Bangladesh has now requested the International Monetary Fund to lower the requirement of foreign exchange reserves at $20 billion as a condition of releasing the second installment of the $4.7 billion loans, an official of Bangladesh Bank confirmed this on Monday (October 16, 2023).
The request was made to the visiting IMF delegation that reviewed with the officials the progress in meeting its conditions.
Despite different measures taken by including cutting unnecessary and luxury goods imports, in the last three months, gross reserves declined by $2.58 billion.
Two main sources of foreign exchange earnings –inward remittances flow saw a record decline to $1.34 billion in September and export earnings failed to achieve the target.
Considering the situation the central bank proposed to the IMF mission led by Rahul Anand to revise the reserves down to $20 billion.
Under the terms of the $4.7 billion IMF loan, the actual reserves were supposed to be maintained at $24.46 billion last June and $25.30 billion in September. At the end of December, Bangladesh must maintain at least $26.81 billion in net reserves.
The net forex reserves are now less than $18 billion, according to the calculations of Dr Zahid Hussain, a former lead economist of the World Bank's Dhaka office.
However, the IMF also suggested that BB fix the exchange rate of US dollars on competitive market price, which is now being set by the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) in the concentration of the BB.
The central bank earlier relaxed the exchange rate of the US dollar gradually and now the official exchange rate is Tk112 per dollar.
Economist Dr Ahsan H Mansur said that Bangladesh has to maintain strict monitoring of trade-based money laundering along with cutting unnecessary imports to check the downslide.