BB to set forex reserve requirement at $6b
Shakhawat Hossain | Saturday, 14 June 2008
The central bank is likely to set its foreign exchange reserve requirement at US$6.0 billion against existing $5.0 billion for the new fiscal to meet higher import payment, said a senior central bank official.
The country's average monthly import payment, currently hovering around $1.8 billion, is expected to rise to more than $2.0 billion in the next fiscal, beginning on July 1.
The higher foreign exchange reserve is required because of the soaring import payment for fuel oils and fertiliser, whose prices have been rising in the international market, said the official.
Bangladesh Bank (BB) executive director Yasin Ali said: "There is no hard and fast rule on the country's reserve requirement, but it should be enough to meet at least three months' import bills.
Such reserve requirement is crucial to maintain the country's macro-economic stability and ensure uninterrupted import of industrial raw materials and machinery for industries, he said.
The country will have to spend almost double the amount of foreign exchange on import of commodities in the new fiscal, when the economic activities might pick up amid signs of business confidence, he said.
The BB officials also forecast a rise in import of raw materials, intermediate and consumer goods. Import of major items marked a rise in the last six months compared with level in first half of the outgoing fiscal, they said.
The BB's latest monthly review said settlement of LCs (letters of credit) for industrial raw materials during July-April of fiscal 2007-08 stood at $1353.83 million compared with $1121.86 million in the corresponding period of the last fiscal.
LCs worth $524.43 million were awaiting settlement during the period, it added.
Recently, the central bank governor asked the revenue board to probe into the 18 per cent jump in import of reconditioned vehicles in the first 11 months of the outgoing fiscal.
The sharp rise in import of the luxury cars will exert additional pressure on the foreign exchange reserve.
The central bank raised the reserve requirement to $5.0 billion in August 2007 from the previous $3.0 billion following worldwide price hike of consumers' products and fall of US dollar.
The move to make upward adjustment of foreign exchange reserve requirement has been taken despite record inflow of remittance and recovery of export sector in the outgoing fiscal.
Inflow of remittances recorded nearly 28 per cent rise in the first 11 months while the export growth was more than 12 per cent in the first nine months of the fiscal 2007-08.
The country's average monthly import payment, currently hovering around $1.8 billion, is expected to rise to more than $2.0 billion in the next fiscal, beginning on July 1.
The higher foreign exchange reserve is required because of the soaring import payment for fuel oils and fertiliser, whose prices have been rising in the international market, said the official.
Bangladesh Bank (BB) executive director Yasin Ali said: "There is no hard and fast rule on the country's reserve requirement, but it should be enough to meet at least three months' import bills.
Such reserve requirement is crucial to maintain the country's macro-economic stability and ensure uninterrupted import of industrial raw materials and machinery for industries, he said.
The country will have to spend almost double the amount of foreign exchange on import of commodities in the new fiscal, when the economic activities might pick up amid signs of business confidence, he said.
The BB officials also forecast a rise in import of raw materials, intermediate and consumer goods. Import of major items marked a rise in the last six months compared with level in first half of the outgoing fiscal, they said.
The BB's latest monthly review said settlement of LCs (letters of credit) for industrial raw materials during July-April of fiscal 2007-08 stood at $1353.83 million compared with $1121.86 million in the corresponding period of the last fiscal.
LCs worth $524.43 million were awaiting settlement during the period, it added.
Recently, the central bank governor asked the revenue board to probe into the 18 per cent jump in import of reconditioned vehicles in the first 11 months of the outgoing fiscal.
The sharp rise in import of the luxury cars will exert additional pressure on the foreign exchange reserve.
The central bank raised the reserve requirement to $5.0 billion in August 2007 from the previous $3.0 billion following worldwide price hike of consumers' products and fall of US dollar.
The move to make upward adjustment of foreign exchange reserve requirement has been taken despite record inflow of remittance and recovery of export sector in the outgoing fiscal.
Inflow of remittances recorded nearly 28 per cent rise in the first 11 months while the export growth was more than 12 per cent in the first nine months of the fiscal 2007-08.