In August 2021, the country’s foreign exchange reserves were 48.06 billion. After two and a half years and last Tuesday, the gross reserve of the country was 25.32 billion dollars. And according to BPM-6 on the advice of the IMF, it was 19.97 billion dollars. But it is not a real reserve, it is just another account that is given to the IMF. According to that, the reserve of two and a half years has decreased by about 23 billion dollars.
Accordingly, to derive the actual expendable reserves, $5.90 billion must be deducted from the BPM manual as current liabilities, accrual bills, foreign debt, project arrears, and Special Supplementary Currency (SDR) arrears. As such, excluding these, expendable reserves stand at 14.07 billion dollars. However, it is difficult to meet the import liability of three months with the actual amount of reserves of the country, the concerned say. According to international standards, it is necessary for a country to have at least three months’ worth of import capacity with reserves. Such situation of reserves has raised concern among importers.
On the other hand, the International Monetary Fund (IMF) is failing to meet the 4.70 billion dollar loan waiver target. Amidst the crisis, a special team from IMA arrived in Dhaka yesterday to discuss the terms of the loan. Sources of Bangladesh Bank say that the reserve was 48.06 billion two and a half years ago.
According to banking officials, foreign currency loans are being taken from the IMF and other international organizations. However, it is running out to meet the cost of importing oil and gas. As a result, the reserves are no longer increasing. Bangladesh Bank is selling dollars to state-owned banks forced to settle emergency LCs. The move to increase the dollar supply is very effective but not visible. Meanwhile, concerns about dwindling reserves have surfaced among importers.
Rafiqul Islam, an entrepreneur in the clothing sector, said that he could not take many orders before the last election. Now orders are coming, machinery is also needed. But I could not open LC after visiting several banks. Although limited to assurances from banks, I am still hopeful.
Drug importer Russell Hossain told the media, “I am not getting dollars, and there is concern about the reserves again.” If the foreign bank comes to know about not being able to cover the import expenses for three months with the reserve, they will not want to open the LC. Some banks will ask for additional charges. Business will suffer from this.
According to the central bank, the average import expenditure for January, February and March was 5.87 billion dollars, 5.20 billion dollars and 5.10 billion dollars respectively. A total of 44.48 billion dollars in letters of credit (LC) have been opened for the import of goods in the eight months from July to February this year. Which is an average of 5.56 billion dollars per month.
In the first 9 months of the current fiscal year 2023-2024, more than 10 billion dollars have been sold. As much as $1 billion was purchased from some commercial banks during the period under discussion. Another 2.7 billion dollars has been borrowed from commercial banks by the central bank through the swap mechanism. Last fiscal year 2022-2023 was $13.58 billion and $7.62 billion in 2021-2022 fiscal year.
Meanwhile, the country received two installments of the IMF loan of 4.7 billion dollars. Now the third installment is due. But according to the conditions given by them, the net reserves of Bangladesh have not improved. A special team of IMF is coming to Dhaka yesterday 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 delegation is coming to Dhaka. The party will focus on fiscal policy in this visit. Besides, the organization may talk about bank merger in the name of bank reform. Moreover, the IMF may ask for a detailed plan as to why reserves are not increasing, why targets are not being met and how reserves can be increased.
The agency released the second tranche after approving a waiver that Bangladesh had formally sought from the IMF to lower its reserve conservation target as a condition of the $470 million loan. According to the IMF’s terms, the new target for reserves at the end of December was set at $17.78 billion. As of December, actual reserves stood at $16.75 billion. And the actual reserves at the end of March should be 19.26 billion dollars, in reality it was about 15 billion dollars. Again, in June last year, although the target was 23.7 billion dollars, the actual reserve was still 19.5 billion dollars. However, a senior official of the concerned department of Bangladesh Bank said that there is nothing to worry about the country’s reserves. This official also said that there is more reserve than international standards.##
