IMF sets Bangladesh's net reserve target at $17.78b for December
The IMF also disclosed that net reserve stood at $15.9 billion in October when gross reserve was $20.3 billion
The International Monetary Fund (IMF) has set the net foreign exchange reserve ceiling to $17.78 billion for December, revising down from the previous target of $26.8 billion.
The new condition for maintaining net reserve was set at its first review report under the $4.7 billion loan package that the IMF disclosed today.
The IMF also disclosed that net reserve stood at $15.9 billion in October when gross reserve was $20.3 billion.
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Bangladesh Bank failed to meet the net reserve target for June. The net reserve was $19.5 billion in June against the target of $23.7 billion, according to IMF report.
Though IMF sets the net reserve ceiling as a condition for releasing the next instalments of the loan package, Bangladesh Bank does not make the data public.
In a recent statement sent to The Business Standard, Bangladesh Bank claimed that the published net reserve figure of $15.9 billion was misleading. It also claimed that the country's reserve was $19 billion the entirety of which is usable fund.
According to IMF standards, only the net reserve portion is instantly available to use. That's why the multilateral lender sets a target for the net reserve to avail the next instalments of loans.
According to the review report, the current account deficit has narrowed considerably, but the external position remains vulnerable.
Similar to other small open economies, the FX market in Bangladesh has experienced significant fluctuations, amid rising global inflation and continued monetary tightening in major economies. In response, BB has allowed greater exchange rate flexibility, unified the prevailing exchange rates, and tightened monetary policy.
In FY23, the Taka depreciated by 15.2% against the US dollar, and 4.5% in real effective terms.
Due to import compression and relatively resilient exports, the current account (CA) deficit has narrowed considerably (0.7% of GDP in FY23 compared to 4.1% of GDP in FY22)
Nevertheless, the overall balance of payments (BOP) has deteriorated, given an unprecedented reversal of the financial account leading to FX shortages, Gross international reserves (GIR) and net international reserves (NIR) declined to $20.3 and $15.9 billion respectively, as of 31 October 2023.
Bangladesh's external position at the end of FY22 is assessed to remain broadly in line with the level implied by fundamentals and desirable policies.
