Forex Reserves Fall Below $37 Billion – The Business Standard | Jewelry Dukan

TBS report

September 21, 2022 at 10:35 p.m

Last modified: September 21, 2022, 10:45 p.m

Representative picture. Photo: Collected

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Representative picture. Photo: Collected

Amid an ongoing dollar crisis, the country’s foreign exchange reserves have fallen below $37 billion as the central bank continues to sell the greenback to ease government imports.

On Wednesday, reserves totaled $36.97 billion after Bangladesh Bank sold about $30 million to banks at a rate of Tk96 to settle import letters of credit (LCs), central bank officials at the concerned department said .

Reserves topped $37 billion Tuesday after the central bank sold $110 million at the same rate.

Subtracting US$8 billion allocated to various funds such as Export Development Fund loans from the reserves, the country’s usable reserves are about US$29 billion.

They are still less than the cost of imports, according to central bank officials, despite an increase in exports and income for expatriates in the country. The central bank is constantly selling dollars to facilitate the government’s importation of various commodities, causing reserves to decrease.

Speaking for anonymity, a central bank official said that due to the lack of dollars in the market, the supply will come from reserves. This reduces the reserves.

“Imports are declining due to various measures. Exports and incomes of emigrants increase. As a result, demand for dollars also falls. The situation will be normal in the coming days,” he added.

Earlier on Sept. 8, reserves fell to $37.06 billion after the Asian Clearing Union (ACU) made a $1.73 billion payment.

As of August 2021, the country’s reserves were $48 billion. As the central bank continues to sell the greenback to pay import bills, reserves are declining.

Reserves fell sharply last fiscal year when the central bank sold $7.6 billion to banks. Also, it has sold more than $3 billion so far in the current fiscal year, which starts in July.

The country posted its highest trade deficit of $33.25 billion in fiscal 2021-22, driven by an increase in the cost and volume of imports relative to exports.

At the same time, the current account deficit also exceeded $18.5 billion.

Since the beginning of the current financial year, however, the country’s foreign exchange market has been in a reasonably stable position due to lower import costs and increasing foreign transfers. Now the price of the dollar is determined based on supply and demand.

The import volume has decreased in the last two months. Import in the form of LC (letter of credit) settlements fell 20% mom in August thanks to various moves like raising the LC margin to 100% to stabilize the country’s foreign exchange market. The opening of LCs was also declining.

LC payments totaled $5.93 billion in August, down from $7.42 billion in the previous month, according to the latest Bangladesh Bank report.

In addition, remittance inflows were on an upward trend in July and August. Expatriate Bangladeshis each sent home more than $2 billion in remittances in the first two months of the current fiscal year. The country has received over $1 billion in remittances in the first 15 days of September.

Interbank Dollar Market

The average dollar purchase price of 55 banks was Tk102.26 on Wednesday as lenders sourced the greenback between Tk99 and Tk106.77.

For LC settlement, they sold the dollar at a maximum profit of Tk1. Also, according to the previous decision, the banks cashed in export proceeds of Tk99 and collected remittances in the amount of Tk108.

CFOs at several banks said payment pressure was less than before due to a drop in the country’s imports. For these reasons, the price of the dollar falls slightly.

After checking interbank exchange rate information on Bangladesh Bank’s website, the banks were found to be trading dollars between themselves Tuesday at Tk101.78-102.56.

Also, the dollar was sold on the open market at Tk115. Traders said they bought the greenback at Tk114. They also said dollar supply has increased slightly.

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