IMF asks for 'proper action plan' by 8 May on building reserves

The International Monetary Fund (IMF) has observed that Bangladesh's net reserves fall short of its target and has asked the Bangladesh Bank for a proper action plan by 8 May detailing how to bolster the stockpile of foreign exchanges.

The visiting IMF mission made the observation during a meeting on Monday with senior officials of the Bangladesh Bank to review the progress on its various targets ahead of the release of the third tranche of the $4.7 billion loan, a central bank official present at the meeting told The Business Standard.

He said the country's net reserves at the end of March were about $4 billion short of the IMF's target of $19.26 billion.

According to data from the Bangladesh Bank, the foreign exchange reserves on 24 April were $19.97 billion, according to the IMF's BPM-6 formula. However, if the Asian Clearing Union (ACU) payment amount and loan and short-term liabilities are excluded from the reserves, the net reserve will stand at $14.07 billion.

The central bank official further said the IMF's net reserve target is $20.10 billion for June 2024. Now, the global lender has asked for a specific action plan on how to increase the reserves in the coming days.

"There were various wrong policies of the central bank behind the failure to retain reserves," he quoted an IMF official as saying at the meeting.

"The IMF delegation has asked whether there is any inconsistency in the disclosure of data on defaulted loans in addition to reserves. At the same time, it has also sought to know whether banks' funds stuck in cases, rescheduling, and write-offs are being presented to customers as bad assets," the official said.

Bangladesh Bank Spokesperson Mezbaul Haque told TBS, "During today's meeting with the IMF, we have presented [data on] our reserves, revenue, and macroeconomic indicators."

He also said, "These indicators were among the areas where the IMF set its targets. We have also highlighted our overall indicators and progress."

The central bank spokesperson said the IMF has also asked for information on whether the Bangladesh Bank is providing any facilities to loan defaulters.

"Also, the global lender has asked for complete information about the amount of money laundered from the country. It also called for information about the progress of the central bank's steps to prevent money laundering," he added.

The visiting IMF team has held three rounds of meetings with the Bangladesh Bank regarding their loan package. Also, it held a bilateral meeting with Abu Farah Nasser, policy adviser at the central bank, on bank mergers.

Earlier on Sunday, the IMF in a meeting with central bank officials recommended the complete disclosure of data regarding distressed assets – including defaulted loans – held by the country's banks. Additionally, the multilateral lender suggested that inspection reports on the financial health of banks, conducted by the Bangladesh Bank, should be made available to customers.