Reserves at $2.9 Billion: Import Ban or Exchange-Rate Adjustment?

Liquidity arithmetic. $2.9 billion of reserves against a $1.7 billion monthly import bill is roughly 1.7 months of cover – far below any prudent floor and below the programme's NIR path. The monthly current-account gap is roughly $1.7 billion of imports against about $1.73 billion of visible inflows (exports, remittances, tourism), i.e. near balance on the measured lines, which means the pressure is being carried by the capital and services account and by expectations, not by a permanently oversized trade deficit.

What the parallel premium tells you. An 18% premium persisting for five weeks is the signature of rationing, not of excess money supply. If the problem were purely monetary, credit growth of 14% against 4.2% inflation would show up as broad inflation and asset prices; instead the adjustment is happening in a queue for foreign exchange. That is a price-and-allocation problem.

What is genuinely monetary. 14% credit growth with 4.2% inflation is mildly loose, so a rate response is defensible but secondary; it cannot by itself clear a queue.

What is structural. Fuel dependence, a narrow export base and a sovereign guarantee that converts a supplier's commercial risk into public contingent liability.

Evidence that would change the diagnosis: (i) if the premium widened after a credible depreciation, the problem is credibility and forward contracts, not the level; (ii) if credit growth were 8%, the monetary element would drop out; (iii) if remittances were falling month-on-month, the issue is confidence in the formal channel, and the answer is a remittance incentive, not a rate hike.

Measure 1 - Clear the queue by price, with a crawl. Allow a phased depreciation towards the parallel rate, announced with a published schedule and a weekly auction. Gain: removes the 18% rent that currently flows to whoever gets official allocation, and ends the arbitrage that starves the formal market. Trade-off: immediate pass-through to fuel and food, roughly proportional to the import share of the basket. Mitigation: pre-announce a temporary, targeted fuel-price smoothing funded from the existing subsidy line, not from reserves.

Measure 2 - A 100bp hike, framed as a defence of the crawl. Gain: slows credit growth of 14%, reduces the incentive to hold dollars, and signals to the IMF mission that the adjustment is not purely administrative. Trade-off: raises the sovereign's own borrowing cost and tightening while depreciating can look inconsistent – so the communication must present the rate as supporting the exchange-rate anchor.

Measure 3 - No general import ban; instead a narrow, time-bound, triggered restriction. The 320-line ban is estimated to save at most $200–250 million a month, but it creates leakage, rent-seeking and smuggling, and, more seriously, it risks a non-observance finding under a programme that discourages new trade restrictions and multiple-currency practices eight weeks before a review. Alternative: restrict no more than 30 lines, publish the list, attach a sunset clause and a review trigger (reserves below 1.5 months' cover), and remove lines automatically as cover improves.

On the fuel credit line: do not issue a sovereign guarantee before a debt-sustainability check. Offer a partial guarantee or an escrow arrangement from export proceeds instead – a full guarantee creates a preferential creditor and complicates the restructuring perimeter.

Tell them (and put in writing):

1. The exchange-rate crawl with a published schedule and auction mechanism – this is the prior action they will want.
2. The 100bp rate decision and the credit-growth path it implies.
3. That the import restriction is narrow, published, sunset-bound and triggered by a reserves metric, with the 320-line version explicitly withdrawn.
4. A fiscal number: the cost of fuel-price smoothing, and its financing source, so it does not appear as an off-budget item.

Do not commit to:

1. A specific exchange-rate level or a timetable in dollars – you cannot bind a market and will be measured against it.
2. A sovereign guarantee to the fuel supplier, or any new preferential creditor, before the debt-sustainability analysis is shared with them.
3. A reserves figure for the review date that assumes the supplier credit is disbursed – the NIR floor must be set on flows you control.
4. Any sequencing that makes disbursement conditional on withdrawing the narrow restriction; keep the restriction framed as temporary balance-of-payments protection, consistent with the programme's own safeguard language, and get their written view on it before the review mission arrives.

Frame of the message: the committee is choosing between an administrative fix and a price fix; you are choosing price plus a small, reversible administrative backstop. That framing is both accurate and the one the mission can defend internally.