The International Monetary Fund (IMF) has recommended that Bangladesh Bank (BB) restrict loans and quasi-financial activities extended to various institutions from its foreign exchange reserves.
An IMF review team, led by mission chief Chris Papageorgiou, is currently visiting Dhaka to assess progress on loan conditions and discuss the next tranche of the $5.5 billion loan programme. The review is scheduled to continue until 13 November.
During a meeting on Sunday, Bangladesh Bank officials informed the IMF that the Export Development Fund (EDF) has already been reduced from $7 billion to $2.22 billion. Other loans extended from reserves will also be scaled down, though officials noted that an immediate, full reduction is not feasible as it could adversely affect the export sector. The central bank is working to gradually reduce the EDF to $2 billion.
The IMF discussion involved several executive directors and officials from multiple levels of Bangladesh Bank. Under the IMF programme, the central bank calculates reserves according to the BPM6 manual, under which certain funds are excluded from reserve calculations. These include:
$2.22 billion for the EDF
$20 million for the Green Transformation Fund
$3.85 million for the Long-Term Financing Facility
$4.8 million provided to Bangladesh Biman via Sonali Bank
Deposits in the International Islamic Trade Finance Corporation
Although these amounts are excluded from reserves, they are recorded separately in the bank’s accounts.
According to Bangladesh Bank data, foreign exchange reserves under BPM6 rose to $27.54 billion as of 30 October. Using its own accounting method, the central bank reports reserves at $32.14 billion, the highest level in 31 months. By comparison, before the fall of the previous Awami League government, reserves under BPM6 had declined to $20.48 billion, while in August 2021, they had peaked at $48.06 billion.
In a separate Sunday meeting, Governor Ahsan H Mansur, four deputy governors, and senior officials discussed inflation trends. The governor noted that although inflation has declined from double digits to a more tolerable range, it remains above the target due to high rice prices. He emphasised that the key policy interest rate (repo rate) will not be reduced until inflation falls below 7 per cent.