Monday, May 06, 2024
A visiting delegation of the International Monetary Fund (IMF) has sought to know the reason why Bangladesh’s net foreign exchange reserves are yet to improve and emphasised achieving the revenue collection target in the next national budget in line with the conditions for the $4.7 billion loan, according to Finance Division sources.
Their views came during a meeting held at the finance ministry on Wednesday. The Finance Division Additional Secretary Shirajun Noor Chowdhury led the Bangladesh side while Chris Papageorgiou, chief of the Development Macroeconomics Division of the IMF Research Department, led the IMF delegation.
The IMF team will stay in Dhaka and hold multiple meetings till May 8.
Requesting anonymity, officials present at the meeting told The Business Post that the IMF delegation made its observations on two issues but getting 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 FY2024-25. And it cannot be said that the government is failing the revenue collection target of the ongoing fiscal year of 2023-24. There was a negative trend till February but the main portion of the revenue was 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 getting 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.
Following Wednesday’s discussion, the IMF team will hold a series of meetings with various organisations including the Finance Division, Financial Institutions Division, Bangladesh Bank, and the National Board of Revenue (NBR).
Sources said that efforts are ongoing to meet the revenue collection target while banking sector reforms are also underway. However, Finance Division officials claim that Bangladesh has fulfilled all the conditions of the IMF, except the improvement of net reserves.
Several Finance Division officials said that the IMF wants to leave the dollar to the market-driven exchange rate and it has been pressuring the government on this matter. But the government is reluctant to meet that demand. The dollar exchange rate system will remain what it is now as the government fears that the rate will go out of control if it’s left to the market, they said.
However, in March this year, Bangladesh could not achieve the net reserves target. 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 getting the next tranche as 90 per cent of the conditions have been met.
According to the IMF, net reserves are actual or usable reserves. The central bank has an obligation to maintain these net reserves on a quarterly basis as per IMF conditions.
