Bangladesh Bank (BB) is likely to face challenges to fulfill the stringent Net International Reserves (NIR) target of $20.1 billion set by the International Monetary Fund (IMF) for June 2025 under its $4.7 billion loan program.
The fourth tranche, a critical component of the program, has heightened pressure on policymakers amid slowing remittance inflows and stagnant export performance.
A central bank official said as of January 20, 2025, Bangladesh's current NIR stands at over $16 billion. The foreign exchange reserve, calculated under the Balance of Payments Manual 6 (BPM6), is $20.01 billion, while the gross reserve is $25.24 billion.
NIR, a core metric for measuring usable reserves, excludes liabilities and forward commitments, offering a clearer view of a country's liquidity.
Meanwhile, BPM6 reserves matters in the country's financial assets and liabilities, aligning them with global standards. Gross reserves, the broadest measure, reflect the total foreign currency holdings but may include unusable assets such as swaps.
The path to the fourth tranche poses significant challenges, as the current NIR level remains well below the target. A senior Bangladesh Bank official acknowledged that maintaining steady reserve growth is increasingly difficult, especially with a sluggish start to January's remittance inflows following a robust December.
Despite these hurdles, the central bank remains confident of meeting the elevated NIR target, citing ongoing measures to enhance foreign currency inflows.
In June 2024, the IMF approved the third tranche of $1.15 billion loan, bringing the total disbursement to $2.3 billion.
However, at the time, the country's NIR stood at $16.73 billion, missing the $17.78 billion target. The IMF, recognizing the government's corrective efforts, granted a waiver for this shortfall and proceeded with the disbursement.
The upcoming review in March 2025 will evaluate Bangladesh's progress on fourth tranche requirements. Key performance indicators include reserve accumulation and revenue mobilization, both of which remain under pressure.
In the first seven months of FY2024-25, the National Board of Revenue (NBR) achieved only 12 per cent growth in tax revenue, far below the 20.39 per cent target required to support the IMF program's fiscal objectives.
The central bank official said beyond IMF compliance, meeting the NIR target is essential for economic stability. The declining remittance inflows-an otherwise reliable foreign exchange source-underscore vulnerabilities.
In December 2024, remittance inflows showed a rare surge but failed to maintain momentum in January 2025. Simultaneously, export growth has stagnated, with key sectors like textiles facing reduced global demand.