BB sells $3.75b to banks in three months despite USD scarcity
Business Report :
The Bangladesh Bank sold $3.75 billion to banks from July 1 until October 8 this calendar year, as the country’s banks were struggling with a severe dollar crisis which made the settling of letter of credit (LC) payments difficult for the banks.
This substantial dollar intervention exerted a notable pressure on the country’s foreign exchange reserve, which, in line with IMF guidelines, plummeted to $21.07 billion on October 8.
The net reserve currently hovers at $17 billion.
The reserve was $41.8 billion on June 30, 2022 and $46.2 billion in September 2021.
Over the past two financial years, a total of $21.12 billion was drawn from the reserve, with $13.5 billion in FY23 and $7.62 billion in FY22, meaning approximately $25 billion being utilized in the past 27 months.
In FY23, the Bangladesh Bank withdrew approximately Tk145,000 crore and Tk82,300 crore in FY22 through dollar sales.
Therefore, the banking sector also witnessed persistent liquidity shortage.
The situation was further compounded by sluggish growth in remittances and export earnings.
The remittance inflow dropped from $1.59 billion in August to $1.34 billion in September, marking the lowest since April 2020 when the Covid-19 pandemic had prompted a global and domestic shutdown.
The remittance inflow edged up to $21.43 billion in FY23 compared with that of $21.03 billion in FY22.
Bangladesh’s export earnings in July-August of FY24 rose by 9% to $8.85 billion compared with those of $8.11 billion in the same period of FY23.
Due to the severe dollar crisis, the banks encountered difficulties in settling import payments and initiating LCs.
Since April 2022, the government and the Bangladesh Bank have implemented a series of initiatives to curb a significant growth of imports.
In the first two months of FY24, the country’s import payments declined by 22.3% to $9.86 billion compared with those of $12.69 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.
The Bangladesh Bank in its new monetary policy statement said that it would adopt a market-based and unified exchange rate regime, allowing the exchange rate to be determined by market forces.
Bangladesh Bank has also decided to compile and publish gross international reserves in line with the BPM6 (Balance of Payments and International Investment Position Manual, 6th edition).
Currently, the central bank is selling dollars at Tk110.5 a dollar, which is also the interbank dollar rate.
