Concerns and fears are increasing as reserves decrease: News Online

Only two and a half years ago the reserve was 48.06 billion. And currently expendable reserves stand at 14.7 billion. With which it is not possible to import products for three months. However, as an international standard, it is necessary for a country to have the ability to meet its import expenses for at least three months with reserves. In such a situation there is concern and panic about the reserve.

Not only that, the International Monetary Fund (IMF) is repeatedly failing to meet the 4.70 billion dollar loan waiver target. In such a critical situation, the special team of the donor organization is coming to Dhaka yesterday to discuss the terms and conditions of the loan.

According to the data of Bangladesh Bank, the gross reserve was 25.32 billion dollars last Sunday. It is 19.97 billion dollars according to BPM-6 in IMF advice. This, however, is not a real reserve. And to derive the actual expendable reserves, $5.90 billion as current liabilities, foreign debt, project arrears, and Special Supplementary Currency (SDR) arrears must be deducted from the BPM manual. As such expendable reserves stand at 14.7 billion dollars.

According to the data, the average import expenditure in January, February and March was 5.87 billion dollars, 5.20 billion dollars in February and 5.10 billion dollars in March respectively.

According to the updated information on the website of Bangladesh Bank, letters of credit (LC) for the import of goods were opened for the total of 44.48 billion dollars in eight months from July to February this year. On average, it is 5.56 billion dollars per month.

Ahsan H. Mansoor, executive director of Bangladesh’s private research organization Policy Research Institute (PRI), said that the IMF team will focus on fiscal policy this time. And in the name of banking reform, banks may object to mergers. Besides, why the reserve is not increasing, why the target is not being met and how to increase the reserve in the future who can ask for a detailed plan. They will even look at what kind of policy steps are being taken with the loan program. Apart from IMF, foreign currency loans are also being taken from other international organizations. But it is running out to meet the cost of importing oil and gas. As a result, reserves are not increasing.

According to central bank data, it has sold more than $10 billion in the first nine months of the current fiscal year 2023-24. At the same time, Bangladesh Bank bought about 1 billion dollars from some commercial banks. Apart from this, Bangladesh Bank has mortgaged another 2.7 billion dollars from commercial banks through swap method. And in the financial year 2022-23, it was sold at 13.58 billion dollars and 7.62 billion dollars in the previous financial year.

The former chief economist of the World Bank’s Dhaka office. Zahid Hossain said, due to policy mistakes, Bangladesh Bank has no option but to sell dollars from the reserve. Still forced to sell dollars to state-owned banks to settle emergency LCs. So the move to increase the dollar supply does not appear to be very effective. Imports may suffer if reserves fall below international standards.

Meanwhile, the IMF is expected to receive the third installment of the $4.7 billion loan after receiving two installments. But the net reserve of Bangladesh has not improved. A special team of the IMF is coming to Dhaka today to review the loan conditions in front of such reality. The meeting will continue till May 8.

An official of Bangladesh Bank said on condition of anonymity that the IMF’s conditions have brought prosperity to the country. Without them, Bangladesh Bank could not do anything. Especially the reform of the banking sector and good governance have been as they said. The IMF has hinted that reserve protection and bank consolidation will be important. For this, the central bank seems to have tightened things.

Sabbir Rahman, a customer who came to Motijheel in Dhaka to buy dollars, said that even after visiting several banks, the dollars were not found. Some bankers quipped that the reserve is on its way to the end. After hearing this, lightning struck the head. If there is no reserve in the country then it will become Sri Lanka.

According to the IMF, the agency approved the second tranche after Bangladesh officially sought an exemption from the IMF to lower the reserve conservation target as a condition of the loan. According to the conditions, the new target of reserves at the end of December was set at 17.78 billion dollars. However, as of December, the actual reserves were $16.75 billion. And the actual reserves at the end of March were supposed to be 19.26 billion dollars, but in reality it was about 15 billion dollars. In June last year, the target was 23.7 billion dollars, but the actual reserves were 19.5 billion dollars.