Dhaka,  Wednesday
29 May 2024

More flexible exchange rate regime needed to build reserves : IMF 

Staff Reporter 

Published: 08:26, 20 April 2024

More flexible exchange rate regime needed to build reserves : IMF 

Photo : Collected

Bangladesh should adopt a more flexible exchange rate regime for building its foreign exchange reserves, the International Monetary Fund (IMF) has said.

"I think it is important for Bangladesh to transition to a more flexible exchange rate regime. That will be important to build external resilience and build buffers and build reserves," IMF's Communication Officer Huong Lan Vu said at a press briefing on the Regional Economic Outlook for Asia and Pacific on Thursday.

"So, I think that is the area where engagement and dialogue continue in terms of allowing the exchange rate to be more flexible so that reserves can be built up, so that, in a sense, will be a key priority for the country going forward," she added.

Huong Lan Vu made the comment in response to a question from a journalist about the depleting foreign exchange reserves of Bangladesh. 
The foreign exchange reserves fell below $20 billion recently.

At the end of Thursday, reserves stood at $19.89 billion, the Bangladesh Bank said in a report. Reserves at the end of last week were $20.1 billion.
The IMF has emphasised meeting the target of the foreign exchange reserve as a condition to get the third instalment of $4.7 billion in loan support for Bangladesh.
As per the conditions of the loan from the IMF, it was set as a target to hold $19.26 billion in reserves in March 2024. But actual reserves are less than $16 billion.

The first tranche of the loan package was cleared on 30 January last year. Bangladesh received $447.8 million on 2 February. The entire amount will be released in seven instalments till 2026. The fourth instalment of the loan will be available in December this year, requiring net reserves to be raised to $20.2 billion by next June.

In December last year, the Executive Board of the IMF completed the first review under the Extended Credit Facility (ECF), Extended Fund Facility (EFF) and Bangladesh's Resilience and Sustainability Facility (RSF) arrangements for Bangladesh, allowing the authorities to withdraw the equivalent to about $468.3 million under the ECF/EFF, and about $221.5 million under the RSF.

Earlier in October, an IMF delegation came to Bangladesh on a two-week visit, reviewed the loan programme, and gave a green signal to Bangladesh from the staff level.

After concluding the review, the mission said the IMF staff and the Bangladesh authorities had reached staff-level agreement on the policies needed to complete the first review.