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The International Monetary Fund (IMF) has disbursed the fourth and fifth tranches of its loan agreement with Bangladesh, amounting $1.33 billion.
In addition, Bangladesh’s reserves have crossed $30 billion in a single day due to the remittance flow, alongside the release of committed budget assistance from the World Bank, the Asian Development Bank, and JICA (Japan International Cooperation Agency).
It is the first time reserves have crossed $30 billion after two years, according to a bdnews24.com reports.
On Jun 24, the IMF approved the fourth and fifth tranches of its loan agreement with Bangladesh, totalling nearly $1.34 billion. It issued a press release on the loan’s approval by its executive board around midnight Bangladesh time on Monday.
Bangladesh received the message of the disbursement on Thursday, central bank spokesman, Executive Director Arif Hossain Khan said. “The IMF has released two installments. But the effect on the reserve account will be seen next Monday,” he said.
Although the money has been added to the foreign exchange reserves, the voucher settlement (the final certificate of account between the two parties after receiving and sending the money) has not been completed due to geographical distance.
The settlement process will not be completed before the weekend as Friday and Saturday are weekly holidays in Bangladesh and Sunday falls on the weekend in the United States.
Bangladesh will be able to publish its foreign reserve information formally on Monday after the settlement process is completed on.
On Jun 25, the gross reserves stood $27.67 billion as per the data released by Bangladesh Bank.
This reserve figure amounted to $22.65 billion according to the BPM-6 method.
According to the primary estimate of central bank officers, Bangladesh’s reserves are now $30.30 billion. According to the BPM6 method, they are at $25.51 billion.
Two years ago, Bangladesh’s reserves dropped to $30.84 billion on June 26, 2023.
Amid the onset of the coronavirus pandemic, the country was on the verge of reaching the $50 billion reserve milestone. Due to a decline in foreign trade and record remittance flows, the reserves reached a maximum of $48 billion on Aug 25, 2021.
However, after the pandemic ebbed, fuel and food prices shot up in the global market, and then the war in Ukraine broke out, which hiked import costs further. This gradually reduced reserves.
Ahsan H Mansur became the governor after the Awami League government was toppled by a mass uprising in August last year. After taking office, the new governor announced that banks would not get support by selling dollars from the reserves. This will increase the reserves, and there was no possibility of them falling further, he said.
Net reserves are calculated according to the IMF accounting method BPM-6. The amount of net or actual reserves is known by deducting short-term liabilities from the gross or total reserves.
The central bank has been publishing information on BPM6 and gross reserves since July 2023, after the IMF approved the loan.
According to Bangladesh Bank, expatriates sent remittances worth $1.98 billion through banking channels in the first 21 days of June.
Bangladesh had to go through many negotiations to secure the fourth and fifth installments of the loan.
After several rounds of negotiations since 2022, Bangladesh signed a $4.7 billion loan agreement with the IMF early in 2023 to address its financial crisis.
The loan disbursement began on Jan 30, 2023. Bangladesh received the first tranche of $476.3 million on Feb 2 of that year. The second tranche of $682 million was received in December of the same year.
The third tranche of $1.15 billion was received in June 2024.
Bangladesh received a total of $2.31 billion from the IMF in those three tranches.
The fourth instalment of the loan was delayed due to several issues, including Bangladesh’s need for more time to make the exchange rate with the dollar fully market-oriented.
During the last IMF visit, it was announced that the international lender had agreed to release the fourth and fifth instalments of the loan together, following discussions with Bangladesh.
After a series of meetings, progress was made in the loan negotiations after the exchange rate became market-oriented. On May 14, Governor Ahsan H Mansur said that the IMF had agreed to release the tranches.
A month and 10 days later, the IMF board meeting approved the disbursement of the tranches. The IMF said that despite the political and economic challenges in Bangladesh, satisfactory progress has been made in implementing the conditions in its loan agreement.
In May, the delegation led by Chris Papageorgiou visited Bangladesh and completed its review of Bangladesh’s progress in hitting the IMF’s conditions, but did not make a decision. They again offered to negotiate.
After a two-week review, the organisation’s representatives said at a press conference at the Bangladesh Bank office on Apr 18 that further discussions on the issue would continue and the two instalments could be made available by the end of June.
IMF mission chief Papageorgiou said that further discussions on the issue would be held at the IMF-World Bank Spring Meeting in Washington, DC.
Later, on the sidelines of the meeting held from Apr 21-26, Financial Advisor Salehuddin Ahmed and Governor Mansur met with IMF officials.
After his return, Salehuddin spoke of negotiating a loan with the organisation on April 29. He claimed that Bangladesh would be able to function even without an IMF loan.
Later, IMF officials held separate virtual meetings with Bangladesh Bank and the Ministry of Finance.
After several rounds of negotiations since 2022, Bangladesh signed a $4.7 billion loan agreement with the IMF early in 2023 to address its financial crisis.
The loan disbursement began on Jan 30, 2023. Bangladesh received the first tranche of $476.3 million on Feb 2 of that year. The second tranche of $682 million was received in December of the same year.
The third tranche of $1.15 billion was received in June 2024.
Bangladesh received a total of $2.31 billion from the IMF in those three tranches.
However, the IMF was not releasing the fourth tranche of the loan due to non-compliance with the conditions set by the organisation on the market-oriented exchange rate, meeting a net foreign exchange reserves target, and fiscal management.