Forex reserves erode further22 June 2022
Staff Reporter :
The country's forex reserves have eroded further, weighed by persistent capital outflows and the taka's weakness driven by the dollar's broad surge in recent months.
The Bangladesh Bank (BB) is selling dollars from the reserves to keep the money market stable. As a result, the central bank's reserves have reached one and half year low.
The foreign exchange reserves reached $41.15 billion, which is the lowest amount since November, 2020. The reserves were $41.26 billion in November, 2020.
The foreign exchange reserves fell to $42.20 billion at the end of last month.
The inter-market exchange rate of dollar has increased to Tk 92.95 on Tuesday. The exchange rate was Tk 92.90 against per dollar on Monday.
According to the central bank, the dollar price has risen more than ten times in the last two months.
Md Serajul Islam, Executive Director and also spokesperson of the Bangladesh Bank, confirmed the matter and said the rate fluctuates in the inter-market based on the transaction.
He also said that the central bank sold $114 million on Tuesday, but did not sell any dollar on Sunday and Monday this week.
"Bangladesh Bank is not fixing the dollar price. Rather, the central bank is taking into account one of the prices transacted by the banks," he said.
Last month, the dollar rose to a record high of Tk 102 in the open market. The dollar is now being traded at Tk 97.99 in the open market. As per international standards, a country must have at least three months' worth of foreign exchange reserves to cover import costs.
Economists and central bank officials believe that the main reason for this is the increase in the country's import cost, decrease in the flow of remittance.
"The reserves will decrease if imports increase and there is nothing to worry about as there is still a fairly satisfactory level of reserves," said Dr Ahsan H Mansur, Executive Director of the Policy Research Institute (PRI).
"However, now we have to reduce imports and focus on increasing remittances and export earnings," he added.
Prof Mustafizur Rahman, distinguished fellow of Centre for Policy Dialogue (CPD), said, "The drop in remittance flow has already affected Bangladesh's macro-economy. But it is natural that the reserves will decrease if imports increase."
The country's import payments have shot up since the end of last year because of the rising prices of commodities in the global market.
Between July and April, imports went up by 41 per cent year-on-year to $68.66 billion, while exports grew 35 per cent to $41 billion.
This resulted in a record trade deficit -- the gap between exports and imports -- of $27.56 billion, up 53 per cent year-on-year.
The remittance, the cheapest source of foreign currencies for Bangladesh, fell 16 per cent year-on-year to $19.2 billion in the first 11 months of the fiscal year.
All these led to the decline in the foreign exchange reserves to $41.38 billion on June 15, which was $46.15 billion on December 31.