Bangladesh's Forex Puzzle: Reserves, Imports and the IMF Chapter

In August 2021, Bangladesh's foreign exchange reserves peaked at $46.8 billion — enough to cover 8.5 months of imports. By March 2025, reserves had fallen to $24.3 billion under the IMF's BPM6 accounting methodology, covering just 4.2 months of imports, below the IMF's adequacy threshold of 5 months for a pegged exchange rate regime.

"The IMF approved a $4.7 billion Extended Credit Facility (ECF) and Extended Fund Facility (EFF) arrangement for Bangladesh on January 20, 2023. As of June 2026, the IMF has disbursed $2.1 billion across four tranches, with two additional reviews pending.

The Reserve Drawdown: A Timeline

The reserve depletion follows a clear sequence. From $46.8 billion in August 2021, reserves declined to $33.8 billion by December 2022, driven by post-COVID import recovery and the commodity price shock following the Russia-Ukraine war. The pace accelerated in 2023, with reserves falling to $27.4 billion by December 2023, as energy import costs surged 42% year-on-year.

The drawdown continued through 2024, reaching $24.8 billion by December 2024. The primary drivers were: energy imports ($13.2 billion in FY2024, up from $8.1 billion in FY2021), food grain imports ($6.8 billion), and debt service payments ($4.2 billion). Remittance inflows and RMG exports, while growing, were insufficient to offset the import bill.

The IMF Programme

The IMF's programme, approved in January 2023, required a series of structural reforms. By June 2026, Bangladesh had implemented 8 of 12 structural benchmarks. Key achievements include: the introduction of a crawling-peg exchange rate regime (replacing the de facto dollar peg in May 2024), the unification of the multiple exchange rate windows, and the establishment of an autonomous monetary policy committee.

However, two critical benchmarks remain unmet: the adoption of a market-based interest rate framework (the central bank continues to administer a floor on lending rates) and the full liberalisation of current account transactions (limits on advance import payments remain).

The Import Compression Challenge

To preserve reserves, Bangladesh Bank implemented import compression measures starting in 2023. Letters of credit (LC) openings for non-essential imports were restricted to 25% of banks' total LC portfolio. The impact was significant: total LC openings fell from $72.4 billion in FY2022 to $54.8 billion in FY2024.

The Recovery Path

Bangladesh Bank projects reserves will reach $28-30 billion by December 2026, based on assumed RMG export growth of 8%, remittance growth of 6%, and import growth moderated to 4%. The IMF's most recent staff report, published in April 2026, assessed Bangladesh's programme performance as "broadly satisfactory" but warned that "reserve adequacy remains below prudential thresholds."