Forex reserves fall to $29.77b after ACU payments
The country's foreign exchange reserves have fallen to $29.77 billion as Bangladesh Bank cleared import bills to the tune of $1.18 billion through Asian Clearing Union (ACU).
The reserves stood at $42.20 billion in May last year, meaning that the amount decreased by 29.45 per cent over the past year, showed central bank data.
With Bangladesh Bank having made the payment to the ACU last week, the funds were adjusted from the country's foreign exchange reserves on Sunday.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said neither the central bank nor government took effective measures in recent times, which was why the reserves have been declining.
The reserves stood at $42.20 billion in May last year, meaning that the amount decreased by 29.45 per cent over the past year, showed central bank data
He fears that the reserves may drop further in the days ahead as the central bank's upcoming policies, which may be declared in its next monetary policy in July, would not be able to bring a halt to the downward trend.
The central bank recently announced that it would issue policies on implementing a market-based interest rate on loans and floating exchange rates.
It seems Bangladesh Bank will try to control the interest rate on loans as well as the exchange rate as it has already hinted, said Mansur, also a former official of International Monetary Fund.
The central bank should allow the market to fully determine both the interest rate and exchange rate, or else the country's macroeconomic situation would worsen.
"The conditions imposed by the IMF are soft and will not help resolve the ongoing economic problems," he added.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said the continued drop in reserves was really concerning.
"We should increase our remittances and export earnings at any cost to stop the erosion of the reserves," he added.
Remittance, the cheapest source of US dollars for Bangladesh, declined 16.27 per cent year-on-year to $1.68 billion in April. However, the flow was up 2.36 per cent to $17.71 billion in the first 10 months of fiscal year 2022-23.
Export earnings dipped 16.52 per cent to $3.95 billion in April, data from the Export Promotion Bureau showed yesterday. But it was up 5.38 per cent to $45.67 billion during the 10-month period.
Although import bills fell 10.27 per cent to $48.79 billion in the first eight months of 2022-23, it was not enough to stop the depletion of the forex. Import data for March and April have not been published yet.
A central bank official said the reserves faced trouble after every ACU payment in recent months.
The ACU is an arrangement for settling payments for intra-regional transactions among member countries, including Bangladesh.
India, Bhutan, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are other members of the Tehran-based ACU.
Member countries of the ACU clear their payments once every two months.
Bangladesh's foreign exchange reserves soared to a historic high of $48 billion in August 2021.
Although the deficit in trade and current account decreased significantly in the last couple of months, the shortfall in the financial account widened to a large extent, worsening the volume of the reserves.
Under such a situation, the central bank injected US dollars into banks almost every working day.
Between July 1 and April 27 of the ongoing financial year, the central bank supplied a record $11.79 billion to banks in contrast to $7.62 billion for the entire fiscal year of 2021-22.