BB moves for managed floating exchange rate to get IMF loan

Bangladesh Bank Governor Ahsan H Mansur has announced a managed floating exchange rate from today to meet conditions of the International Monetary Fund (IMF) to get loan confirmation.

Bite sized: What is a managed floating exchange rate?

"Bangladesh will receive a total $3.5 billion by June from different multi-donour agencies, including the WB, ADB and IMF," said the governor at a press conference held at the central bank headquarters.

The governor said he hoped that the exchange rate will be around the existing rate due to available dollar liquidity.

Banks were already informed about the exchange rates at today's meeting, said the governor.

He also said the central bank will intervene in case of large foreign payments to keep the rate stable.

There will be a band exchange rate which will not be disclosed, said the governor. 

Earlier on 13 May, the Bangladesh Bank finally reached an agreement with the IMF (International Monetary Fund) over the implementation of greater exchange rate flexibility after a series of meetings conducted by the governor.

Now, the IMF agreed to release $1.3 billion of the $4.7 billion loan package in June, which was previously withheld due to disagreement over the implementation of greater exchange rate flexibility through a crawling peg.

The IMF remained insistent on implementing a truly flexible exchange rate – one that goes beyond minor corridor adjustments and eliminates multiple exchange rate windows. The central bank, however, remains cautious, citing risks of inflationary shocks and political pushback.

The IMF approved a $4.7 billion loan for Bangladesh in 2023. So far, the country has received three instalments totalling $2.3 billion.