Without plugging the hole of capital flights, BB injunction will be wasted out

Bangladesh Bank has injected $330 million into the country’s foreign exchange market since February 1 when the International Monetary Fund disbursed $476.27 million to Bangladesh as the first installment of a $4.7 billion loan. The Washington-based lender approved the loan in January under the extended credit facility (ECF) and the extended fund facility (EFF) to help the country defuse the ongoing volatility in its foreign exchange market.
Although the IMF has suggested Bangladesh reduce the frequent injection of US dollars into the market, the central bank has not followed the recommendation yet. Between July 1 and February 9, the central bank supplied a record $9.44 billion to the market. After the disbursement of the first tranche of the loan, the reserves stood at $32.69 billion on February 2, but the volume fell to around $32.6 billion yesterday owing to the continuous dollar injection into the market. The reserve was $45.39 billion on February 9 last year.
The IMF support came as Bangladesh continues to face an exchange rate instability fuelled by a US dollar shortage caused by the fast depletion of the reserves amid escalated import payments against lower-than-expected export and remittance receipts. As per the global lender’s quantitative performance criteria, foreign exchange reserves can’t be below $24.5 billion in June, $25.3 billion in September, and $26.8 billion in December.
Ahsan H Mansur, executive director of the Policy Research Institute, explained that around $7 billion would have to be added to the reserves calculated by the IMF as the central bank considers the Export Development Fund and the funds under some other schemes while calculating its reserves. The IMF will disburse $4.7 billion in several installments over a 42-month period.
Expatriate Bangladeshis sent remittances amounting to $12.45 billion, in the first seven months of the current financial year, up 4.25 per cent from a year earlier. The deficit in the financial account stood at $1.09 billion in the first six months of 2022-23 in contrast to $6.89 billion during the same period a year ago. The economy is on the verge to collapse, while the fresh fund injection will incur a tax burden. Without plugging the hole such as capital flights, corruption and financial fraudulence in the banking sector, the injection will be wasted out.