The Bangladesh Bank has reduced the Export Development Fund (EDF) by $400 million in May to increase net foreign exchange reserves, aligning with International Monetary Fund (IMF) conditions. The IMF recommended that Bangladesh raise its net reserves to over $24 billion by June, which is slightly below the required amount. Although the central bank does not disclose net reserves, it reported gross foreign exchange reserves of $29.87 billion as of 1st June. The EDF reduction has no impact on disclosed reserves, as it is included in gross reserves. The EDF size now stands at $4.6 billion, down from $7 billion after a series of cuts over six months.
To meet the IMF conditions, imports have been curtailed, but exports have not increased significantly, leaving limited alternatives to boost reserves. Bangladesh Bank officials anticipate that net reserves may fall below $24 billion by the end of June, suggesting further adjustments in the future. While the adjustment supports foreign exchange reserves, exporters express concerns about the impact on their operations, as reduced EDF outlay adds to existing challenges in the industry. The demand for EDF loans has declined alongside reduced imports and stricter measures by the central bank to encourage export proceeds. The establishment of the Exporters’ Fund with lower interest rates has also contributed to the decrease in EDF loan applications.
Source for more details:
