Staff Reporter :
Bangladesh’s foreign currency reserves will remain under pressure further, if the current pace of import cost continues to rise steadily, warned International Monetary Fund (IMF).
The visiting delegation of the Washington-based multilateral lender passed the remark in a meeting with the technical team of the Cost Debt Management of Bangladesh at the latter’s office in Dhaka on Monday.
“There is nothing to worry about the country’s current reserves spending. The IMF is satisfied with the reserves. But the reserves will remain under pressure, if the import cost increases further,” the delegation said, according to finance ministry sources.
They further said, “The IMF delegation wanted to know about the cash loans of the country. We answered the question.”
The IMF’s delegation emphasized on NBR’s capacity building on different sectors including
policy analysis and revenue analysis to increase revenue collection.
As part of capacity building, sufficient trainings are needed to make the officials skilled to cope with the modern technologies, the delegation suggested according the NBR officials, who participated in the meeting.
The team led by Rahul Anand, Division Chief in the IMF’s Asia and Pacific Department, held the meeting with the NBR high ups at the revenue board’s conference room in the capital on Monday.
NBR Chairman Abu Hena Md Rahmatul Muneem briefs them the recent development activities of the revenue board, official sources said.
The activities including overview of tax collection in FY22 and FY23, reasons for under or over-performance in individual tax categories in FY22 including exemptions, tax exemptions-revenue impact, trends and recording, money-whitening scheme progress, strategy to raise revenue collection and reach fiscal year targets, direct tax and customs tax reform update and digitization and automation efforts are discussed in the meeting, they said.
The NBR officials said the IMF’s expert teams are likely to hold several meetings with the heads of the three wings of the NBR separately.
Bangladesh government is desperately trying to get loans worth $4.5 billion as budgetary support to shore up the precarious foreign currency reserves, which stood at the lowest since October 14, 2020.
As part of the loan negotiation, the IMF delegation came to Bangladesh in order to observe the situation.
If everything proceeds smoothly, the loan deal could be finalized by October this year.
Typically, the World Bank and the IMF prescribe an import cover of three months, but in times of economic uncertainty, they advise keeping sufficient reserves to meet 8-9 months’ imports.
Going forward, even though imports are slowly contracting, the elevated inflation levels around the world mean the odds of a slowdown in both remittance inflows and export orders, two sources of foreign currency for Bangladesh, are high.
The IMF officials will look into the impacts of the Russia-Ukraine war and escalated global commodity prices on the Bangladesh economy, the status of recovery from the global Covid-19 pandemic and the government’s large subsidy program.
They will see whether the subsidy spending is justified and compare it with the other countries.
If it is deemed excessive, the IMF mission may suggest ways to trim it.
The IMF could tie in conditions for the loan package.
The conditions could include measures to increase revenue, lower subsidy expenditure, market-based exchange rate and lending rate, and reforms in the banking sector and tax administration, the ministry official said.
The government has already moved to tighten its belts though.
It has unveiled a relatively smaller budget for the current fiscal year, put on hold low-priority projects, suspended foreign tours of government officials, adjusted the prices of gas and diesel to some extent, and loosened the exchange rate policy.
Surjit Bhalla, Executive Director of the IMF for India, Bangladesh, Bhutan and Sri Lanka, who represented Bangladesh on the board of the Washington-based lender, is also set to visit Bangladesh separately.
