The $48 billion reserve was bloated anyway. Happened as Covid 19 meant :
Bangladesh's forex reserves fall to $32.7b after ACU payment
Payment of import bills worth $1.12b to be adjusted tomorrow
Staff Correspondent | Published: 22:55, Jan 03,2023 | Updated: 05:02, Jan 04,2023
A file photo shows the Bangladesh Bank headquarters in the capital Dhaka. Foreign exchange reserves in Bangladesh will fall to $32.7 billion once the payment of import bills worth $1.12 billion is adjusted tomorrow. — New Age photo
Foreign exchange reserves in Bangladesh will fall to $32.7 billion once the payment of import bills worth $1.12 billion is adjusted tomorrow.
Bangladesh has made the payment to the Asian Clearing Union for the months of November and December.
Bangladesh Bank officials said that the payment was made on Tuesday and it would be adjusted on Thursday.
Foreign exchange reserves dropped to $33.83 billion on December 28, 2022 from record $48.6 billion in August 2021.
The Asian Clearing Union is a payment settlement forum whereby the participants settle payments for intra-regional transactions through the participating central banks on a net multilateral basis.
Payment obligations of transactions among Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are settled through the ACU payment system.
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Central banks of the countries make the payment obligations at a two-month interval.
Apart from the payment obligations to ACU, continued sales of the foreign currency reduced the foreign reserves of the country.
The BB had injected more than 6 billion in the financial system from July 1 to November 30 in 2022 in order to stabilise the foreign currency market and facilitate banks in making import payments obligations.
The central bank sold $7.62 billion directly to the banks in FY22 amid a shortage of the greenback on the market.
The central bank on September 14 approved the floating rate of the dollar.
The interbank exchange rate of the US dollar is ranging between Tk 103 and Tk 105.
Due to various restrictions and sluggish business environment amid the Covid pandemic, import payments had declined sharply while exports and remittance earnings witnessed growth in 2021.
But imports have recently exceeded remittance and export earnings, depleting foreign reserves of the country that has also brought down the import payment capacity.
The country’s reserves dropped by $15.9 billion from $48.6 billion a year ago, weakening Bangladesh’s import payment capacity.
Of the amount, the central bank formed a $7-billion export development fund for exporters, but the amount is still considered as reserves and for which the International Monetary Fund has already raised its objection.
If the EDF is excluded from calculation, the country’s reserves would fall to $25 billion.
The government and the central bank have already taken a number of steps to protect the reserves by way of containing the skyrocketing imports.
The government has slapped high taxes on some non-essential items along with imposition of high margin on the opening of letters of credit for import of luxurious and non-essential items.
The country’s trade deficit hit record $33.24 billion in FY22 against $23.78 billion in FY21.
The trade deficit was $11.79 billion in the July-November period of FY23.
In the first five months of FY23, the country’s import payments reached to $32.53 billion from $31.16 billion in the same period of the previous year.
Bangladesh's forex reserves fall to $32.7b after ACU paymentForeign exchange reserves in Bangladesh will fall to $32.7 billion once the payment of import bills worth $1.12 billion is adjusted tomorrow. Bangladesh has made the payment to the Asian Clearing Union for the months...www.newagebd.net
1. A drastic fall in imports
2. Lendors like WB, China, Japan released funds added to reserve
3. Unprecedented level of inbound remittance
4. Zero hundi
BD's normal forex reserve should be around $30 to $35 billion
Dollar crunch happened due to:-
1. Pending payments of matured private sector loans
2. Pending Line of Credit
3. Increased fuel price
4. Money laundering
5. Low inbound remittance
Anyway BD's neat/usable forex reserve is around $26 billion According to IMF formula. Not that great, not that bad either. They should look to increase earnings from remittance and export.
Also while at it abolish that export promotion fund or EDF. Pure garbage idea.