Bangladesh's foreign exchange reserves dropped by $1.47 billion to $21.71 billion as of September 13, according to the Bangladesh Bank's latest data.
The data showed that reserves were $23.18 billion on September 5. After the payment adjustment of the Asian Clearing Union (ACU), it stood at $21.71 billion.
Bangladesh Bank paid around $1.3 billion of ACU bill on September 10 and reserves fell below $22 billion as per the International Monetary Fund's BPM6 method. According to the central bank data, gross reserves are $27.61 billion.
Mezbaul Haque, spokesperson for Bangladesh Bank, told The Business Post that gross reserves stood at $27.61 billion after the ACU payment.
The ACU is an arrangement to settle payments for intra-regional transactions among its member countries, including Bangladesh.
BB started following international standards in calculating foreign exchange reserves as per a condition set by IMF for a $4.7 billion loan approved for Bangladesh earlier this year to mitigate forex crunch.
Since 2012, IMF member countries have been calculating reserves with the Balance of Payments and Investment Position Manual (BPM6). But BB took over a decade to implement it.
Reserves calculated as per the BPM6 method are not the net or actual reserves of Bangladesh. Several short-term liabilities, including SDRs from IMF, are excluded in calculating net reserves. According to that, Bangladesh's net reserves are now around $20 billion.
An analysis of Balance of Payment (BoP) data clearly indicates that the government has been mostly unable to curb the steady loss of foreign exchange reserves.
The Bangladesh Bank pumped $8.22 billion of support from the reserves to stabilise the balance of payment in the last FY, which was $6.5 billion in FY22. As a result, gross reserves fell from $41.82 billion to $31.2 billion in FY23.
Calculated under the International Monetary Fund (IMF) method, these reserves would stand at $33.38 billion and $24.75 billion in FY22 and FY23 respectively.
At the end of last FY, Bangladesh had the capacity to cover 4.6 months of import expenses with the reserves. Experts warn that as this figure continues to decrease, it will take down the country’s capacity for essential commodity imports.
This in turn puts Bangladesh into a path of crisis. Under the international standard, a country must have the capacity for at least three months of import payment, and five months capacity denotes a comfort zone.
Bangladesh has been witnessing volatility in the forex market for the past one year and a half owing to the sharp depletion of the forex reserves.
Taka continues to depreciate against the USD due to depletion of reserves. On June 30, the last day of FY22, the USD price was Tk 93.45, compared to Tk 108.35 at the end of FY23. Since this week, the exchange rate has increased to Tk 110.
However, due to the high demand of the US greenback, USD is sold at higher prices in the open market and in some banks as the remittance inflow through unofficial channels has increased.
In FY23, Bangladesh exported the highest manpower in history, but remittance did not come to the desired level.
During the period, remittances came in at just $21.61 billion against exports of 11.37 lakh manpower. However, during the period of Covid-19 pandemic, remittances inflow was at $24.77 billion against the export of only 1.33 lakh manpower in FY21.
