Home ›› 27 Oct 2022 ›› Front
An International Monetary Fund (IMF) mission – currently on a 15-day visit to Dhaka – is set to meet with central bank senior officials today to discuss several key issues, including overall trade deficit, the calculation process of net forex reserves, and banking sector reforms.
Led by IMF Mission Chief Rahul Anand, the delegation has already set a series of discussions on October 27, October 30 and October 31 at the regulator’s headquarters. Bangladesh is seeking $4.5 billion in loans from the IMF, and the issue will be a key point in those sessions.
This mission will stay in Dhaka until November 9, and on that day, the visiting mission will set up a wrap-up session with the central bank governor Abdur Rouf Talukder, deputy governors and other key officials, Bangladesh Bank sources told The Business Post.
On Thursday, the IMF mission plans to hold multiple discussions with the central bank governor, deputy governors Ahmed Jamal, AKM Sajedur Rahman Khan and Kazi Sayedur Rahman.
Matters related to trade deficit, cross-border interbank loans, gross reserves, external loans, exchange rate development, oil import volume, banking sector issues, monetary and exchange rate issues, net reserve calculations, and current challenges faced by the local banking sector will be discussed.
The mission will also hold discussions with the directors of forex reserves and treasury management, accounts and budgeting department and off-site supervision departments of the central bank.
Commenting on the matter, Bangladesh Bank Chief Economist Md Habibur Rahman said, “The IMF mission will meet with senior officials for day long discussion sessions. They want to know about the country’s banking and economic situation in detail.”
What’s for discussion in later sessions?
As part of the next series of sessions on October 30, the IMF mission will hold discussions with the Bangladesh Financial Intelligence Unit (BFIU) on matters of risk-based supervision, major challenges and actions.
The mission will also meet with the statistics department director to discuss matters relating to the balance of payment.
Later, on October 31, the IMF mission will meet with central bank Deputy Governor Abu Farah Md Nasser, and hold discussions regarding the present status of state-run commercial banks, their performance under the regulator’s MoU, and recent changes in the board of these banks.
The mission will also inquire about the status of the central bank’s pilot project with 10 banks, introduced recently to improve those banks’ risk management and carry out reforms in the sector.
The IMF had previously argued regarding how the central bank calculates its net reserves. The Bangladesh Bank is including the Export Development Fund (EDF) and other loans while calculating the forex reserves, but the IMF had said such loans should be excluded from the calculation.
Useable reserves as per IMF calculation
Bangladesh’s forex reserves stood at $35.98 billion on October 20, down from $46.19 billion posted during the same period last year, show data from the central bank.
However, as per the IMF calculation, the usable forex reserves stand at $27.98 billion, because around $8 billion have been invested – including $7 billion in the Export Development Fund (EDF), insiders say.
As per central bank officials, Long Term Fund (LTF) and Green Transformation Fund (GTF) have been formed with the remaining $1 billion. Crisis-hit Sri Lanka also took $200 million as loans from the Bangladesh reserves.
During the July-August period of this FY, Bangladesh’s trade deficit stood at $4.55 billion, up from $4.28 billion compared to the same period last FY. The country’s current account deficit stood at $1.50 billion during this period, as per the central bank data.
A number of senior officials at the central bank said the IMF will also hold discussions about the country’s forex market instability, the process of fixing USD exchange rates, and interest rate cap in loans.
In mid-September of this year, the central bank allowed a floating exchange rate for USD with the aim to reduce pressure on foreign exchange reserves.
The Bangladesh Foreign Exchange Dealers Association (BAFEDA) is currently calculating the inter-bank exchange rate and reporting it to the central bank daily. Following this measure, local currency Taka devalued by 25.87 per cent against the USD this year.
Despite allowing a floating exchange rate, the central bank continues to pump USD into the forex market. During July to October 26 of this FY, the regulator sold around $5 billion to the banking sector.
Banking sector reforms
The international financial agency has been asking for reforms in the country’s banking sector for years. Recently, the incumbent central bank Governor Abdur Rouf Talukder took a number of initiatives to reform this sector.
As part of the move, the banking regulator identified 10 weak and scam-hit banks, and began monitoring them closely. The Bangladesh Bank also appointed coordinators in those banks to improve their financial health.
