The International Monetary Fund (IMF) will hold a meeting with the Bangladesh Bank on Wednesday (24 April) regarding the implementation of the "crawling peg" mechanism as part of the process of establishing a market-based exchange rate in Bangladesh.

A senior official of the central bank told The Business Standard that the IMF will hold two separate meetings with several teams from the central bank. These meetings will focus on discussing the progress of implementing the crawling peg mechanism for determining the exchange rate.

In addition to this, there will be a detailed discussion about the current process of determining the value of the currency against the dollar, he said.

The IMF advocates for a market-based dollar rate. However, given the current situation, it is not feasible to base the dollar rate solely on the market. Furthermore, the challenges that the central bank is encountering in implementing the crawling peg process will also be addressed, the official further said.

A crawling peg is a system of exchange rate adjustments in which a currency with a fixed exchange rate is allowed to fluctuate within a band of rates. The par value of the stated currency and the band of rates may also be adjusted frequently, particularly in times of high exchange rate volatility.

Commenting that maintaining a net reserve is not a significant obstacle for releasing loan instalments from the IMF, the central bank official said efforts are being made to keep the reserve healthy. In addition to selling dollars from reserves, the central bank has also bought more than $2 billion from the market in the current financial year.

Starting Wednesday, the IMF team will begin meetings with the finance division of the finance ministry, Bangladesh Bank, National Board of Revenue (NBR), etc. These meetings will continue until 8 May. Every year, an IMF team visits Dhaka before the budget.

The IMF imposed several conditions against the $4.7 billion loan facility over a three-and-a-half-year period in January 2023. Bangladesh has received two instalments of the loan by fulfilling almost all the conditions except the reserve.