Not possible to meet IMF's reserves target: Finance minister

It is not possible for Bangladesh to meet the foreign exchange reserves target set by the International Monetary Fund, Finance Minister AHM Mustafa Kamal said today.

"The key strength of the Bangladesh economy is its foreign exchange reserves. The reserves are in a good position, both net and gross. Still, the country could not achieve the reserve target set by the IMF," he said while exchanging post-poll greetings with reporters at his office.

He also said, "It is possible to double the amount of remittance in the country. Despite facing turbulent situations, Bangladesh's reserves stand at around $25-26 billion."

The minister also affirmed the need to ensure that the reserves do not drop below $30 billion this year.

The Washington-based lender approved a $4.7 billion loan for Bangladesh in January last year and fixed a minimum forex reserve of $26.81 billion by December 2023.

The IMF eased conditions for the loan's third tranche due to a shortfall, originally set at $26.81 billion for December this year, with the target reduced to $17.78 billion.

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 the IMF report.

However, the targets are difficult to achieve to secure the third tranche of the global lender's $4.7 billion loan, economists say.

In February, when the IMF approved the loan package, the Bangladesh Bank's net reserves were $3 billion short of the $24.46 billion target set for June.

The net reserve was over $20 billion in February, but it has been falling steadily since then, reaching below $18 billion in September.

However, reserves rose to $21 billion in the last week of December after various initiatives taken by the central bank.

The IMF approved the second installment of a loan to Bangladesh amounting to $689.89 million on 12 December.

'Maintaining economic stability main challenge for new govt'

Mentioning that the main challenge of the new government will be in maintaining economic stability, Kamal said, "To achieve this goal, the government must unlock the potential sectors of the economy. There should be a significant focus on enhancing revenue collection as a key priority."

He highlighted numerous untapped opportunities for advancing Bangladesh's economy, citing several unexplored sectors and undiscovered components.

He stressed the need for the government to expend more efforts in exploring these areas.

The primary focus of the new finance minister would be to boost revenue collection, he added.

"Bangladesh's annual foreign debt does not match its foreign remittances. But there is nothing to worry about. Revenue is also being generated from both goods and services, further contributing to the economy," he added.

Replying to a query, Kamal acknowledged that there have been numerous reforms in Bangladesh's banking sector.

While noting some isolated incidents that arose, he held out the assurance that these would be addressed in the future.

He affirmed Bangladesh's ongoing progress and its commitment to moving forward.

Mentioning that non-performing loans (NPLs) have significantly decreased, the minister said Bangladesh aims to be the 20th largest economy by 2041.

Answering another query, he highlighted the significance of inflation in driving economic progress. He stated that discussions on inflation often involve individuals with limited economic insight.

Kamal also mentioned that the prime minister will decide who will be the finance minister of the new government.

"Whoever is the finance minister, the government will work to make the economy more dynamic," he added.

When asked about the possibility of sanctions on Bangladesh's economy, he said Bangladesh has not engaged in any wrongdoing that can warrant such actions.

"There is no justification for imposing sanctions on the country. However, if such measures are forcibly taken, Bangladesh will be compelled to respond with similar action," he said.