Bangladesh’s net reserve now stands at $16 billion, surpassing the $14.7 billion target set by the International Monetary Fund (IMF) for June, as reported by Bangladesh Bank.
As of June 30, the gross reserve was $21.83 billion, up from $19.4 billion on June 26, according to the Balance of Payments and International Investment Position Manual (BPM6), confirmed by Bangladesh Bank Spokesperson Md Mezbaul Haque. The net reserve, representing readily available cash from the gross reserves, excludes short-term liabilities based on the IMF’s formula as per BPM6.
This achievement marks the first time Bangladesh has exceeded the IMF target since the approval of a $4.7 billion loan package in February of last year. In April, the net reserve had fallen below the threshold to $12.8 billion from $19.6 billion at the end of June 2023, according to the IMF’s second review report under the loan package.
Meeting the IMF Target and Its Consequences
While Bangladesh has met the IMF’s June target, it has come at the cost of import compression, which has slowed economic growth and fueled inflation due to rising fuel costs. Bangladesh Bank Governor, in a letter to the IMF, admitted that continued import compression has slowed economic activities. Persistently high global commodity prices and the ongoing depreciation of the taka have kept inflation high, disproportionately burdening the poor.
Bangladesh’s imports declined by 15.42% in the first nine months of the outgoing fiscal year FY24, according to Bangladesh Bank data. Additionally, an inflow of $2 billion in loans, including $1.15 billion from the IMF and $900 million from other sources as budget support, has also helped Bangladesh surpass the IMF’s net reserve target.
Moreover, halting dollar sales from the reserves has contributed to this achievement. Bangladesh Bank stopped selling dollars from the forex reserve on May 8 after introducing a new crawling peg mechanism, raising the dollar price from Tk110 to Tk117 in a single day, marking the biggest devaluation of the taka in the country’s history.
