Central bank foreign exchange reserves at lowest in 18 months

Although remittances increased a little before Eid, the cost of imports increased a lot due to higher prices in the international market. As a result, central bank reserves continue to decline.

After paying a record import bill, Bangladesh’s foreign exchange reserves have shrunk to less than $42 billion.

On Thursday, the first working day after Eid, Bangladesh Bank paid the $2.24 billion Asian Clearing Union (ACU) import bill for the March-April period.

Needless to say, Bangladesh has never paid such amount of ACU bills before.

Reserves have reached their lowest level in 18 months or a year and a half. Earlier, in November 2020, the reserve was $41.26 billion.

According to international standards, a country must have at least three months of foreign exchange reserves to cover import costs.

Current reserves can be used to cover five months of imports depending on the cost of imports last January and February.

Economists and central bank officials believe that the main reason for this is the rising cost of the country’s imports, the decrease in the flow of remittances and the sale of US dollars in banks.

“It is natural that reserves will decrease if imports increase and there is no need to worry. The level of reserves remains quite satisfactory,” said Dr Ahsan H Mansur, executive director of the Policy Research Institute (PRI).

“However, now we need to reduce imports and focus on increasing remittances and export earnings,” he added.

Earlier, economics researcher Professor Mustafizur Rahman, Emeritus Fellow at the Center for Policy Dialogue (CPD), told the Dhaka Tribune: “The decline in remittances has already affected the macroeconomy of Bangladesh. But it is natural for reserves to decrease if imports increase.

But like Dr Mansur, Prof Mustafizur also thinks there is still nothing to worry about.

He said: “There is nothing to worry about as reserves are still good. It is better to increase imports as this will increase investment in the country. There will be a boost in the economy and employment. will increase.

Serajul Islam, Chief Executive and Spokesperson of Bangladesh Bank, said: “Prices of all kinds of commodities, including capital goods and industrial raw materials, are rising as the economy recovers. from the shock of Covid-19. Rising fuel oil and food prices have also increased our import costs. So the reserve decreases.

Reserves have steadily increased for several years, breaking one record after another.

Due to a slowdown in imports and increased remittances and export earnings during the pandemic, reserves crossed the $48.04 billion mark on August 24 last year, the highest ever recorded in the history of Bangladesh.

According to data from the central bank, from July to February of the current fiscal year 2021-22, the import of various products amounted to 58.77 billion dollars, which is 46.70% more than at the end of the year. same period last year.

On the other hand, the latest data released by Bangladesh Bank on remittances for the past ten months (July-April) indicates that expatriates sent remittances of $17.30 billion, or 16, 24% less than the same period last year.

But the good news is that the export boom continues. In nine months (July-March), Bangladesh earned $38.60 billion from exporting various products, up 33.41% from the same period last year.

Bangladesh, Bhutan, India, Iran, Myanmar, Nepal, Pakistan, Sri Lanka and the Maldives are current members of the ACU.

Invoices for products that Bangladesh imports from these countries must be paid by the ACU every two months.