Reserves surpass $20b with IMF, ADB loans

Bangladesh's gross foreign exchange reserves increased by $1.08 billion to $20.4 billion, thanks to the release of the second instalment of a loan programme by the International Monetary Fund (IMF) and project support from the Asian Development Bank (ADB).

The Bangladesh Bank has experienced a rebuilding of its reserves five months after continuous depletion.

The country last saw a rise in reserves in June when it received $800 million in budget support from two development partners – the ADB and the China-led Asian Infrastructure Investment Bank (AIIB).

The reserves continued to deplete since then amid dollar selling by the Bangladesh Bank, dragging down the gross reserves to $19.7 billion on Thursday when the net reserves declined to below $16 billion.

The Washington-based lender has revised down its net foreign exchange reserve target from $26.8 billion to $17.78 billion for December.

"Currently, the country's reserves amount to $20.4 billion, which was $19.17 billion on Thursday," said Bangladesh Bank spokesperson Mezbaul Haque during a press briefing on Sunday. He also said the gross reserves stood at $25.82 billion.

On Friday, $689 million from the IMF and $400 million from the ADB were added to the forex reserves, he added.

On 16 November, according to BPM-6, the reserves fell to $19.60 billion, compared to $20.78 billion on 8 November. The reserves were $21.07 billion on 11 October.

The central bank spokesperson said an additional $90 million from South Korea and $130 million from other sources will be added to the reserves.

Mezbaul Haque said positive trends in remittance inflows and additional loan support from various donors this quarter are expected to contribute to a net increase in foreign exchange reserves.

"A substantial portion of our reserves will be utilised next for ACU (Asian Clearing Union) import bill payments. Around $1 billion will be withdrawn from our reserves for this purpose in January," said the spokesperson.

Zahid Hussain, former lead economist of the World Bank's Dhaka office, told The Business Standard that while the upcoming debt support may provide temporary relief for the foreign exchange reserves, its impact on reserve expenditure remains uncertain.

"It is somewhat comforting to see the dollar inflows, but how effectively this loan will support our import-related expenditures in the long run is yet to be seen," he added.

The new condition from the IMF for maintaining net reserves was set in its first review report under the $4.7 billion loan package.

Bangladesh received the first tranche of $447.8 million on 2 February and is scheduled to get the entire amount released in seven installments until 2026.

The fourth installment of the loan will be available in December 2024, requiring net reserves to be raised to $20.20 billion by June of the following year.