Staff Reporter :
The Bangladesh Bank has sold a substantial amount of US dollars from its foreign exchange reserves to local banks, totaling $11.67 billion in less than 10 months of the current financial year of 2023-24.
It was known that from July to December of this fiscal year alone, the depletion amounted to $6.7 billion, reaching over $11 billion by April 22, as per data from the central bank.
Over the past 34 months, the Bangladesh Bank has sold approximately $32.79 billion, including $13.5 billion in FY23 and $7.62 billion in FY22, from its foreign exchange reserves to banks.
The foreign exchange reserves stood at $41.8 billion in June 2022 and $46.2 billion in September 2021. However, experts attribute the depletion of foreign exchange reserves primarily to settling high import payments, exacerbated by sluggish growth in remittances and export earnings.
Moreover, increased dollar sales have absorbed a significant amount of local currency from banks, affecting liquidity conditions in the banking sector.
In response to the situation, the government and the Bangladesh Bank have implemented initiatives since April 2022 to curb the significant growth of imports, aiming to mitigate the pressure on foreign exchange reserves.
In the first eight months of FY24, the country’s import payments declined by 15.36 percent to $40.88 billion compared with those of $48.3 billion in the same period in the previous year.
The current dollar shortage has already forced the government to secure $4.7 billion in loans from the International Monetary Fund over a period of three years. However, the reserves have not improved since the loan programme was rolled out.
The government was given a target by IMF to keep minimum net international reserves (NIR) of $17.78 billion for December 2023. The country fell short of the target by $58 million.
The goal for June last year was $23.74 billion. However, the country had a reserve of $19.56 billion at that time.
The Bangladesh Bank has adopted a market-based and unified exchange rate regime, allowing the exchange rate to be determined by market forces.
Besides, the BB has also decided to compile and publish gross international reserve in line with the BPM6 (Balance of Payments and International Investment Position Manual, 6th edition).
Currently, the BB is selling dollars at Tk110 a dollar, which is also the inter-bank dollar rate.
However, many banks are collecting remittances at rates as high as Tk118 each to meet their demand, despite the rate being set at Tk110 each by the Association of Bankers, Bangladesh and the Bangladesh Foreign Exchange Dealers’ Association.
