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The Bangladesh Bank is planning to calculate foreign exchange reserves by excluding invested assets – such as Export Development Fund (EDF) and other loans – as per the requirement of the International Monetary Fund (IMF).
On Sunday, the central bank made the decision in principle after a meeting with the visiting IMF mission in Dhaka, and decided to calculate forex reserves in two parts – forex reserve assets and forex reserves, insiders told The Business Post.
The IMF is holding a series of detailed discussions with regulators and stakeholders regarding Bangladesh’s economy. Bangladesh is seeking $4.5 billion in loans from the IMF, and the ongoing discussions are part of the process. When the new decision is implemented, Bangladesh’s forex reserves could come down to $27.98 billion from $35.98 billion. The central bank currently calculates forex reserves with invested assets.
Bangladesh has so far invested around $8 billion – including $7 billion in the Export Development Fund (EDF) – from the forex reserves, as per the BB 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 in loans from Bangladesh’s forex reserves, show data from the central bank.
The visiting IMF mission on October 27 had asked the central bank to keep accounts of both forex reserve assets and forex reserves.
As per the IMF requirement, the total figure of $35.98 billion in foreign exchange reserves (including EDF loans and other loans) will count as foreign exchange assets. The forex reserves were at $46.49 billion at the same period of last year
The reserves continue to fall due to the growing import payments in recent times.
The forex reserves dropped by $10.51 billion in the last one year mainly due to the central bank’s USD selling spree. The banking regulator has been selling USD to banks almost every day.
The regulator injected around $5 billion to banks in just three months of this fiscal year. A senior official of the central bank told the Business Post that the forex and treasury management department and the research department are working on the issue.
He said the IMF mission has asked the Bangladesh Bank to follow the international standard in reserves calculation.
The IMF mission will stay in Dhaka until November 9. On that day, it will hold a wrap-up session with the central bank governor, deputy governors, and other key officials.
On Sunday a delegation of the IMF mission held discussions with the banking regulation and policy department, off-site supervision department, research department, monetary policy department, forex reserves and treasury management department and foreign currency investment department.
The discussion agenda included topics such as exchange rate pressures and expected development, current status, challenges and timing in implementation of interest rate corridor system, second-round effects from fuel price hikes.
