The International Monetary Fund (IMF) has agreed to reduce the reserve target to $18 billion from $20.10 billion for the fiscal year ending June 30, 2024.
The IMF has also requested a detailed plan on how Bangladesh will increase its reserves in the future, according to sources from a meeting between the IMF and the finance ministry.
The meeting was held on Monday in the ministry’s conference room.
The Bangladeshi delegation was led by Finance Division Additional Secretary Shirajun Noor Chowdhury, and the IMF delegation was led by Chris Papageorgiou, chief of the Development Macroeconomics Division in the Research Department.
The meeting, which saw attendance from officials of both parties, is set to continue until May 8.
Requesting anonymity, officials present at the meeting told The Business Post that the IMF delegation made its observations on two issues, but obtaining the next instalment of the loan will not be a problem. The lender will release their third tranche in May. In the meantime, the government will work on ways to increase revenue collection.
It is expected that the benefits will come in the upcoming budget for FY 2024-25. It cannot yet be said that the government is failing the revenue collection target of the ongoing fiscal year 2023-24. There was a negative trend until February, but the main portion of the revenue is collected in the last two months of FY24, which means the government is working to meet the target, they said.
The $4.7 billion loan programme with the IMF is still ongoing. Bangladesh has already received two instalments, and now the process of obtaining the third instalment is underway. The IMF team is now in Dhaka to review the measures taken to fulfil the 38 conditions given for the loan.
The IMF delegation has started a series of meetings with officials from the Ministry of Finance and other ministries and government agencies to review the fulfilment of the 38 conditions associated with the loan.
The IMF board approved the $4.7 billion loan over three and a half years on January 30 and set several conditions.
Bangladesh, so far, has received two instalments of this loan after meeting nearly all conditions, except those related to reserves.
The third instalment is due in June, following a review of compliance with loan conditions up to December.
Bangladesh received the first instalment in February 2023 and the second in December 2023. However, it did not fully meet the time-specific targets before receiving the second instalment, particularly the foreign currency reserve targets set for the end of June.
The actual reserves at the end of last December were $16.75 billion, whereas they were supposed to be $26.8 billion.
The IMF approved a formal request from Bangladesh to reduce these reserve targets, and new targets were set at the end of December at $17.78 billion.
In March this year, Bangladesh could not achieve the net reserves target. The actual reserves at the end of March were supposed to be $19.26 billion, but in reality, the amount was around $15 billion.
In June last year, the target was $23.7 billion, but the net reserves were at $19.5 billion.
Bangladesh Bank Governor Abdur Rouf Talukder hopes that the third instalment will be cleared without any problem.
After the Spring Meetings of the World Bank Group and the IMF in Washington, DC, on April 16, he told journalists that there would be no difficulty in obtaining the next tranche as 90 per cent of the conditions have been met.
According to the IMF, net reserves are the actual or usable reserves. Bangladesh Bank is obligated to maintain these net reserves on a quarterly basis as per IMF conditions.
Alongside failing to preserve net reserves, Bangladesh has also not met its revenue collection targets.
