IMF tranches on hold, officials to conduct another meeting with BB on Tuesday

Bangladesh's hopes for the fourth and fifth tranches of its $4.7 billion IMF loan remain in limbo after the latest negotiations ended without a breakthrough – once again stalled over the contentious issue of adopting a market-driven exchange rate.

Despite the IMF's insistence on genuine exchange rate flexibility, the Bangladesh Bank has resisted relinquishing control, fearing inflationary shocks and political backlash. A senior central bank official, speaking anonymously, told TBS that the virtual meeting with IMF officials – attended by Governor Ahsan H Mansur and his two deputies, Md Habibur Rahman and Md Kabir Ahmed – yielded no resolution.

Finance Adviser Salehuddin Ahmed, speaking to TBS over the phone from Milan where he is attending an ADB event, said no decision was reached in Monday's meeting regarding the exchange rate. 

The IMF is scheduled to hold another meeting on Tuesday to try and resolve the issue.

The release of the next loan tranches remains uncertain, as both parties remain firm in their respective positions on exchange rate flexibility, he added.

IMF's unwavering demand

The IMF has remained firm: Bangladesh must move beyond minor exchange rate adjustments and allow the market to determine the taka's value. However, the central bank argues that sudden liberalisation could destabilise prices.

"Given high inflation, the governor is urging the IMF to delay full exchange rate flexibility," the official said, though he noted "positive developments" in the talks.

Spokesperson of the Bangladesh Bank (BB) Arif Hossain Khan also told TBS that the central bank's top brass had a meeting with the IMF yesterday. "But I have no information about this meeting update," he said.

"I can't discuss the issue," a senior finance ministry official told TBS after the meeting.

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 Net International Reserves (NIR), which excludes certain liabilities, as a key benchmark.

During the IMF's recent Dhaka review mission, the Bangladesh Bank 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 central bank 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.

Political Posturing

Amid the deadlock, Chief Economic Adviser's Special Assistant Anisuzzaman Chowdhury warned that Bangladesh could withdraw from the IMF program if additional conditions are imposed.

Earlier this year, delays in the $645 million fourth tranche prompted government reassurances that the holdup was procedural. The finance ministry stated that the fourth and fifth installments would be combined and disbursed in June 2025 after a final IMF review.

Bangladesh has so far received $2.3 billion of the $2.3 billion of the $4.7 billion IMF loan approved in 2023. With both sides dug in, the wait for clarity—and dollars—continues.