BD forex reserves fall below $40b

Bangladesh's foreign-exchange reserves fell below US$40 billion, the lowest level in two years, largely for imports far outstripping exports and falling currency-exchange rate against the US dollar.
Sources say an ACU (Asian Clearing Union) payment amounting to $1.99 billion against import bills pushed the reserves down.
The decline in foreign-exchange reserves is adding to financial strains the country already faces for a record current-account deficit amid deep depreciation of the local currency, taka, against the international trading currency, the US dollar.
The central bank of Bangladesh Tuesday reported that the reserves with it in the past week plunged to $39.8 billion-in a gradual slide from the pinnacle of $48.0 billion in August 2021.
It assigns the latest tranche of ACU payments as the main reason for the fall.
Asian Clearing Union is an arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks on a net multilateral basis.
Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan and Sri Lanka are members of the Tehran-headquartered ACU. The central banks of the countries have to make the payments every two months.
In the meantime, financial-market experts say the reserves now got under pressure because of higher import payments and lower inflow of remittances.
They feel that this is a concern as it has surfaced in the fastest way, i.e., in the last three months.
"To my mind, this is not out of control, but the central bank should take steps to strengthen the reserve position," says Dr Salehuddin Ahmed, a former governor of the Bangladesh Bank.
He suggests rationalization of imports and boosting exports.
The economist also sees the accumulating private overseas debt as "a matter of concern".
He says the falling reserves have implications for inflation and other macroeconomic indicators.
On a serious note of observation, the former BB governor says the government and the law-enforcement agencies should investigate whether or not the dollar is being smuggled out from 'kerb market', where the greenback is in high demand and sells at higher prices than formal rates.
Dr Ahsan H. Mansur, executive director at PRI (Policy Research Institute of Bangladesh), told the FE that Bangladesh lost foreign reserves equivalent to four months' need in the last one year.
"We had eight months' reserves, now it is four months'…," Dr Mansur comments.
The economist, however, thinks that actually Bangladesh has now around $32 billion in foreign-exchange reserves when the EDF (export development fund), Sri Lanka loan and others are to be considered.
Furthermore, he notes, the central bank will have to pay more in the coming months to buy gas, oil, fertilizer and meet the subsidy.
Dr Mansur, who had worked as division chief in the Middle East of the IMF, feels that Bangladesh now needs to inject funds to stabilise the country's external account.
He advocate for conducting reforms in the taxation system to boost revenue and limit imports.
He mentions that there are $13 billion in short-term individual debts, which is posing another threat to the reserves.
However, in eleven months, between July and May last fiscal year, imports had increased to $75.40 billion, up 39 per cent on a year-on-year basis, while exports grew by 33 per cent to $44.58 billion.
And remittance inflow contracted in 2021-22. The wage earners' remittance stood at $21.03 billion in the last fiscal year--more than 15-percent down from that of the fiscal year 2021.
jasimharoon@yahoo.com