Forex reserves below $36b

Bangladesh's foreign exchange reserves dipped below $36 billion on Wednesday due to increased import payments compared to slower-than-expected export earnings.

The reserves stood at $35.98 billion, down from $36.11 billion a day ago, according to data from Bangladesh Bank.

The country's reserves stood at $46.19 billion on October 19 last year.

The reserves have been decreasing even though Bangladesh Bank has been repeatedly injecting US dollars into the market for the last couple of months to help businesses clear their import bills.

The central bank has so far injected more than $4.57 billion into the market this fiscal year after supplying a record $7.62 billion in the last fiscal year.

Imports surged to $12.7 billion in the first two months of this fiscal year, up 17 per cent from a year prior.

Meanwhile, exports grew 24 per cent to $8.13 billion and remittance flow rose 12.25 per cent to $4.13 billion.

A high official of a commercial bank said remittances have declined in recent periods, putting extra pressure on the reserves.

The taka has been rendered one of the worst-performing currencies in South Asia in the last one year because of the country's plummeting foreign exchange reserves.

The exchange rate of the taka stood at Tk 105 per dollar on October 19, down 22.6 per cent from a year ago.

Only two other currencies – the Sri Lankan rupee and Pakistani rupee – performed worse than the taka during the period. The Sri Lankan rupee fell by 79.3 per cent while the Pakistani rupee was down 27.7 per cent, showed central bank data.

The depreciation of the taka has already reduced the number of letters of credit (LCs) being opened, which will have a positive impact in curbing the depletion of foreign exchange reserves in the coming days.

The number of LCs opened amounted to $12.4 billion in the first two months of the ongoing fiscal year in contrast to $12.3 billion in fiscal 2021-22.

At a press briefing yesterday, the Centre for Policy Dialogue said the central bank should prevent the forex reserve from falling further, "particularly in view of the recent debate regarding the estimation methodology and pursue a floating exchange rate policy".