Ballooning import payments amid price rises and a payment to the Asian Clearing Union (ACU) dragged Bangladesh's foreign-exchange reserves down US$44 billion, officials say.
The reserve position stood at $43.93 billion Sunday after the routine payment worth $2.10 billion to the ACU against the imports of the January-February period of the current calendar year, from $46.07 billion of the previous working day, according to the central bank's latest statistics.
"The reserves have been maintaining a falling trend in recent months following higher import-payment obligations alongside lower flow of inward remittances," says their explanation of the position.
Earlier on January 05 last, the country's forex reserves came down to $44.33 billion from $46.29 billion of the previous working day for the same grounds.
Bangladesh's forex reserves had surged to $48.04 billion on August 24 last year, setting a new record, from $46.58 billion of the previous working day. The rise was after receiving $1.45 billion from the International Monetary Fund (IMF) as general allocation of Special Drawing Right (SDR).
"We've already remitted the funds to the ACU headquarters in Tehran in line with the existing provisions of the union," a senior official of the Bangladesh Bank (BB) told the FE writer Sunday.
Under the existing provisions, outstanding import bills and interest thereon are to be paid every two months among the member-countries.
Meanwhile, imports from the ACU member-countries, particularly from India, grew by more than 11 per cent or $225 million to $2.16 billion in the last two months of 2022 from the previous $1.93 billion.
"Higher rice and raw cotton imports from India have pushed up the overall import payments under the ACU arrangement during the period under review," the central banker says while explaining the causes of the increased payments.
Bangladesh is now importing different consumer items, intermediate goods, raw materials and capital machinery from the ACU-member countries, particularly from India, according to the officials.
The ACU is an arrangement involving Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives, through which intra-regional transactions among the participating central banks are settled on a multilateral basis.
However, the country's overall import expenses jumped more than 54 per cent to $38.97 billion during the July-December period of the current fiscal year (FY), 2021-22, from $25.23 billion in the same period a year ago, the BB data show.
Besides, the settlement of letters of credit (LC), generally known as actual import, in terms of value, rose by nearly 7.0 per cent to $6.41 billion in January - from nearly $6.0 billion in the previous month.
Actually, Bangladesh's overall imports have increased significantly in recent months, following gradual reopening of economic activities - both at domestic and global levels - after more than one year of Covid-19 pandemic upset.
Higher prices of essential commodities, including petroleum products, on the global market have also pushed up the country's import payments during the period, the BB officials explained.
On the other hand, the flow of inward remittance dropped by more than 19 per cent to $13.44 billion during the July-February period of FY '22 from $16.69 billion in the same period of the previous fiscal.
The BB officials feel that the country's forex reserves are now under pressure mainly due to higher import-payment obligations, particularly for petroleum products, intermediate goods and industrial raw materials.
The central bank has so far sold $3.38 billion from the reserves direct to the commercial banks as liquidity support for settling their import- payment obligations in FY '22.
"Our external balance is now facing challenges mainly due to higher outflow of foreign currency than that of inflow," another BB official told the FE.
He also said higher import-payment pressure on the economy along with lower inflow of remittances was creating the challenges.
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