Bangladesh's foreign-exchange reserves fell to US$41.95 billion following the feeding of the dollar-hungry money market over the months and a latest large import payment.
Official sources say the central bank has pumped over US$5.0 billion into the market from reserves in nearly last 10 months to keep the country's foreign-exchange market stable.
Higher import-payment obligations along with a routine payment to the Asian Clearing Union (ACU) have pushed the country's foreign-exchange (forex) reserves bellow $42 billion, they add.
The reserves fell to $41.95 billion Wednesday after the payment worth $2.24 billion to the ACU against the imports of March-April period of 2022 from $44.11 billion of the previous working day, according to the central bank's latest statistics.
Earlier on March 06 last, the country's forex reserves came down to $43.93 billion from $46.07 billion of the previous working day for the same grounds.
Actually, the country's forex reserves have maintained a falling trend in the last couple of months following lower flow of inward remittances and higher import-payment pressure on the economy.
Bangladesh's forex reserves had surged to $48.04 billion on August 24 last calendar 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).
On the other hand, the central bank is providing foreign-exchange liquidity support to the banks continuously for import payments, particularly for essential items like fuel oils.
As part of the moves, the Bangladesh Bank (BB) sold US$21 million to three state-owned commercial banks (SoCBs) on Wednesday, adding up to the 10-month tally.
A total of $5.02 billion has been sold from the forex reserves since August 18 of the current fiscal year (FY) 2021-22 to the scheduled banks as part of the central bank's ongoing liquidity support, according to the latest BB figures.
"The demand for the US currency increased significantly globally, including in Bangladesh, following the ongoing Russia-Ukraine war," another BB official told the FE.
However, the US dollar reached a new 20-year high on Monday as risk-off sentiment stemming in part from concerns over the Federal Reserve's ability to combat high inflation boosted the greenback's safe-haven appeal.
The greenback has risen for five straight weeks as US Treasury yields have climbed on expectations the Fed will be aggressive in attempting to tamp down inflation, reports Reuters.
Bangladesh's import expenses jumped in recent months as a fresh hike of essential commodities, including fuel-oil prices, on the global market mainly due to the war, according to the official.
Market operators, however, say the demand for the US dollar is still prevailing high mainly due to higher import payments, particularly for petroleum products and consumer items, including food-grains.
They urge the central bank to expedite the ongoing foreign-currency support to the banks for curbing the upward exchange rate of BDT against the dollar.
Talking to the FE, Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, said such liquidity support has eased the pressure on the country's forex market slightly.
Meanwhile, the settlement of letters of credit (LC), generally known as actual import, in terms of value, rose by nearly 50 per cent to $60.57 billion during the July-March period of the FY'22 from $40.48 billion in the same period of the previous fiscal.
On the other hand, the opening of LCs, generally known as import orders, grew over 46 per cent to $68.36 billion during the period from $46.81 billion in the same period of FY '21.
The central bank has already remitted the funds to the ACU headquarters in Tehran in line with the existing provisions of the union, according to the officials.
Under the existing provisions, outstanding import bills and interest thereon are to be paid every two months among the member-countries.
Imports from the ACU member-countries, particularly from India, grew by more than 3.0 per cent to $2.24 billion in the last two months of 2022 from the previous $2.16 billion.
"Different products including rice and raw cotton imports from India have pushed up the overall import payments under the ACU arrangement during the period under review," a central banker says while explaining the causes of the increased payments.
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.