Bangladesh is set to receive $3.5 billion in external financing by June—including $1.3 billion from the IMF—as it moves to implement a “limited” market-based exchange rate, a key condition tied to its $4.7 billion loan package from the International Monetary Fund.
“The exchange rate of the US dollar will now be determined by market forces, though we expect it to remain close to current levels,” said Bangladesh Bank Governor Ahsan H. Mansur at a virtual press conference on Wednesday from Dubai.
He clarified that while market forces will set the rate, the central bank retains the authority to intervene if necessary to ensure stability.
The policy shift follows extended negotiations with the IMF, which had called for a flexible exchange rate system before releasing the fourth and fifth tranches of the loan. With Bangladesh agreeing to the condition, the IMF has approved the simultaneous release of both installments.
“Now is the right time to transition,” Mansur said, citing strong remittance inflows, stable foreign exchange reserves, and an improved balance of payments. “We expect $3.5 billion to come in by June, further strengthening our reserves.”
Under the new regime, banks were instructed Wednesday to trade foreign currency at market-based rates, while keeping prices close to existing levels to avoid volatility.
The move marks a major shift in Bangladesh’s monetary policy, bringing it in line with global financial norms. The government also anticipates $2 billion in additional budget support from development partners. Officials emphasized that reforms were domestically initiated, with international partners providing only technical support.
To support the transition, Bangladesh Bank will establish a $500 million intervention fund to stabilize the foreign exchange market if needed. “If instability arises, we will intervene,” Mansur said.