Forex reserves fall below $20 billion after import payments

Bangladesh's foreign currency reserves have slipped below $20 billion after a gap of one month following the central bank's settlement of import bills through the Asian Clearing Union (ACU).

The ACU is an arrangement for settling payments for intra-regional transactions among eight countries: Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka. 

The central bank of Bangladesh cleared import bills worth $1.29 billion last week, according to a central banker. 

Thus, the reserves fell to $19.99 billion on Wednesday from $21.15 billion on March 6, as per Bangladesh Bank's calculation based on the International Monetary Fund's Balance of Payment Manual.

It was $19.94 billion on February 14. 

The volatility in the global market driven by the Russia-Ukraine war has sent commodity prices higher, hitting the reserve level of import-dependent countries such as Bangladesh. 

On the other hand, export and remittance, the two biggest sources of US dollars, have remained lower than expected levels although both sectors showed major improvements in February. 

Remittance inflows soared 39 percent in February to $2.16 billion, the highest in eight months, as expatriate Bangladeshis took advantage of the higher dollar rate offered by some banks.

However, the growth remains low, with analysts blaming money transfers through the informal channel popularly known as hundi, which offers higher exchange rates and more convenience compared with the official channels.

Exports grew 12 percent year-on-year to $5.18 billion in February, as the global economy is gradually recovering from the high inflationary pressure.

On the other hand, imports, whose higher levels have brought Bangladesh's healthy forex reserves significantly, fell 7.94 percent to $ 5.87 billion in January, the latest for which central bank data is available. 

The current level of reserves is way lower than the record $40.7 billion reached in August 2021.