BB overstates forex reserves by $7.2b: IMF23 November 2021
News Desk :
The International Monetary Fund (IMF) says the Bangladesh Bank has overstated its foreign exchange reserves by $7.2 billion through inclusion of non-reserve assets underestimating related risks.
In a draft report on safeguards assessment of the Bangladesh Bank for 2021, the IMF has identified the misclassification of foreign assets leading to an inflated foreign reserve held by the central bank.
The foreign exchange reserve of $46 billion as reported at the end of June this year was overstated by 15%. Originally, the foreign exchange reserves would be $39 billion, according to IMF calculation.
Explaining this finding, IMF has said a portion of the reserve has been used to finance, deposit with resident banks, invest in non-investment grade bonds and lend to Sri Lanka following the decisions of the central bank board and its investment committee.
Yet the central bank continues to include these non-reserve assets in the
performance and risk analysis for foreign reserves
"Such exaggeration of foreign reserves leads to a wrong judgement about their redundancy," said the IMF report, which also mentioned that the Bangladesh Bank has limited expertise and constrained IT capacity.
The IMF recommended that the Bangladesh Bank should manage foreign reserves separately from non-reserve assets to avoid overstatement of foreign currency liquidity and underestimation of related risks, and report transparently.
When contacted about the issue, Kazi Sayedur Rahman, deputy governor of the Bangladesh Bank who is responsible for the Forex Reserve and Treasury Management Department, refused to explain the IMF's claim of overstating foreign exchange reserves.