Bangladesh's foreign-currency reserves further dropped as the central bank Monday cleared import bills amounting to US$ 1.35 billion to the Asian Clearing Union (ACU), officials said.
With the payment to settle the import bills through ACU mechanism, the forex reserves slid to US$34.42 billion.
Before paying the ACU, the country's foreign-currency reserves were over $35.77 billion as of Sunday (November 6), Bangladesh Bank (BB) data showed.
The significant fall in reserves, particularly the greenback, come as a matter of concern for the economy which is under stress amid Bangladesh's falling foreign-exchange reserves, dragged by higher import payments against lower export earnings and remittance inflows.
The ACU is an arrangement by which the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.
Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the Tehran-headquartered ACU. The member-countries of the clearing union clear their payments every two months.
The ACU import bill for the May-June period was US$1.96 billion, which plummeted to $1.75 billion in the July-August period, according to the BB calculations.
Seeking anonymity, a BB official confirmed the ACU payment, saying that the downward trend in the foreign-currency reserves continues because of a gradual fall in earnings from export and remittance in recent months.
"We need the IMF-promised loan of US$ 4.5 billion urgently to stabilise the falling foreign-exchange reserves a bit. Otherwise, we would be in serious trouble as dollar supply continues shrinking," he adds.
However, the central bank has sold US$ 5.01 billion from reserves to state-owned banks for essential imports since July 2022 up to November 6th.
When contacted, Executive Director of the Policy Research Institute of Bangladesh Dr Ahsan H Mansur said the actual size of the reserves is little over US$ 26 billion if the EDF (export development fund) of US$ 8.0 billion is excluded from the forex figure.
"It means we're moving towards yellow zone from the green, which is not a good sign. But the way it (reserve) is declining, we will soon be in red area if we don't increase the dollar supply," he said, mentioning that a reserve less than US$ 22 billion is considered in red zone.
"We've to do something immediately. We need to do everything to confirm IMF's US$ 4.5 billion loan that might help a bit," he suggests.
Talking to the FE, Chairman of Policy Exchange of Bangladesh Dr M. Masrur Reaz said the government ought to increase the supply of dollar to avert unbearable pressure on the economy in the days to come.
"Otherwise, it would trigger panic severely disrupting business activities," he says on a note of caution.
Mr. Reaz said the country, as part of the ongoing austerity measures to protect the greenback, witnessed significant drop in the number and volume of LCs (letters of credit), which is a good sign under the existing circumstances.
"But to get the real benefits of it, we've to enhance earnings from exports and remittance anyhow."
As a way of increasing export outcomes, he suggests that the government ensure uninterrupted supply of gas and power to the industrial hubs to ensure cent-percent productivity.
Simultaneously, the difference in rates of dollar in banking system and kerb market needs to be narrowed as quickly as possible alongside taking measure to further devalue the local currency to attract the remitters for sending their money in formal channel.
The country witnessed fall in remittance inflow in the just-past October with an earning of US$ 1.52 billion, down by 7.37 percentage points year on year as expatriates had sent $1.64 billion in the same period of 2021. Even remittance recorded 24.4-percent monthly fall in September as well.
Export is another prime source through which the country earns significant volume of foreign currencies but its trend is not going well as the country's single-month merchandise-export earnings in October this year declined 7.85 per cent to US$ 4.35 billion, year on year, mainly because of the economic slowdown in the European Union caused by the Russia-Ukraine war.
Bangladesh's exports fetched $4.72 billion in October 2021. The October'22 earnings also fell short of the target by 12.87 per cent, according to Export Promotion Bureau (EPB) data.
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