Bangladesh Bank’s foreign currency reserves have declined further. after the Asian Clearing Union (ACU)’s March and April payment, the total forex reserves of Bangladesh Bank have fallen to $23.77 billion. according to the BPM6 method of the International Monetary Fund (IMF), the reserves have now stood at $18.32 billion the real or usable reserves are now less than $13 billion, it is learnt on Tuesday.
Bangladesh Bank’s sources said the central bank paid $1.63 billion regarding the ACU bills last week. Then the forex reserved had declined, and the forex reserves now stands at $18.32 billion.
According to the net foreign exchange reserves’ target set by the IMF target for Bangladesh up to June 30 next was $20.11 billion. The IMF has lowered the target at $14.75 billion though the reserves are now less than $13 billion. Bangladesh now spends some $5 billion from its reserves to meet the import expenses each month.
Bangladesh Bank Executive Director and spokesperson Mezbaul Haque said the central bank paid last two months’ import bills worth $1.63 billion. As a result, reserves have declined somewhat. However, Bangladesh will receive IMF’s loan installment next month. Besides, foreign currency of different projects will be released by June. Moreover, the inward remittances sent by expatriates will surpass $2 billion in the current month. It means that the flow of dollar will increase. As a result, pressure of selling dollar from the reserves will also go down.
Bangladesh Bank began calculating forex reserves according to the method of the IMF in July 2023. on July 13 last year, foreign exchange reserves were $23.56 billion. however, Bangladesh Bank says, according to its calculation, the forex reserves now stands at $23.71 billion after the ACU payment, down from $25.27 billion on May 8.
Under its domino effect of the crunch, the balance-of-payments deficit was continuing to widen with its further stress on the reserves. The government was thus forced to seek loans from the IMF, as also from other development partners, to replenish its coffer.
The IMF this past January granted $4.7 billion worth of loans with a string attached that includes a number of reforms, including publishing forex-reserve position in line with the BPM6. to calculate gross international foreign-currency-reserve position Bangladesh Bank will have to exclude the reserve-related liabilities and reserves earmarked for quasi-fiscal activities.
The gross reserves data, published Thursday, show Bangladesh falling short of target as set by the IMF, a floor at US$24.46 billion for the month of June. the Washington-based development financier set the floor on reserve position as Quantitative Performance Criteria (QPC) in the loan programme. It will check the reserve position in the next loan review in September.
Dr Zahid Hussain, former lead economist of the World Bank’s Dhaka office, told the FE on the day that the central bank published the new reserve position by excluding the foreign currencies which do not have monetary uses.
“The net reserve position will be much lower, somewhere in $18 billion to $19 billion,” he said. he notes that presently the central bank is selling $50 million or more every day to keep imports floating. “Unless the selling is stopped, the net reserve position will further fall in the days to come.” the economist strikes a note of caution that unless any policy comes to prevent falling reserve position, “we may fall in problem further”.
To stop selling dollars to the banks the central bank has to take measures to increase supply of the greenback to the market from other sources. “Because, by selling US dollar, the central bank is supporting continuation of importing essential commodities.” Mr Hussain suggests that the central bank ease exchange rate further to stop selling dollars.
