Forex reserves under strain: Govt defers employees' foreign tours, less important projects

[Imran Khan]

Forex reserves under strain: Govt defers employees' foreign tours, less important projects​

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Rejaul Karim Byron , Zina Tasreen

Thu May 12, 2022 08:00 AM Last update on: Thu May 12, 2022 12:54 PM



The government finally raised its guard against the dwindling dollar reserves, putting its employees' foreign tours on hold and deferring projects that require much imports.
This comes a day after the central bank toughened its rules for luxury and non-essential imports like sports utility vehicles, washing machines, air conditioners and refrigerators.
The twin moves are expected to safeguard the foreign currency reserves, which have come down to less than $42 billion -- enough to cover five months' imports.
"When times are tough, we have to take decisions that are tough too," Finance Minister AHM Mustafa Kamal told reporters after a meeting of the cabinet committee on public procurement yesterday.
The impacts of the Ukraine war, which has increased the prices of commodities in the global market, are being felt everywhere.
"We cannot say when the Ukraine war will end. Considering the global situation, we have taken this step. All this while, we were living in luxury. We can defer our luxury purchases for a month, two months or six months."
Projects that would not derail the strong economic growth momentum are being deferred, Kamal said.
"We are restructuring to effectively manage the situation. Through this, our economy will become more robust," he added.
Economists though said the government should have acted more proactively and taken the step as soon as the reserves began dipping.
After a pause in 2020 for the global coronavirus pandemic, imports started surging in 2021.
Exports were surging and remittance was gushing in, so reserves stayed at a healthy level, enough to give cover to six to eight months' import throughout last year.
The situation took a turn in January with the start of Russia's invasion of Ukraine. The reserves began to feel the pinch of the drop in remittance growth, which began in July last year, as well as the swelling import bill.
By February, the import cover came down to less than six months and has been getting worse since.
Meanwhile, the taka began depreciating and the central bank was selling dollars from the reserves to keep the exchange rate stable.
"This step was necessary and should have been taken much earlier," said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue.
For instance, Nepal imposed a ban on luxury and non-essential imports last month, when its import cover was for seven months.
The World Bank and the International Monetary Fund prescribe a reserve buffer of six months' import bill.
"I don't know how much success this piecemeal move will have in preserving the foreign currency reserves," Bhattacharya added.
Earlier on April 11, banks were instructed to impose a margin of at least 25 percent on the opening of letters of credit for non-essential consumer goods but to no avail.
The government should have acted decisively much before, said Zahid Hussain, a former lead economist of the WB's Dhaka office.
"I have been saying for a while that the government's foreign currency expenditure must be brought down promptly. If the import demand is not cut, the deficit in the current account that has been widening every month will not be brought down. These are the right steps."
Hussain went on to advise the central bank to exercise restraint in its currency sales.
"The reserves have now come at a stage that it is the bare minimum. Normally, six months' import cover is sufficient but given the global inflation, eight to nine months' cover would be safe."
The exchange rate adjustment must be allowed to depreciate more.
"It will have an impact on remittance and import -- it will help both ways."
The inflation will increase but that is necessary.
"Those who will be impacted by the rising prices should be given a helping hand through the budget as not everyone will be impacted. Monetary policy cannot help them much."

Forex reserves under strain: Govt defers employees' foreign tours, less important projects

The government finally raised its guard against the dwindling dollar reserves, putting its employees’ foreign tours on hold and deferring projects that require much imports.

www.thedailystar.net

 

[PadmaBridge]

Forex reserves under strain: Govt defers employees' foreign tours, less important projects​

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Rejaul Karim Byron , Zina Tasreen

Thu May 12, 2022 08:00 AM Last update on: Thu May 12, 2022 12:54 PM



The government finally raised its guard against the dwindling dollar reserves, putting its employees' foreign tours on hold and deferring projects that require much imports.
This comes a day after the central bank toughened its rules for luxury and non-essential imports like sports utility vehicles, washing machines, air conditioners and refrigerators.
The twin moves are expected to safeguard the foreign currency reserves, which have come down to less than $42 billion -- enough to cover five months' imports.
"When times are tough, we have to take decisions that are tough too," Finance Minister AHM Mustafa Kamal told reporters after a meeting of the cabinet committee on public procurement yesterday.
The impacts of the Ukraine war, which has increased the prices of commodities in the global market, are being felt everywhere.
"We cannot say when the Ukraine war will end. Considering the global situation, we have taken this step. All this while, we were living in luxury. We can defer our luxury purchases for a month, two months or six months."
Projects that would not derail the strong economic growth momentum are being deferred, Kamal said.
"We are restructuring to effectively manage the situation. Through this, our economy will become more robust," he added.
Economists though said the government should have acted more proactively and taken the step as soon as the reserves began dipping.
After a pause in 2020 for the global coronavirus pandemic, imports started surging in 2021.
Exports were surging and remittance was gushing in, so reserves stayed at a healthy level, enough to give cover to six to eight months' import throughout last year.
The situation took a turn in January with the start of Russia's invasion of Ukraine. The reserves began to feel the pinch of the drop in remittance growth, which began in July last year, as well as the swelling import bill.
By February, the import cover came down to less than six months and has been getting worse since.
Meanwhile, the taka began depreciating and the central bank was selling dollars from the reserves to keep the exchange rate stable.
"This step was necessary and should have been taken much earlier," said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue.
For instance, Nepal imposed a ban on luxury and non-essential imports last month, when its import cover was for seven months.
The World Bank and the International Monetary Fund prescribe a reserve buffer of six months' import bill.
"I don't know how much success this piecemeal move will have in preserving the foreign currency reserves," Bhattacharya added.
Earlier on April 11, banks were instructed to impose a margin of at least 25 percent on the opening of letters of credit for non-essential consumer goods but to no avail.
The government should have acted decisively much before, said Zahid Hussain, a former lead economist of the WB's Dhaka office.
"I have been saying for a while that the government's foreign currency expenditure must be brought down promptly. If the import demand is not cut, the deficit in the current account that has been widening every month will not be brought down. These are the right steps."
Hussain went on to advise the central bank to exercise restraint in its currency sales.
"The reserves have now come at a stage that it is the bare minimum. Normally, six months' import cover is sufficient but given the global inflation, eight to nine months' cover would be safe."
The exchange rate adjustment must be allowed to depreciate more.
"It will have an impact on remittance and import -- it will help both ways."
The inflation will increase but that is necessary.
"Those who will be impacted by the rising prices should be given a helping hand through the budget as not everyone will be impacted. Monetary policy cannot help them much."

Forex reserves under strain: Govt defers employees' foreign tours, less important projects

The government finally raised its guard against the dwindling dollar reserves, putting its employees’ foreign tours on hold and deferring projects that require much imports.

www.thedailystar.net

 

[PadmaBridge]

$42 billion -- enough to cover five months' imports. That looks like ancient history, now that there is less than $7 Billion.

But the Foreign Minister is still travelling like a whirlwind. All for what I don't know.

Imports have been strangled whilst exports of garments has increased by over 50% to US and EU.

Hence reserves are now at 25 billion and predicted to be above 40 billion by June next year.

Stop spreading Trumpian lies!

 

[epebble]

Imports have been strangled whilst exports of garments has increased by over 50% to US and EU.

Hence reserves are now at 25 billion and predicted to be above 40 billion by June next year.

Stop spreading Trumpian lies!

My apologies. I thought the news was about Pakistan, since nowhere it said Bangladesh. Bangladesh is nowhere near the panic stage, but it is good that they are economizing on not importing luxury goods. Bangladesh will be OK.

 

[bluesky]

The government finally raised its guard against the dwindling dollar reserves, putting its employees' foreign tours on hold and deferring projects that require much imports.

@EasyNow, what happened to our dollar money earned by our poor women working in garment factories?

Only about a year ago, Hasina Bibi ordered a few hundred BAL chamcha to fly en mass to Toronto on the BIMAN inauguration flight. The BAL govt was implying that BD is awash with raw dollars and wasting a few million dollars in Toronto is nothing. After all, America has lent us printing machines to print dollars.

Now, suddenly dollars are in short supply. The newspapers must be anti-BAL and anti-BD. Hasina Bibi should arrest the editors and hang them for being pro-Pakistan Razakars.

 

[Tigers]

Imports have been strangled whilst exports of garments has increased by over 50% to US and EU.

Hence reserves are now at 25 billion and predicted to be above 40 billion by June next year.

Stop spreading Trumpian lies!

Pakistan has never had $40 billion in foreign exchange reserves. They are nearing default. Arguing with them is a waste of time.

 

[Enigma SIG]

My apologies. I thought the news was about Pakistan, since nowhere it said Bangladesh. Bangladesh is nowhere near the panic stage, but it is good that they are economizing on not importing luxury goods. Bangladesh will be OK.

FR mate. I thought this was Pakistan. I was like WTF who put some sanity into imported govt LMAO.

 

[villageidiot]

My apologies. I thought the news was about Pakistan, since nowhere it said Bangladesh. Bangladesh is nowhere near the panic stage, but it is good that they are economizing on not importing luxury goods. Bangladesh will be OK.

@Imran Khan sb, just breaking some balls and getting revenge I think.

PDF Bangladeshis used to post upbeat news about their economy, with no indication in the title and Pakistanis would take the bait hoping to hear good news, only to find out it's about BD and not Pakistan, since nothing good happens here. We don't do that here

@Enigma SIG

 

[mb444]

Forex reserves under strain: Govt defers employees' foreign tours, less important projects​

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Rejaul Karim Byron , Zina Tasreen

Thu May 12, 2022 08:00 AM Last update on: Thu May 12, 2022 12:54 PM



The government finally raised its guard against the dwindling dollar reserves, putting its employees' foreign tours on hold and deferring projects that require much imports.
This comes a day after the central bank toughened its rules for luxury and non-essential imports like sports utility vehicles, washing machines, air conditioners and refrigerators.
The twin moves are expected to safeguard the foreign currency reserves, which have come down to less than $42 billion -- enough to cover five months' imports.
"When times are tough, we have to take decisions that are tough too," Finance Minister AHM Mustafa Kamal told reporters after a meeting of the cabinet committee on public procurement yesterday.
The impacts of the Ukraine war, which has increased the prices of commodities in the global market, are being felt everywhere.
"We cannot say when the Ukraine war will end. Considering the global situation, we have taken this step. All this while, we were living in luxury. We can defer our luxury purchases for a month, two months or six months."
Projects that would not derail the strong economic growth momentum are being deferred, Kamal said.
"We are restructuring to effectively manage the situation. Through this, our economy will become more robust," he added.
Economists though said the government should have acted more proactively and taken the step as soon as the reserves began dipping.
After a pause in 2020 for the global coronavirus pandemic, imports started surging in 2021.
Exports were surging and remittance was gushing in, so reserves stayed at a healthy level, enough to give cover to six to eight months' import throughout last year.
The situation took a turn in January with the start of Russia's invasion of Ukraine. The reserves began to feel the pinch of the drop in remittance growth, which began in July last year, as well as the swelling import bill.
By February, the import cover came down to less than six months and has been getting worse since.
Meanwhile, the taka began depreciating and the central bank was selling dollars from the reserves to keep the exchange rate stable.
"This step was necessary and should have been taken much earlier," said Debapriya Bhattacharya, distinguished fellow of the Centre for Policy Dialogue.
For instance, Nepal imposed a ban on luxury and non-essential imports last month, when its import cover was for seven months.
The World Bank and the International Monetary Fund prescribe a reserve buffer of six months' import bill.
"I don't know how much success this piecemeal move will have in preserving the foreign currency reserves," Bhattacharya added.
Earlier on April 11, banks were instructed to impose a margin of at least 25 percent on the opening of letters of credit for non-essential consumer goods but to no avail.
The government should have acted decisively much before, said Zahid Hussain, a former lead economist of the WB's Dhaka office.
"I have been saying for a while that the government's foreign currency expenditure must be brought down promptly. If the import demand is not cut, the deficit in the current account that has been widening every month will not be brought down. These are the right steps."
Hussain went on to advise the central bank to exercise restraint in its currency sales.
"The reserves have now come at a stage that it is the bare minimum. Normally, six months' import cover is sufficient but given the global inflation, eight to nine months' cover would be safe."
The exchange rate adjustment must be allowed to depreciate more.
"It will have an impact on remittance and import -- it will help both ways."
The inflation will increase but that is necessary.
"Those who will be impacted by the rising prices should be given a helping hand through the budget as not everyone will be impacted. Monetary policy cannot help them much."

Forex reserves under strain: Govt defers employees' foreign tours, less important projects

The government finally raised its guard against the dwindling dollar reserves, putting its employees’ foreign tours on hold and deferring projects that require much imports.

www.thedailystar.net

Surely this is a positive news. Forex needs to be saved so govt is belt tightening where it spends.