Cenbank to brief IMF team on loan term progress Wednesday

An International Monetary Fund (IMF) delegation will sit with the central bank today (4 October) to discuss the terms of its loan given to Bangladesh and overall economic performance before releasing the second tranche in December.

According to the central bank's meeting agenda seen by The Business Standard, the Bangladesh Bank plans to present updates on key areas to the IMF officials. 

These include foreign exchange intervention and import restrictions, delays in export proceeds, concerns about capital flight, recent performance and outlook of the financial sector as well as an overview of risks and new regulations.

Rahul Anand, the IMF mission chief in Bangladesh, will head the delegation.

In addition, key drivers of recent inflation, current assessment of projected inflation and exchange rate developments, monetary policy stance, actual and neutral real interest rates level, extent of Bangladesh Bank devolvement, public and private credit growth, and operationalisation of the interest rate corridor system will also be presented at the meeting.

The IMF in January this year approved a $4.7 billion loan package for Bangladesh. The country received the first tranche of the IMF loan in February.

One of the key conditions agreed to implement before the second instalment is to hold at least $25.32 billion in net international reserves on 30 September. But the amount was $21.15 billion on 27 September, according to the Bangladesh Bank.

Another major condition is introducing a floating exchange rate. The central bank has given exchange rate-setting powers to the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers' Association (Bafeda). 

At the beginning of last January, the dollar selling rate was Tk103, which was increased to Tk110.50 on 3 October. Although now remittance and export proceeds have a single rate, bankers say the actual market rate is Tk115/117.

In addition, the Bangladesh Bank will present its experience with the SMART (six-month moving average rate of Treasury bill) rate to the IMF officials.

The central bank will also highlight the steps taken in the monetary policy to reduce money supply to control inflation. Of this, the Bangladesh Bank has lowered the private sector credit growth projection to 10%, compared to 14.1% in FY23.

According to data from the Bangladesh Bank, the last time private sector credit growth dipped below the current August figure of 9.75%. 

In their meeting on 5 October, the Bangladesh Bank will present climate-related green finance initiatives, implementation of sustainable finance and green bond policies, concerns about capital flight, financial account reversals in FY23, errors and omissions totalling $3 billion, trade credit, cross-border private loans, and the appropriateness of monetary policy/stance for the balance of payments to the IMF team.

During their stay till 18 October, the IMP officials will sit with the Bangladesh Bank seven times, according to the meeting agenda.