As a precautionary move, Bangladesh has started talks with the International Monetary Fund about taking a loan of $4-4.5 billion to shore up the precarious foreign currency reserves.
Yesterday, foreign currency reserves stood at $41.7 billion, which is sufficient to cover about five months’ import bill. 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.
After next week’s payment of $2 billion to the Asian Clearing Union — the system through which payments for trade made with Bhutan, Iran, India, Nepal, Maldives, Nepal, Pakistan and Sri Lanka are settled — Bangladesh’s foreign currency reserves may drop to less than $40 billion, meaning the import cover will be even thinner.
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.
Subsequently, the loan option is being considered, said a finance ministry official involved with the proceedings.
“There is nothing to panic about — we are just being on the safe side,” he told The Daily Star.
Earlier in October last year, the Washington-based lender had offered Bangladesh $3 billion as the country’s share in the newly issued $650 billion…
