IMF recommends no incentives on remittances
“The recent exchange rate reforms make such an incentive for attracting inflows unnecessary," the IMF says
The International Monetary Fund (IMF) has recommended the government not to incentivise remittances.
According to the IMF staff report published yesterday, the recommendations also include forming asset management companies in the private sector to reduce defaulted loans.
Earlier on 24 June, despite failing to meet the net international reserves ceiling and revenue target, the International Monetary Fund (IMF) approved releasing $1.15 billion in the third tranche of a $4.7 billion loan package for Bangladesh.
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The information was disclosed in the report, which stated the IMF's approval of the loan's third tranche.
With the withdrawal of incentives for remittances, the IMF said, "The recent exchange rate reforms make such an incentive for attracting inflows unnecessary. Consequently, the authorities are encouraged to reduce this subsidy below 2% and eliminate it eventually."
The government introduced a 2% subsidy on remittances in August 2019 to make remittance through official banking channels more attractive. This was subsequently raised to 2.5% in January 2022.
The IMF said, "While there is no breach of the continuous performance criterion (PC) on multiple currency practice (MCP) as the subsidy was introduced prior to the IMF-supported programme, under the new IMF guidance on MCP which came into effect in February 2024, the subsidy for remittances triggered an MCP."
Earlier, the agency stipulated maintaining the net foreign exchange reserves at $14.9 billion by September and $15.3 billion by the end of December before receiving the fourth loan instalment in December.
