Net reserve now $16.77b surpassing IMF target: BB

The country's net foreign exchange reserves increased to $16.77 billion at the end of June, surpassing the $14.7 billion target set by the International Monetary Fund (IMF) as a condition of the $4.7 billion loan package, according to the Bangladesh Bank.

The net reserve amount, which had dipped to $12.8 billion in April, now meets the international threshold of three months of prospective imports.

Meanwhile, the gross reserve as of 30 June was $21.83 billion, up from $19.4 billion on 26 June, according to the Balance of Payments and International Investment Position Manual (BPM6), said Md Mezbaul Haque, spokesperson for the central bank.

Net reserve, which represents readily available cash from the gross reserves, is calculated excluding short-term liabilities from the gross reserve as per the IMF formula based on BPM6.

The Bangladesh Bank, for the first time, disclosed the net reserve figure.

Though the IMF set a net reserve target to meet as per BPM6 calculation, the Bangladesh Bank has been publishing gross figures on its website since June 2023.

When responding to a question from journalists at a monetary policy announcement event, Bangladesh Bank Governor Abdur Rouf Talukder declared that they would not publish a net reserve figure.

However, the central bank made the data public after the net reserve crossed the IMF target for the first time since the loan package was approved in February last year.

However, Bangladesh achieving the IMF's June target comes at the cost of import compression, which slowed down the country's economic growth, fuelling inflation as a result of raising fuel costs.

The Bangladesh Bank governor, in a letter to the IMF, admitted that continued import compression has slowed economic activities, while persistently high global commodity prices and continued taka depreciation have kept inflation persistently high, placing a disproportionate burden on the poor.

The country's imports declined by 15.42% in the first nine months of the outgoing fiscal year, according to Bangladesh Bank data.

Additionally, the inflow of $2 billion in loans, of which $1.15 billion came from the IMF and $900 million from other sources as budget support, helped the country cross the net reserve target.

Moreover, the Bangladesh Bank has stopped selling the dollar from the forex reserve since 8 May after introducing the crawling peg mechanism by raising the dollar price from Tk110 to Tk117 in a single day, the biggest devaluation of the taka in the country's history.

After introducing a crawling peg, the central bank stopped selling dollars from reserves to support the government's import settlement, causing delays in foreign payments and forcing Bangladesh Petroleum Corporation to cut down on fuel imports.