IMF advises Bangladesh to build strong forex reserves

The International Monetary Fund (IMF) has asked the finance and commerce ministries to take strong measures to keep foreign exchange reserves afloat despite the fallout of the Russia- Ukraine war.

Currently, Bangladesh’s foreign exchange reserve shrinks to $39.8 billion following an Asian Clearing Union payment. The next ACU payment will be due in September. The mission said Bangladesh should accumulate a strong forex reserve.

Asian Clearing Union (ACU) is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.

An IMF team is visiting Dhaka to assess Bangladesh’s application for budget support worth $4.5 billion from the IMF. The fund, if released, would be used to boost the country’s Small and Medium Enterprises (SMEs) and expand the social safety net. However, no budget support meeting took place yet at any of the three separate meetings held on Sunday.

The visiting IMF team advised the banking secretary to take initiatives to recover defaulted loans and bring back discipline and good governance to the financial sector, said a senior finance ministry official.

They lauded the commerce secretary for Bangladesh’s new export policy as it has helped increase shipment despite some fall in export revenues in the European Union countries, Russia and China.

Meanwhile, the commerce ministry was asked to take strong trade development measures and raise trade volumes as the country graduates from Least Developing Country status within years. Bangladeshi products may not be cheap as importing nations will impose duties and home goods may lose competitiveness.

“No sovereign guarantee is issued against any loan other than that is provided to the SOEs,” a finance division correspondence revealed while responding to a query placed by the visiting International Monetary Fund (IMF) delegation.

Rahul Anand, division chief of the IMF’s Asia Chapter is leading the IMF nine-member team that will stay in Dhaka until July 21.