Forex reserves drop to $29.77b after ACU payment
The pressure on Bangladesh’s foreign-exchange reserves continues to mount as the central bank cleared import payment amounting to US$ 1.18 billion through the Asian Clearing Union (ACU) mechanism on Sunday, officials said. After the clearance of import liabilities, the country’s forex
Bangladesh forex reserves drop to $29.77b after ACU payment
JUBAIR HASAN
Published :May 09, 2023 11:06 AM
The pressure on Bangladesh’s foreign-exchange reserves continues to mount as the central bank cleared import payment amounting to US$ 1.18 billion through the Asian Clearing Union (ACU) mechanism on Sunday, officials said.
After the clearance of import liabilities, the country’s forex reserves dropped below $30-billion mark and stood at $29.77 billion as on May 07.
The ACU is an arrangement through which the member countries settle payments for intra-regional transactions among the participating central banks on a net basis.
Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the ACU. The member countries of the Tehran-headquartered union clear their payments every two months.
The significant fall in the reserve, particularly the greenback, comes as a matter of concern for the economy, which is facing difficulties to meet the NIR (net international reserve) target of $24.46 billion within June, as set by the International Monetary Fund (IMF).
Seeking anonymity, a BB official confirmed the ACU payment, saying that the downward trend in the foreign currency reserve continues because of comparatively lower export earnings.
On the other hand, the central bank has sold over $12 billion from its reserve to the commercial banks - from July 2022 to May 7, 2023 - to facilitate them settle LCs.
However, the BB sold $7.62 billion to the commercial banks in the previous fiscal year (FY), 2021-22.
“This is also putting an extra pressure on the reserve. Because of it, the BB might miss the IMF-set target of maintaining $24.46 billion NIR by June,” the central banker said.
Talking to the FE, BB spokesperson Md Mezbaul Haque said meeting the NIR target is a major challenge for the BB, but the Prime Minister has signed some important loan agreements during her trips to Japan, the US and the UK.
Once the funds under the loan agreements will be released, these will strengthen the country’s financial account and also help to overcome such challenges, he also said.
Simultaneously, the latest hike in the exchange rate for remittance and export proceeds will hopefully encourage remitters and exporters to bring more foreign currencies in the coming days, he opined.
When contacted, Professor of Independent University, Bangladesh (IUB) M A Taslim said the continuous reserve fall is not a good sign for the economy that restricted import of many items amid forex dearth.
“But the problem is that we don’t know the actual size of the reserve. The BB should release the real data.” As part of its austerity measure, the import restriction has helped to reduce the current account deficit.
“It’s a good sign,” the economist said, also pointing out the downside risks that the measure badly affected the imports of raw materials and capital machinery as well as hampered industrial production, employment and growth.
He suggested devising a long-term plan to boost supply of foreign currencies. The gross forex reserve reached a record high of $48 billion in August 2021 since when the BB started injecting the greenback into the forex market, as the banks began facing its shortage due to growing import payments, triggered by the economic recovery from the Covid-19 crisis.
The forex crisis intensified later with the start of the Russia-Ukraine war in February 2022, further disrupting the global supply chain.
jubairfe1980@gmail.com
