IMF loan conditions: Govt seeks lower reserve target

Bangladesh has requested the visiting International Monetary Fund staff mission to revise down some of the targets as the existing numbers are not achievable in the present context.

At the end of December, Bangladesh must maintain at least $26.81 billion in net foreign currency reserves.

The government has now requested the IMF to bring down the ceiling to less than $20 billion, The Daily Star has learnt from Bangladesh Bank officials informed with the proceedings.

Net foreign reserves are less than $18 billion, according to the calculations of Zahid Hussain, a former lead economist of the World Bank's Dhaka office.

Bangladesh has taken several steps since last year to increase its strained dollar stockpile but none have worked so far.

For instance, on July 13, the central bank began publishing gross foreign reserves as per the IMF's calculation. It stood at $23.65 billion.

As of October 11, Bangladesh's gross reserves stand at $21.1 billion, according to the central bank's latest published statistics.

This means, that in the three months, gross reserves declined by $2.58 billion despite the best efforts by the government to conserve the dollar stockpile.

In this context, the central bank has proposed to the IMF mission, led by Rahul Anand, to bring down the ceiling of net foreign currency reserve for December and June next year such that they can be achieved given the current economic conditions.

The IMF mission has agreed to this request, according to the central bank officials.

Another condition set by the IMF is the rollout of automated fuel pricing by the end of this year. adjustment mechanism for petroleum products by the end of December this year.

The finance ministry has now proposed pushing back the deadline to March next year. The IMF mission has also agreed to the request, The Daily Star has learnt from finance ministry officials informed with the proceedings.

"We are not implementing the automated pricing formula considering the high price of fuel and inflationary pressure. We have done the homework and a draft is also ready. Once the fuel price is stable, we will implement it," Finance Minister AHM Mustafa Kamal told The Daily Star recently.

It is expected that the new quantitative conditions for December and June next year will be finalised during the closing meetings with the BB governor and the finance secretary on October 19, the last day of the IMF mission.

After that, the IMF staff mission led by Rahul Anand will place Bangladesh's proposals before the IMF management and board, which will take a final call.

The proposals include a waiver for failing to meet two of the six quantitative targets for June. The decision to authorise the disbursement of the second instalment is based on the performance at the end of June.

One of the three mandatory conditions to get the second instalment authorised was keeping a minimum net reserve of $24.46 billion. The country had about $21 billion.

Another condition was a minimum tax collection of Tk 345,000 crore in fiscal 2022-23, which the government failed to do.