Bangladesh's forex reserves cross $27b: Central bank

Bangladesh's foreign exchange gross reserves have crossed $27 billion as the International Monetary Fund (IMF) and other lenders have provided the country with $2.25 billion in loans in recent days, the central bank claimed on Friday (28 June).

The foreign exchange reserves reached $27.15 billion today, central bank spokesperson Md Mezbaul Haque told The Business Standard. 

However, the central bank calculated the reserves amount in the old method - BPM5 - which experts say is "misleading".

Bangladesh started to follow the forex reserves calculation using the BPM6 formula from June 2023 in line with the suggestion of the IMF. 

Central bank officials said the gross reserves is now around $22 billion according to BPM6.

"We have received $1.15 billion from the IMF. We also received around $900 million from other sources like South Korea, International Bank for Reconstruction and Development, and Islamic Development Bank IDB," the Bangladesh Bank spokesperson told TBS on Thursday (27 June).

As per the IMF formula based on the Balance of Payments and International Investment Position Manual (BPM6), the Bangladesh Bank will have to exclude foreign currency loans to local banks - known as the Export Development Fund (EDF)-, deposits with state-owned local banks, deposits with the IDB Group, fixed-income securities below investment grade, a loan to Sri Lanka and other foreign currency assets in non-convertible currencies.

The IMF says the central bank must also exclude the reserves-related liabilities to estimate the net reserves. 

The IMF introduced the BPM6 manual in reporting the reserves and balance of payment in 2012 under its Safeguards Assessments Agreement, which applies to all members of the global lender. But Bangladesh started to follow it after 11 years.

On Monday (24 June), despite missing the net international reserves ceiling and revenue target, the IMF approved releasing $1.15 billion as the third tranche of Bangladesh's $4.7 billion loan package.

In a review report, the IMF said the Bangladesh Bank was given a waiver for maintaining the net reserve target set for December 2023 based on the two corrective actions – the appropriate realignment of the exchange rate and operationalisation of the new exchange rate arrangement; and the authorities' commitment to a tighter policy mix to counter inflation.

The Bangladesh Bank failed to meet the net reserve target of $17.7 billion set for December when the actual net reserve was $16.7 billion, according to the IMF report.

The IMF also revised down the net reserve ceiling for June this year to $14.78 billion from an earlier target of $20.1 billion.

In April this year, net reserves fell to $12.8 billion, down from $19.6 billion at the end of June 2023, according to the IMF review report.

"Reserve coverage is currently below the threshold of 3 months of prospective imports, but it is expected to stabilise around four months of coverage in the medium term," said IMF.