Bangladesh Bank to hold meeting with IMF on final decision on loan at 6pm
The issue remains a sticking point in the ongoing IMF negotiations, delaying the release of the next $1.3 billion tranche from the lender's $4.7 billion loan package
Highlights
- BB to meet IMF at 6pm today to finalise decision on exchange rate flexibility
- The $1.3bn loan tranche is delayed due to disagreement over free float
- BB wants to avoid market volatility and proposes a managed fund instead
- Gross reserves stand at $21bn, but IMF monitors net reserves (NIR)
Bangladesh Bank (BB) is set to meet with the International Monetary Fund (IMF) today (5 May) at 6pm at its headquarters to finalise discussions on transitioning towards greater exchange rate flexibility.
A senior BB official stated, "The release of the next instalments will depend on today's meeting, as Bangladesh Bank could not reach an agreement during discussions in the Spring meeting in Washington."
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The Bangladesh Bank governor, along with two deputy governors overseeing relevant departments, will represent BB in the meeting.
The issue remains a sticking point in the ongoing IMF negotiations, delaying the release of the next $1.3 billion tranche from the lender's $4.7 billion loan package.
Even during the recent IMF-World Bank Spring Meetings in Washington, BB Governor Ahsan H Mansur resisted calls to adopt a free float regime immediately.
Bangladesh's gross reserves currently exceed $21 billion, enough to cover nearly four months of imports. However, the IMF monitors NIR, which excludes certain liabilities, as a key benchmark.
During the IMF's recent Dhaka review mission, BB proposed scrapping the NIR floor to allow the fund's creation. While the IMF hasn't responded yet, the central bank hopes to reach an agreement by June.
Previously, a BB official warned that a sudden free float could trigger disruptions, with aggregators hoarding dollars to drive up prices.
"With inflation already high, we need to avoid added volatility," he said. "The fund would allow us to inject dollars and counter manipulation."
Citing India's model, he noted that the Reserve Bank of India frequently intervenes in the forex market to steady the rupee amid capital outflows and trade uncertainties.
He also shared a recent incident: when the Bangladesh Bank directly paid Qatar for energy imports, bypassing the open market, dollar hoarders were forced to sell at lower rates, causing the exchange rate to fall by Tk0.50 to Tk0.60.
Chief Adviser's Special Assistant Anisuzzaman Chowdhury on Saturday said Bangladesh would pull out of the loan programme if the IMF imposes additional conditions for the release of upcoming tranches.
