiting Dhaka. He gave this information in a press conference at the Secretariat on Wednesday (May 8).
According to the IMF delegation, there will be no problem in getting the next installment of the Bangladesh loan. The lender will release the third installment after their board meeting. In the meantime, the government will work on ways to increase revenue collection.
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Chris Papageorgeou said the IMF delegation has reached an agreement with Bangladeshi officials to receive the third tranche of the IMF loan. The donor is now awaiting approval from the agency’s executive board in the next few weeks.
The head of the IMF delegation said that the authorities of Bangladesh have undertaken important structural reforms under the IMF-supported program. They have implemented a formula based fuel price adjustment policy especially for petroleum products. Despite various problems including inflation, the IMF has welcomed the steps taken by Bangladesh Bank to realign the exchange rate.
He said that if policy measures are taken, the overall economy will gradually stabilize. It is estimated that the real GDP growth in the current financial year will be 5.4 percent due to import contraction and policy framework. However, in the next financial year 2024-25, we expect the GDP growth to be 6.6 percent due to reduced pressure on foreign exchange reserves and increased imports.
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We estimate inflation to be 9.4 percent in FY 2023-24. However, due to a combination of stricter policies and lower foreign food and commodity prices, inflation will come down to 7.2 percent in the next financial year 2024-25.
Referring to the fact that revenue collection is less than GDP in Bangladesh, the head of the IMF delegation said that priority should be given to sustainable revenue to increase development investment. In this case, real tax policy and various administrative measures should be taken in the next budget to increase the revenue of 10.5 percent of the GDP.
The IMF is silent on money laundering, but is advising the NBR to reduce tax exemptions. In response to questions from journalists, the head of the IMF delegation said that one of the important policies of the IFF is to control money laundering. Our target is to support various programs that raise taxes. We have program with NBR. We are working with BFIU on money laundering. In our press release we talk about establishing good governance. There is a solution to the problem of money laundering.
People are suffering due to inflation, while suggesting to increase taxes, it will increase people’s suffering or not? In response to questions from journalists, he said, a big part of our program is social security. So we are careful about the impact our policies have on the poor. Matters remain under discussion with NBR.
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Why is inflation high despite high interest rates? In response to such questions, he said, even if the interest rate is increased, there is still inflation in Bangladesh. We have new data pointing to lower inflation. We think inflation will come to 7 percent in Bangladesh next year.
In response to a question about bank mergers, Chris Papageorgiou said, I think the initiative taken by the bank for re-capitalization is sometimes necessary. Because there are 61 banks in Bangladesh, some of them are very strong, some are not strong.
The IMF approved a $4.7 billion loan in January last year as part of Bangladesh’s economic crisis response. Immediately after the approval of the loan, the company released the first installment of 476.3 million dollars. The entire amount is to be paid in seven installments over three and a half years till 2026. The IMF board approved the second tranche of the loan in December last year.
