For all latest news, follow The Financial Express Google News channel.
The foreign exchange reserves held by Bangladesh Bank have increased to $21.75 billion, according to the BPM6 method of calculation used by the International Monetary Fund (IMF).
On Apr 30 this year, reserves had exceeded $22 billion after 19 months. Before that, reserves had previously reached $22 billion in September 2023, as per a bdnews24.com report.
However, due to the payment of dues at the Asian Clearing Union (ACU), the number dipped below $22 billion again on May 6, within six days. The country's reserves have now been below $22 billion for 48 days.
Bangladesh Bank Executive Director and spokesman Arief Hossain Khan spoke to the media on reserves on Monday night. The data said that the country’s gross reserves stood at $26.82 billion.
During the coronavirus pandemic in 2020, the country’s foreign reserves had risen to $48 billion, on the verge of the $50 billion milestone.
However, after the pandemic ended, fuel and food prices shot up in the global market. Then came the war in Ukraine, which drove up import costs. Foreign reserves have been on the decline since 2022.
But remittance flows and exports have been increasing since August 2024. As a result, there is a bit more stability in the dollar market.
Though remittances and exports have increased, reserves are not increasing as much as expected. On this, a senior official of Bangladesh Bank told bdnews24.com that the new governor has not sold dollars from reserves since taking office.
However, during this time, the outstanding dues on the previous letter of credit have been repaid. Therefore, even though remittances and export earnings have increased, reserves have not.
Under the circumstances, the question naturally arises - where have the approximately $9 billion that came in from excess remittances and export earnings in the current fiscal year go?
The answer is that Bangladesh Bank’s balance of payments (BOP) calculations say that the success of the large growth in remittances and export earnings has been offset by a decline in foreign direct investment (FDI), foreign grants and medium and long-term foreign loans.
Compared with the previous fiscal year, FDI was about $370 million less in the first 10 months (July-April) of the current fiscal year 2024-25. At the same time, grants (foreign aid) fell by $1.86 billion.
Medium and long-term foreign loans were also $1.36 billion lower. In total, these three sectors -– all important for any country's economy -– brought in $3.61 billion less.
And in the first 10 months of the current fiscal year, goods worth an additional $2.42 billion were imported. The amount of foreign loan repayments and expenditure in the service sector also increased during this period.
Bangladesh Bank officials say that the dollar crisis that prevailed in the last two to three years has passed. Since the change of course, a record amount of foreign debt, service charges, and outstanding letters of credit (LCs) dues have been paid on time.
Due to this, despite the large growth in remittances and expatriate income, reserves have not increased.
However, it is also true that the reserve level is not putting a strain on the economy. Traders are now able to open LCs for imports according to their needs.
Even after the exchange rate was market-oriented, the price of the dollar has remained stable. These are good signs for the country's economy, say senior officials of Bangladesh Bank.